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| The Best of HB |
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Articles and Advice |
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| Summertime Speeding By California Sunshine By Dee It doesn't seem like we've had our usual sunny and warm summer, and now it's almost August and summer is speeding by. I guess we will have a warm and sunny fall instead, which is fine with me. My apologies for not keeping up with my newsletter lately, to say I've been busy is an understatement. Real Estate became intense as I approached the April-June tax credit deadlines this year. I'm thankful that many of the clients I had been working with for months were finally able to take possession of their new homes. And since it's summer my Hula also has been in full swing with many performances. I would like to slow down just a bit so I can enjoy sailing and working on the boat. We did have a great sail to Catalina last week-end with our club. Enjoy your days, warm or chilly since summer is speeding by, take time to dance and enjoy the pacific ocean, this is what I'm going to do. And, I'll be rested and ready to assist you with all of your Real Estate needs when you call. Best Regards, Dee |
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| Fixing to sell: Don't go overboard By Dian Hymer Fixer-uppers with upside potential were in high demand when the market was appreciating at a fast pace. Once depreciation took over, speculators disappeared until 2009, when low-end foreclosure properties in some areas became hot properties -- particularly if they were selling at a 50 percent discount from the peak in summer 2006. In California, 70 percent of the homes bought by investors in 2009 were distressed-sale properties, according to the CALIFORNIA ASSOCIATION OF REALTORS®. Some were stripped of appliances and fixtures. But, at half price, there was profit potential for buyers who were up for a redo -- especially seasoned investors buying multiple homes to fix up and resell, or rent out. Fixers priced over $500,000 aren't as easy to sell today. Most buyers in higher price ranges are buying a home to live in. They want a home in move-in condition that will suit their long-term needs. There are exceptions. In high-demand market niches with few listings, there is occasionally a fixer-upper that draws a lot of attention. Usually, these fixers sell to buyers who will live in the property and fix it up themselves to save money. Often this is the only way they can afford to move into the neighborhood. Sellers of fixers in such neighborhoods should make their property as presentable as possible by cleaning out clutter, both inside and out. Many homebuyers can't visualize a property's potential. It's often worth a modest investment to show the house at its best advantage. Cosmetic improvements, such as painting, replacing outdated floor covering, or refinishing worn hardwood floors can pay off. Some fixers are staged, even though the property needs a lot of work, so that buyers can envision themselves living there. Presale inspections will help buyers make a decision about whether or not to tackle the project. Make reports available to buyers before they make an offer to avoid having to put the home back on the market if the deal falls apart because the buyer's inspectors discover defects not previously disclosed. HOUSE HUNTING TIP: How much you spend preparing a fixer for sale depends on several factors. How much did you pay for the property? How much do you owe against the property? Is there demand for fixer-uppers in your area? Finally, how much does your real estate agent think you can sell the home for given current market conditions? Sellers who have equity in their home and cash to invest in fix-up for-sale work should consider making cost-effective renovations, like a kitchen upgrade, but not an entire renovation. Ask your agent what the home would sell for with and without these improvements before doing anything to it. The investment may not yield a profit, but could recover the costs when the home sells. In areas where fixers aren't selling, sellers might need to enhance the property to sell at all. A good real estate agent should be able to provide references for reliable, reasonably priced professionals who can do the jobs for sellers who haven't the time or expertise to do the work themselves. Buyers who bought at the peak may not be able sell for even close to what they paid. One possibility would be to rent the property, if it makes sense financially. You may need to fix up the property somewhat to attract a good tenant. Consult with a certified public accountant about the tax consequences of converting a single-family residence to a rental. Another option, if you don't have to sell now, is to stay put for awhile and fix the property up gradually over time. Avoid investing a large amount of money in the hopes of getting a bigger return. THE CLOSING: The housing market in your area may be too uncertain for speculation. