Fixer Upper House

Trying to decide whether to buy a fixer-upper house?

 Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.

1. Decide what you can do yourself. 
TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house. 

• Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
• Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer.

• Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do. If you’re doing the work yourself, price the supplies.
• Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs.

• Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
• Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
• Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work.
If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems. 

Get written estimates for repairs before you commit to buying a home with structural issues. 

Don’t purchase a home that needs major structural work unless:

• You’re getting it at a steep discount
• You’re sure you’ve uncovered the extent of the problem
• You know the problem can be fixed
• You have a binding written estimate for the repairs

5. Check the cost of financing.
Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings. 

If you’re planning to fund the repairs with a home equity or home improvement loan:

• Get yourself pre-approved for both loans before you make an offer.
• Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
• Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer.
Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair. 


7. Include inspection contingencies in your offer.
Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

• Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
• Radon, mold, lead-based paint
• Septic and well
• Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

20 things that can raise the value of your home

When you're house-hunting it's important to be able to identify the things that increase the value of a home and those that actually detract. The seller and his agent, after all, will try to convince you that rail line that runs through the backyard is good because it provides extra green space.  

Here are 10 features that can add value to your home:

1. An updated kitchen. "Kitchens are critical," says Robert Irwin, author of "Home Buyer's Checklist." "Today, people like a big kitchen with a lot of workspace."

They look for solid surface counters and high-quality flooring, such as wood, laminate, tile or stone. And they want newer appliances in working order.

Even if it's not huge, it should have "countertops that are serviceable that aren't going to have to be replaced soon and cabinetry in good condition," says Alan Hummel, past president of the Appraisal Institute. "It has to be well-appointed and large enough to fit your needs."

And it doesn't hurt if it opens onto another room. "A lot of families are looking for that openness," says Hummel.
It helps to have a window over the sink, says Don Strong, a remodeler with Brothers Strong Inc., a Houston remodeling firm.

Be wary if renovations are out of character with the community, such as granite countertops in a subdivision where plastic laminate is the norm.

"Will you sell faster? Yes," says Hummel, CEO of Iowa Residential Appraisal Co., in Des Moines. "Will it sell for more? Not if the appointments you've done are significantly higher quality that the rest of the neighborhood."

2. Modern bathrooms. Buyers are looking for "master baths that give a little room to roam," says Hummel.

A big asset: spa or whirlpool tubs. "I'm always entertained by the people who have them in the master bath and don't use them," says Ron Phipps, principal broker with Phipps Realty & Relocation Services in Warwick, R.I. "But it's a big feature."

Some other features buyers are seeking: separate showers with steam and/or multiple jets, double sink, separate room for the toilet.

And make sure the plumbing and hot water heater can handle the job. The pipes have to be large enough to carry an adequate volume of water and the hot water heater has to be big enough to accommodate it. "You need a bare minimum of a 75-gallon hot water heater, and most of my customers have 100 to 150," says Chicago-based home inspector Kurt Mitenbuler.

"You don't want to see that false economy of a $30,000 bathroom but nobody spent a few thousand dollars to upgrade the pipes," he says.

3. A well-appointed master suite. "People are really excited about master suites," says Hummel. The wish list: a luxurious bathroom, lounging areas and walk-in closets.

4. Natural materials. "People like natural materials," says Phipps. "Ceramic tile, hardwood floors, granite. We've gone back to a real appreciation for historically true materials. And simulated works as well. The look is very popular."

In floor coverings -- especially bathrooms or kitchens -- look for ceramic tile or wood rather than linoleum, which can tear, says Strong.

In the rest of the house, wood or laminate products are a plus over wall-to-wall, says Gary Eldred, author of "The 106 Common Mistakes Homebuyers Make (and How to Avoid Them)".

But if you have carpet, it should be a good product and well maintained so that "a person doesn't have to walk in and think, 'I'm going to have to spend five grand right off the bat," says Strong.

5. Curb appeal. "A good first appearance on a home can add as much as 5 percent to 10 percent to the value of the home," says John Aust, president of the National Association of Real Estate Appraisers. "Homes in a neighborhood tend to vary about 10 percent from house to house, assuming all other things are the same."

6. A light, airy spacious feel. "People buy space and light," says Myra Zollinger, owner/broker with Coldwell Banker Realty Center in Chapel Hill, N.C. "I have yet to have anybody walk into a really dark house and say, 'I love this.'"

