Tuesday, December 27, 2005

It's Crystal Ball Time

After a tumultuous 2005, what can we look forward to in 2006? Of course, nobody truly knows what will happen but let's play anyway.
I think we can be fairly sure that multiple, over priced offers are probably a thing of the past. Last year was very definitely a sellers market and I think 2006 will return a balanced market; one that is fair to both sellers and buyers. This means that buyers will have the luxury of being able to look at several homes, sleep on it, and being able to make a decision without feeling pressured.
Here, in Arizona, pundits are predicting continued appreciation but in the single-digit range. Largely, I agree with this, but I also think there are a few areas, and no I won't name them, that will see small declines. These will be areas with a large percentage of investor ownership. Many have made a 50% return in one year, and likely will be happy to give back a little of that in order to liquidate that investment. Some homeowners in those areas have moaned that investors are "dumping" their properties and are hurting values. This isn't really true. The reality in some cases is that if you live in a community where there are, sometimes, hundreds of similar properties for sale, the investor may sell into the "curve" for a speedy sale. These are in no way "fire sales" and reflect the prices achievable, today in a balanced market.
So, for sellers, you may have to give a little back but you already gained so much, so what? For buyers, a return to normalcy which, for many, means the train hasn't left the station after all.
So, it's good news for everyone.
Happy New Year!

Friday, December 16, 2005

Fix it, or not to fix it; that is the question

Should you fix your home up before you sell it? Good question. Bearing in mind that a potential buyer will most likely perform a professional inspection of your home, you might want to walk around your house and see what little problems are lurking that could easily be fixed. That dripping faucet and the running toilet are types of minor problems that are so easy to fix but if left untouched, give the buyer an impression of "deferred maintenance" which will not endear them to your home. Also, you replaced the roof last year but the water stained ceiling has not been re-painted. Why not? Those popcorn ceilings you've always hated; hire a professional. We did and they spent 70% of their time covering the interior of our home in plastic sheeting to control dust and mess. By the time they were done our ceilings were so smoooooth and there was zero mess in our house. Plus, it wasn't expensive. Also, here's a quick tip for good coverage with ceiling paint. Buy the paint that goes on pink, but dries white. It is excellent and ensures an even coat.
I think it's a good idea to have your home inspected by a licensed termite company at the time of listing. The reason I advise this is that in the event of infestation being present, there is an excellent chance that the buyer will ask you to fix it. It may be a $500 problem, it may be a $5000 problem, either way it is better to know ahead of time as it affects your bottom line.
Remember, you don't have to fix anything, although it might be wise to, but the most important thing is that you must disclose any known problems, or you could suffer legal consequences.

Tuesday, December 13, 2005

Cost vs. Value

The National Association of Realtors recently published its annual report on the cost of various home improvements versus the value they add to that home.
Below, we will show the top ten home improvements and the percentage of the cost of that improvement that is recouped upon sale.
1. Bathroom Remodel 102.2%
2. Minor Kitchen Remodel 98.5%
3. Siding Replacement 95.5%
4. Attic Bedroom 93.5%
5. Deck Addition 90.3%
6. Basement Remodel 90.1%
7. Window Replacement 89.6%
8. Roof Replacement 84.7%
9. Family Room Addition 83.0%
10. Home Office Remodel 72.8%

As you can see, many projects are quite beneficial when selling your home. More important, however, is the effect that not doing some of these improvements can have. For example, an old fashioned bathroom or kitchen can often cause a home to languish on the market.
Remember, when planning these projects get estimates, references and a contract in writing. Also, do not try to cut costs by not pulling permits. First, they provide an additional level of protection for you from shoddy work. Secondly, that unpermitted 500 sq. ft addition could devalue your home due to the cost of remedial work to bring it up to code, or the very real possibility of having to remove it entirely. Finally, if it isn't legally there, the best an appraiser could do would be to ignore its existence; at worse it could have a detrimental effect on appraised value.
Now get to work.

Sunday, December 11, 2005

Be Careful What You Wish For

When it comes time to interview a real estate agent listen carefully to what they have to say. Most will be seasoned professionals, or so we hope, with the experience to help market and sell you home. I recently went on a listing appointment, a listing which I did not get or want, where the homeowner knew everything, having bought a home once.
I decided to monitor this listing to see how it went. It didn't, and is still available at a much lower price but with that added stench of staleness attached.
The mistakes he made were numerous. First, he wanted to give the buyers agent 4% and the listing agent 2%. The buyers agent is not a decision maker and should not be rewarded with bonus commission. After all, the buyer is really paying that commission and might be urged to overpay by an unscrupulous agent. Most experienced agents smell a rat when offered above the norm commission rates or incentives. It screams "I am overpriced". Supply and demand determine prices, not commissions.
This seller got himself a weak agent who was dictated to by the seller. The seller got what he paid for. After starting at a way too high price, they played the price change game. This is a tactic, often employed by dopey agents, whereby a change in price prompts it to appear on an MLS update, putting it back front and center. This is fine for a legitimate price reduction, but these guys drop it buy $100 here, $500 there, sometimes raising it up, then back down again the next day.
To the experienced agent, these tactics telegraph the fact that the seller is an idiot, and that the listing agent is a spineless dope. Does that sound like an appealing duo to be in escrow with? I didn't think so.
So be careful what you wish for and remember; you pay peanuts you get monkeys.