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| Seven rules for room additions By Paul Bianchina If you're happy with your home and your neighborhood but are craving a little more space, maybe adding on is a better alternative to moving out. Room additions can be a terrific alternative for many homes, adding space for a growing family and adding resale value at the same time. But be forewarned. A good room addition involves a whole lot more than just slapping on some additional square footage. Here are some important rules to keep in mind as your planning gets under way: 1. Know why you're adding on: This is the first rule, and it happens before you lift a hammer. Why do you need to add on? And no fair cheating and saying, "I need more space!" Do you need another bathroom? Bedroom space? A laundry room or mud room? An improved kitchen flow? More space to entertain? Better accessibility due to health issues? More storage? A larger garage or hobby area? The only way the addition will meet your needs is to know what those needs are in the first place. 2. Good additions never look like additions: This is the other top rule of room-addition planning. When you're done, the addition -- no matter what its size or where it's located -- should never look like an addition. The architectural styles of new and existing need to blend. The exterior materials need to blend as well, or at least complement each other. To the extent possible, use the same type of windows, roofing, doors, siding and other materials. If the original home has wood windows, using new vinyl windows in the addition screams "add-on" and lowers the appeal and the value. Don't overlook the need to blend landscaping and hardscaping as well. 3. Out, up, down, or a combination: The how and the where of a room addition is always a fun and exciting challenge for everyone involved. Some homes are situated on larger lots and lend themselves very nicely to adding out. Others seem best suited to adding up by building on a second or even a partial third floor. Some houses are even laid out in such a way that it's possible to excavate under them and add new living space in the form of a daylight basement. Or it could be that a combination of two or even all three of these options makes the most sense for your particular home. Keep your mind open to the possibilities. Work with a good contractor and a good designer and you'll be amazed at what you can come up with. 4. Don't let the interior become an afterthought: I've seen a surprising number of additions that look great from the outside but seem to have no thought put into them on the inside. Flooring doesn't match. Trim doesn't match. Sometimes even the interior floor heights don't match. Remember that how the interior of your addition looks and flows on the inside is just as important as how it looks and flows on the outside. Use the same materials or the same style of materials. Match up ceiling, floor, and wall levels. Here again, no matter how you view the addition, inside or out, it should never look like an addition. 5. Create convenient access: This is another afterthought in a lot of additions. Let's say you have a three-bedroom, one-bathroom house, and you want to add a second bathroom. Typically, that's an addition that's going to have a good payback. But then you build the addition so that the only access to the second bathroom is through the kitchen. You now have a three-bedroom, two-bath house, but since the layout is lousy, you've actually gone backwards in terms of desirability and resale value. Are you going to create a beautiful second-floor master suite that can be accessed only by a tiny spiral staircase from the family room? Is the only way into your great new kitchen via a convoluted hallway that leads through the laundry room? When planning your addition, never lose sight of how you're going to access the new spaces, and make sure that access is both convenient and inviting. 6. Don't overwhelm your lot: Granted, room additions are expensive. So when you're doing one, and all those workers are onsite, there's a temptation to get as much square footage as you can. But don't cram your lot full of house. Remember that open space is important as well, both to you and your family, and, later on, to potential buyers. This is a good time to go back to Rule No. 1 and reconsider the "why" part of your room addition. Don't add space just to add it -- stay focused on your overall goals. 7. Understand the legalities: There are lots of rules and regulations that come into play regarding room additions. These include property line setbacks, zoning restrictions, and restrictions imposed by homeowner associations and architectural review committees. In some historic areas, your addition may have to comply with certain historic guidelines. In other areas, there may even be solar shading restrictions that limit the height or the orientation of your roof line. Be sure you check into all of this before you get too far along with your planning. |