Richard "Dick" Gaylord, member of the executive committee for the National Association of Realtors, agrees. "That's a very big feature," he says. "I haven't sold many homes that aren't bright and airy."

7. Good windows. "People are looking at exposures and windows," says Phipps. "It's been a cold winter for most of the country and energy efficiency is very important."

Insulated windows are always a plus, says Strong. "Typically, they pay for themselves in five years," he says. The cost: for an average 2,600-square-foot home, estimate about $10,000 for new windows, he says.

Well-placed skylights are also a good touch to add value, says Phipps.

8. Landscaping. Mature trees "are worth $1,000," says Strong.

And having outdoor spaces with touches such as pergolas and Victorian garden swings "can be very helpful," says Phipps.

Appraiser John Bredemeyer remembers one $250,000 home in Omaha that had no landscaping at all. "It was stark," says Bredemeyer, national chair of government relations for the Appraisal Institute, a professional group for real estate appraisers. "It just stood out as unappealing."

Conversely, you don't have to spend a fortune on plants, either. Just keep it "typical with the neighborhood," he says.

9. Lots of storage. Nothing beats an oversized garage, some attic space and plenty of closets. "If you have a two-car garage, do you have extra space for those things we all have -- bicycles, lawn mower, snow blower?" says Hummel. "Space is important."

A nice plus in the master suite? "His and hers walk-in closets," says Irwin.

10. Basement. "If it's dry, it's a plus," says Kenneth Austin, co-author of "The Home Buyer's Inspection Guide." "But it's a negative if it has water problems."

A finished basement adds even more value. "Ten years ago, nobody cared," says Mittenbuler. "Now everybody wants them."

 

Ways to Invest in Real Estate

If you’re looking to diversify your investments, real estate can be a lucrative venture. There are several ways you can dip your toes into real estate investment waters. Take a look at the categories below to see if one of them is right for you.

Real Estate Investment Groups

If you want to invest in rental properties but don’t want to deal with the day-to-day obligations of being a landlord, real estate investment groups are a great option. A company buys or builds apartments and allows investors to hold the lease on one or more units, while they handle the basics. The company receives a portion of each month’s rent in exchange for its services. Lease holders also typically contribute a percentage of rent to a pool that covers vacancies, providing payment even if the unit stands empty for a month or two.

Be sure to thoroughly research the groups you’re considering. Investment groups are usually safe, but it all depends on who you’re doing business with.

Standard Rentals

Rental properties can cover mortgage payments when tenants are in residence, which then turns to profit once the debt is paid off. Unless you hire a property manager, you’ll be responsible for any maintenance. Figure on spending around 50 percent of your monthly income to keep the property in top shape. 

Property can appreciate between the time of purchase and the final mortgage payment, netting you a tidy profit if the market is right. Work with an area realtor to determine the best time and location to buy and sell.

Real Estate Investment Trusts

REITs are a step further removed from first-hand ownership than investment groups. Around 200 are publicly traded, and their financial records can be easily researched as a result. Trusts or corporations purchase rental properties with investor funds and are required to pay out 90 percent of the taxable profits in dividends. REIT investments provide regular income and are easily liquidated, but you’ll need to do your homework to ensure your investment is sound.

Real Estate Trading

Real estate trading is property investment on steroids. Similar to stock market day trading, it can be both risky and rewarding. Investors hold properties for a 3-4 month period, and then ideally sell for a profit. Real estate traders gamble on undervalued properties and hot commodities to “flip” the investments they’ve made.

If a trader makes the right picks, there’s a lot of money to be made, but one wrong move can send it all crashing down. Because the properties are not held for long periods, most investors don’t keep cash on hand to pay mortgages for extended periods of time, and may have cash tied up in multiple properties.

There’s a less risky way to flip properties, but it is more labor intensive. These investors live in a home while they improve it, and then sell it for a higher price once the renovations are made. Although only one property at a time is typically flipped, there is significantly less risk of failure.

Several methods of real estate investment exist, all with varying levels of risk, reward and involvement. Research your chosen method and the companies involved to make the decision that’s right for your portfolio.

HAPPY FATHERS DAY!

HOMES ARE SELLING FAST!