Wednesday, December 07, 2005

Financing Your New Home

Pretty much everyone knows that in order to obtain a loan for your home purchase at a competitive rate you need to have a good credit score. If your credit is less than stellar you may still obtain a loan but it could come at a higher interest rate and the need for a larger downpayment to make you less likely to walk away thus protecting the lender better.
For most people it makes sense to consult with a lender before you even begin to look for a house. Firstly, you need to know how much you are able to borrow, or in some cases how much you are willing to borrow. Secondly, in order for an offer on a home to be taken seriously a seller will want to know that you have been pre-approved and not just pre-qualified, which essentially means the lender has verified your information and you are ready to purchase, usually subject only to a clear title and a satisfactory appraisal.
Another reason to get started early is that you would be surprised how many times a person runs their credit report and finds something that isn't theirs, or that they forgot about. Even genuine mistakes can take weeks to resolve and you may miss out on the opportunity to buy your dream home.
Lenders reserve the right to, and often will, run your credit report prior to funding so hold off on buying that new Lexus, or all that new furniture until after you close escrow. Also, changing jobs before close of escrow could jeopardize the loan.
Now all you have to do is keep up those payments.

Saturday, December 03, 2005

Architectural Nightmares

During the course of a year in my capacity as a Realtor I get to view many houses at both ends of the price spectrum. Recently I got to see a home that had been subjected to some "improvements" by the owner. In doing so, the home, which was priced at just under a million had been ruined; and I do not use that term lightly.
As I surveyed the property, I remarked to my wife, as I often do in these situations, "Looks like someone got a D-I-Y book on Architecture this Christmas." I was also reminded of the current T.V. commercial where a doctor advises a patient where to make an incision over the telephone. You wouldn't operate on yourself, so equally, get some professional advice before altering your home.
Back to the house in question. The garage had been converted into two bedrooms. The first could only be reached by going through a laundry room. Ok, that's not too bad. The second could be accessed in two ways. By going through the aforementioned laundry room and bedroom, how nice, or by going through the master bedroom and through the master bedroom closet. Realtors like to call them "tandem bedrooms", I like to call them ridiculous.
To compound this the owner had built a new garage in front of the property and then installed a pool between the house and the garage. Doesn't sound too bad, except that all the way to the rear of the property was the outdoor kitchen with a BBQ area completely separated by the house. A family day of outdoor fun would be totally compromised by this crazy set up. The sad thing is that there was plenty of room out back for the pool.
A prospective buyer would wander round this home aimlessly and leave looking dazed and confused. This home owner spent a lot of money on these modifications buy seriously devalued his property as most of them would have to be undone; or the home sold at a seriously discounted price.
Please consult a professional.

Thursday, December 01, 2005

Preparing Your House For Sale

The key to selling your home is to make it attractive to prospective buyers. It is not rocket science and boils down to keeping it simple and uncluttered. It also need not be expensive.
Let's start at the front door, as we all know first appearances matter. How's the front door look? Could it use a lick of paint? Go ahead, it's a few dollars well spent. Take a good look at your welcome mat. Is it welcoming? Or is it threadbare and yucky? Get a new one, it will make the home look better, plus you can bring it with you to your new home if you wish. Or you can be a good guy and leave it for the new buyer. Also consider planting some flowers to brighten up the front of the house.
Inside, keep it simple. Put everything away. Do the dishes. Put them away. Pick up your clothes. Put them away. A gallon of paint costs around $20 and is one of the most cost effective ways of making your home more saleable. Sky blue, pink and purple may be your favorite colors, but they won't sell your house. Light neutral shades or whites will make each room appear larger.
When you start the process of selling your house it is often a good time to have a yard sale, before you list, to rid yourself of unwanted clutter. A furnished home always shows better than an empty one but remember less is more, don't make it feel cluttered. Also, minimize the number of personal photographs as they tend to be a distracting influence.
Finally, set the table, it will look more appealing. Light a fire is the season is appropriate, and bake some cookies so that alluring aroma will permeate the home. Good luck.