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| Sellers face new dilemma in timing the market By Dian Hymer Some sellers have been biding their time for three years and now wonder if they should continue to wait or bite the bullet and sell now. Karl Case, co-creator of the widely followed S&P/Case-Shiller Home Price index, thinks there's a 50-50 chance that we're at the bottom of the market and that we'll see improvements in the months ahead. Unemployment remains a concern. An increase in the number of new households is predicated on an increase in jobs. Even if we have seen the worst of the recession, most analysts believe the housing recovery could be rocky for years. A quick turnaround is probably not on the horizon. The home-sale market is generally better this year than it was last year at this time. Interest rates are lower by about 1 percent. Mortgages are much more readily available. Home prices have dropped significantly, making it possible for buyers to afford to buy a long-term home. An increasing number of fence-sitters have turned into motivated buyers. However, they are focused on value, condition and location; they aren't overpaying, as they did in 2006. It's still a buyer's market and could remain so for some time to come. Sellers who purchased within the last five years might need to sell for less than they paid. One couple bought a home in Crocker Highlands, a coveted Oakland, Calif., neighborhood. They paid just over $1.1 million in 2005 and made improvements to the property. They sold in 2009, after investing more to prepare the property for sale. They received multiple offers, over the list price. The home sold for $905,000. These sellers weren't happy about the loss. But, their goal was to own only one home. They bought a retirement home near Sacramento and were spending most of their time there. Holding onto the Oakland home was a financial drain, particularly since they were there only part time. They couldn't rent the property out for enough to cover the ownership costs. Another homeowner realized before the recent economic downturn that she couldn't afford to continue to make hefty mortgage payments due to a drop in her income. Emotionally attached to her home that she'd improved over time, she decided not to sell then, which would have resulted in a profit. Instead, she rented the property for a few years and moved in with a friend to lower her overhead. Although the rent reduced her monthly debt load, it didn't cover the carrying costs. When she finally sold in January 2010, prices had dropped to a point that the property sold for less than the amounts of the mortgages secured against the property. To get lender approval on a short sale, the seller had to contribute cash at closing. Clearly, she would have been better off financially if she had sold years earlier. HOUSE HUNTING TIP: Deciding whether to sell now and take advantage of an improved home-sale market or wait for a better time is complicated. First, you need to know the approximate selling price of your home in this market. How much work needs to be done to get the property ready to sell? Does the house have any defects or deferred maintenance that will impact the sale price or make the property harder to sell? If so, this would negatively impact the price. This information can be obtained through your real estate agent. THE CLOSING: Low inventories of good homes in some niche market gives sellers an edge. Even so, you'll be successful in today's market only if you are realistic about the current market value of your home. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| Why real estate price padding doesn't work in today's market By Dian Hymer Many sellers are in denial about the current value of their home, particularly if they bought within the past five to six years. The market peaked in the summer of 2006, and home prices dropped significantly in most areas from 2007 through 2009. Sellers often see no harm in asking a higher price -- one based on their needs or desires rather than what the market will bear. "We can always come down" is a common refrain. Letting your home sit on the market at a price that's too high can result in price reductions and a lower sale price, especially if the market is still declining. Today's homebuyers are nervous, pragmatic and well educated about the market. Not only are buyers cost-conscious, fewer buyers can qualify for a mortgage than was the case in 2006 due to recent credit tightening. Many who bought in 2006 couldn't qualify for the same mortgage today. There is a smaller pool of motivated, financially qualified buyers than there was several years ago. These buyers have an edge in most markets. Buyers want to know how long a listing has been on the market. If it has been on the market for some time, they wonder why it hasn't sold. Is there something wrong with it? A high price can signal that the seller isn't motivated. Buyers don't want to waste their time. Don't waste yours as a seller if you aren't serious about selling at current market price. No one knows for sure when the housing market will turn around. Many economists think we've hit bottom or are close to it. Analysts also forecast that home prices will bump along the bottom for some time. They don't expect a quick rebound. There isn't an urgency to buy before prices rise; buyers are taking their time to find the right long-term home. They are not overpaying. Even in low-inventory markets where multiple offers can occur, the price is usually not bid up radically, unless the listing was considerably underpriced. Interest rates are low. Buyers' nervousness about the housing market has thawed recently. The combination of lower home prices and interest rates has made housing more affordable than it has been in years. There is a risk that interest rates will increase to around 6 percent by year end. If so, this