How to Boost your Home's Value

Most appraisers have stories of homeowners irate over the fact that the special remodeling job they performed added zero value to their home. The imported Italian tile you used in your entryway or the pool in the backyard may be of immense value to you while you live in the home, but unfortunately they aren’t items that buyers shopping in your neighborhood value.
To get the most bang for your home improvement buck, consider these 10 best home improvements:

1. Indoor Systems

Before you consider cosmetic and even functional improvements (such as adding additional square footage) to the home, make all needed upgrades, repairs or replacements to the home’s major systems. Major systems include plumbing, heating, electrical and sewer systems, among others.
Buyers want assurance that these basic items are in working order and won’t need to be replaced or repaired in the near future, an issue that will most likely be addressed in the home inspection. Older homes may require updated wiring and plumbing. An old roof should be replaced. Address problems with heating and air-conditioning units.
Looking for more information on major systems? Check out this Yahoo! article about the effect of improving major systems on home buyer interest.

2. Outdoor Replacement Projects

 
 
Replacement projects will give you more added value than remodeling projects, according to Remodeling Magazine. Fortunately for homeowners, these types of projects are also the least expensive and add to the home’s curb appeal. Consider replacing the garage door, siding, the front door and windows. The average return on investment for these projects is almost 72 percent.

The ROI on replacing garage doors, siding, front doors and windows is almost 72%!

The magazine suggests fiber-cement or foam-backed vinyl siding, adding a steel entry door, and vinyl window replacement.

3. Attic Bedroom

The number one home improvement project as far as recouping a return on your investment is the addition of an attic bedroom, according to Remodeling Magazine. At a nationwide average cost of a little over $50,000, expect to recoup 72.5 percent of the cost of adding the attic bedroom when you sell the home.

4. Add an Additional Bathroom

Over the past few decades, the kitchen was the average homebuyer’s focal point when choosing a home. In 2011 bathrooms became more important to buyers than kitchens. That said, an additional bathroom, even a half bathroom, adds significant value to your home, according to the experts at the National Association of Home Builders (NAHB).
A half bath may add up to 10.5 percent to a home’s value, while a full bath can tack on an additional 20 percent. Of course, the amount of additional value you will receive varies according to the home’s other features.

In 2011 bathrooms became more important to home buyers than kitchens.

The price of adding another bathroom to the house varies as well, depending on region. If you live on the West Coast, plan on paying almost $50,000 for a new bathroom, according to Remodeling Magazine. The magazine also states that, at the sale of the home, you’ll recoup almost 67 percent of the cost of the additional bedroom. East Coasters can plan on spending a bit less – around $41,000, but will recoup less as well – 47.7 percent of the cost.
Tip: If you’re on a tight budget and can’t afford a bathroom addition, give the existing bathrooms a facelift. A fresh coat of paint, new fixtures and new flooring will add value and make the home show better.

5. Kitchen Improvements

Kitchens tend to be the heart of a family home so anything you do to improve your kitchen will add value. Again, painting the kitchen should be the first step, whether you plan an entire remodel of the room or just a minor facelift. Vinyl flooring tends to make the room look dated, so consider replacing it with laminate or tile. New cabinetry, kitchen sink fixtures and updated lighting will all add value.
Tip: Folks on a budget can still increase value by sanding and then painting or staining cabinetry and adding new hardware and by purchasing new (matching) appliances and new countertops.

6. Boost Curb Appeal

When a TV show can be built around this one subject, it’s a pretty good indication of its importance. Curb appeal is what beckons potential buyers into your home and underestimating its importance to the value of a home is a big mistake many homeowners make.
If you have a healthy budget, and your landscaping needs extensive work, consider hiring professionals for this home improvement project. A landscape architect can be pricey but necessary if your yard is in desperate need of an overhaul. According to Jeff Mitchell with the American Society of Landscape Architects (ASLA), curb appeal shouldn’t stop at the front yard, but should be extended to the backyard as well.
At the very least, clean the yard of any debris, trim trees and shrubs and spread fresh mulch in the planting beds. A poorly maintained front yard can result in up to a 10 percent drop in value, according to Houston appraiser Frank Lucco.

 Budget curb-appeal improving landscape projects include:

• Line the walkway with solar-powered lights. The big home improvement stores carry a variety of inexpensive styles and all you need to do is stick them in the ground. Not only are they functional – lighting your way at night – but they provide ornamentation as well.

• Green up the lawn, keep it mowed and edged and reseed bare spots.

• Add color to the planting beds. Be careful to keep your color choices aligned with the home’s architecture. In other words, don’t add cottage garden-type flowers to a bed in front of a starkly modern home. Certain plants are grown because of their interesting and colorful foliage, such as hosta and coleus, and are better suited to more modern homes. If you have questions about what to plant, consult with the experts at your local nursery.