will affect the affordability equation and could have a downward influence on home prices, depending on the condition of the job market and the economy. HOUSE HUNTING TIP: To take advantage of this window of opportunity to sell, your home needs to be priced competitively. There was a time when sellers padded their list price so that they'd have room to negotiate. That strategy doesn't work in this market. Your house needs to look great and be priced competitively so that buyers realize they have to jump before someone else does. An analysis of data from the multiple listing service for Piedmont, Calif., properties listed in 2009 provides an insight into the importance of pricing right for the market. During 2009, the listings that didn't sell were listed on average 26 percent higher than the listings that sold. The market is constantly changing. If you find after your home is on the market that it's not receiving the interest you'd anticipated, ask your agent for feedback from agents who showed the property. Find out if similar listings in the area have sold recently. Did buyers who looked at your home buy other listings instead? The market will tell you quickly if your home is priced too high. THE CLOSING: Lower your price as soon as you discover it's too high so that you don't lose marketing momentum. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
| Appraisal rules tough on additions By Dian Hymer Recently a homeowner in the hills above Oakland, Calif., applied for a refinance. An appraiser visited the property and measured both levels of the house. The appraiser called the homeowner a few days later to find out if the lower level had been added with a permit. The public record indicated the house had three bedrooms, two bathrooms, and 1,513-square feet. The actual house in its current configuration has four bedrooms, three baths and a recreation room, giving it considerably more square feet than the public record indicates. The owner didn't know if the lower level had been added legally, claiming the house was in its present configuration when he bought it about 30 years ago. Due to changes in appraisal guidelines for residential properties that took effect in 2009, appraisers usually don't give livable square footage credit for work that was done without building permits. Without the extra square footage, the appraised value will be less than it would have been if the work were done legally. This doesn't mean that the lender won't grant a loan. But, if your house appraises low and you were expecting a loan amount based on a higher figure, you'll be disappointed and perhaps unable to complete the refinance -- or, if you're a buyer, you may be unable to purchase. Let's say you wanted a loan for 70 percent of an $800,000 value, or $560,000. The appraisal comes in at $600,000. On a refinance, the lender probably won't lend more than 70 percent of $600,000, or $420,000, which is $140,000 less than what you requested. HOUSE HUNTING TIP: What can you do in a situation like this to increase the appraised value of your home? The first thing to do is go to the local planning department and request copies of all permits on the house going back to the original building permit. If you can find a permit for the additional work that was done, give a copy to the appraiser. The appraiser will have measured the unpermitted square footage. With confirmation that this space is legal, the appraiser will be able to include the additional square feet and increase the appraised value. Take a copy of the permit that confirms more rooms than is reflected in the public record to the county assessor's office and have them update their records. You may be reassessed based on the fact that your house has a legal addition, so your property taxes could increase. However, your house will appraise and sell for more if you can substantiate that the additional space was added with permits. If you discover that the work was done without permits, you can attempt to have the work legalized after the fact. This can be a complicated and expensive project, depending on when the work was done and how many square feet were added. If the addition is 10-20 percent of the size of the house, the permitting process will be less onerous than if the illegal space equaled 50 percent of the entire house. You will need to meet certain code requirements. For example, if a stairway leads to the unpermitted space, it must be 36 inches wide. Replacing an entire staircase can be prohibitively expensive. Walls may have to be opened to inspect the plumbing and electrical. If something doesn't meet current code requirements, it will probably have to be brought into compliance. You might have to add or change windows. Plus, if the building inspector discovers other items in the house that do not comply with current code requirements, you might have to correct these in order to receive final approval of the project. THE CLOSING: Sometimes contractors take out permits for work, but don't take the time to have the final inspection done. In this case, call the contractor and have him finish his job. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
| Assessed vs. market value By Benny Kass DEAR BENNY: In 2006, the assessed value of my house had climbed to $756,000 and then dropped to $714,000, trailing the declining market. I filed an abatement based on erroneous information that my town was using, and was successful. My house was reassessed at $531,300, very close to my suggested valuation. About the same time, I refinanced my house based on a bank appraisal of $678,000. Since then, my house valuation has decreased each year and it now has an assessed value of $442,600; our area is being re-evaluated this year. Here is my dilemma: I firmly believe, based on almost daily research, that the market value of my house is somewhere in the low $500,000s. I think by filing this abatement, I shot myself in the foot. I know buyers look at the assessed value, which is easily accessed on our town Web site. In my case, this differs dramatically from two years ago as well as the appraisal I had during the same month my abatement went through. Can I realistically list my house at what I consider to be market value and expect a real estate agent to explain these events to potential buyers, or am I stuck with an asking price closer to the current assessed value? --Karen DEAR KAREN: I don't think you shot yourself in the foot; in fact, you have been paying real estate tax on the lower assessed value. You can list your property for any amount you feel it is worth. Some real estate agents may balk if your valuation is too high, but if you have the research (comparables) showing what other similar houses in your area are selling for, you should be able to convince the agents of the value of your house. From my experience, assessments in many parts of the country are not consistent with a home's true value. Many older homes are not carefully inspected, so the government assessor does not always know what kind of improvements have been made. Keep in mind that based on today's economy we are in a buyer's market. Regardless of the price you set for your house, potential buyers will lowball their offers. Obviously, you do not have to accept any offer and have the absolute right to counter with a higher price. When an offer is made either to a seller or a buyer, the recipient has three alternatives: you can accept it, you can counter, or you can reject it outright. One suggestion: Because most buyers do not pay all cash, they will need to get a mortgage. Lenders will obtain an independent appraisal before committing a loan, and appraisers are coming in very conservatively with their valuations. So, to satisfy yourself, I suggest that you consider obtaining your own appraisal before you sign up with a real estate agent. It will be worth the $300-$500 dollars that most appraisers will charge you. DEAR BENNY: I own a condominium unit in a fairly large association. Over the years with good management, we have amassed a sizable reserve account. Recently, the board announced that because we are earning only a very small amount of interest on this account, it wants to start investing these funds in the stock market. The announcement stated that with interest rates starting to increase, the board believes that the stock market will be a good place to earn more money for our association. Can the board do this? --Charles DEAR CHARLES: If absolutely every owner in your association agrees to go to Las Vegas and gamble with your reserve account, I would reluctantly have to say this would be legal (although clearly inappropriate). Notice that I said that every owner must affirmatively agree. Your board of directors has a fiduciary duty to all of the owners who elected them to their positions on the board. If they want to spend their own money on the stock market -- or in Las Vegas -- that of course is their business. They certainly have the right to spend their own money as they see fit. But your reserve account does not belong to the board; it belongs to every owner in your association. The clear obligation of the board of directors is to invest your money in secure, insured investments -- even if that means that your money may not be earning as much as everyone would like. Reserve accounts are very important to the well-being of any community association. If, for example, your elevator or your roof needs replacement, and if the association does not have enough money in reserve to pay for these matters, each owner -- including you -- may be faced with a special assessment. This may cost you a lot of money. More important in today's market economy, lenders are insisting that a condo association have adequate reserves before they will commit to a mortgage loan. Indeed, the FHA loan -- which today is probably the most important mortgage around -- requires associations to have a minimum reserve requirement of 10 percent of the annual budget. For example, if your association's budget is $400,000, you have to allocate $40,000 annually for future reserves. A reserve simply means that the association should have money set aside "in reserve" to cover the cost of future emergency or major repairs. Reserves are (or should be) an essential part of every community association. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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| realtor.com http://www.realtor.com Property Previews http://www.deefether.listingbook.com deef@hularealtordee.com http://www.hularealtordee.com |
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