• Plant a tree. Yes, it sounds like an Arbor Day slogan, but planting a tree in your front yard pays off by helping cut energy costs in the summer (if strategically located to shade the house) and by adding value to the home. Not sure which tree to plant? Use the fun National Tree Benefit calculator to assist you with making the right choice. Just enter your zip code and the calculator will bring up a list of trees suited to your region and let you know the benefits of each.

7. Refurbish the Basement

Converting the basement into a finished room adds usable square footage to the home. Finishing basements is one of the best ways to increase your home’s value as it transforms unfinished basements – glorified storage space – into a usable, attractive room.
Consider the following basement bar. Who wouldn’t be willing to splash out thousands for the privilege of owning something like that?
Here is a short list of rooms your basement can become – and accoutrements to put inside it – if you choose to renovate it:

• Sports den – Big screen TV, sports memorabilia, overstuffed couches and cushy carpeting
• Lounge – Pool table, wet bar, dark hardwood floors and a poker table
• Children’s play area – Playset, soft furniture like beanbag chairs, arts and crafts table and bins and shelves for toys and books

8. Additional Storage

Most new homes come equipped with lots of storage. Older homes, on the other hand, tend to lack even some of the basic storage options, such as a coat or linen closet. If you lack the space to expand closets or other storage spaces or build new ones, consider redesigning the spaces you do have.
There are specialty stores now dedicated to nothing but storage solutions. Do-it-yourself projects may include adding a complete closet system or adding organization details to a pantry.

9. Additional Square Footage

Every 1,000 square feet added to a home raises the value by more than 3.3 percent, according to a 2003 study for the National Association of Realtors®.
While that percentage doesn’t sound significant, when you put it into numbers it makes a lot more sense. For instance, if your home is valued at $200,000, a 3.3 percent increase adds an additional $6,600 to the value.
Additionally, the 3.3 percent statistic can most likely be adjusted upward based on the age of the study. The study also claims that each additional bedroom adds 4 percent to the value of the home.

Each additional bedroom adds 4% to the value of the home.

If your laundry is located in the basement, the value of your home decreases by two percent, so if you plan on adding square footage to the home, build a laundry room on one of the upper floors.

10. Miscellaneous Home Improvements

There are many small items you can add to the home that buyers will perceive as adding value. Some of these include:

• Alarm systems
• Water filtration system
• Luxury touches such as an upgraded dishwasher, whirlpool bathtub and built-in wine coolers may peak the buyer’s interest. Luxury homeowners can take this a step further by adding an in-home theater and additional spa-like features to the bathrooms.

Home upgrades that pay off

“Any changes you make on your house now should increase your home value later,” says Kermit Baker, project director for the Remodeling Futures program at Harvard University. But which projects will yield the most bang for your buck? Take a look at this list, starting with the upgrades most likely to recoup your investment, and then enjoy that gleaming new kitchen.

1. Painting

Why it pays off: Paint provides dramatic results with little investment. If you decide to hire a professional to do the work, expect to pay $3,600 to $6,000 for the interior of an average American house (about 2,400 square feet). An exterior paint job will run $5,000 or more. Can’t decide on a color? Gerri Willis, the anchor of Open House on CNN, says that pale yellow homes tend to sell faster and for more money. Barbara Richardson, the director of color marketing for Glidden and a noted color-trend forecaster, explains, “Yellow is optimistic and inspirational. It gives people joy and the sense that brighter times are ahead.”

2. Adding Siding

Why it pays off: According to the 2007 Cost vs. Value Report, a study conducted by Remodeling magazine, fiber-cement siding (which is made of sand, cement, and cellulose fibers and costs an average of $13,200) is estimated to recoup about 88 percent (or $11,635) of a home owner’s initial investment. While vinyl can crack, split, and warp and aluminum tends to dent and fade, easy-care fiber cement holds up well against the elements and is resistant to fire, rotting, and termites.

3. Building a Deck

Why it pays off: A deck will provide you with more than a place to flip burgers and soak up the sun. “Buyers see a deck as offering a seamless transition from inside to out,” says Jerry Levine, president of the Levine Group, an architectural and construction firm in Silver Spring, Maryland. Experts suggest using natural, rustic wood. In 2007 wooden decks (as opposed to concrete or composite ones) reaped an impressive return on investment: Home owners who spent an average of $10,350 on lumber and labor could expect to recoup $8,840, or 85 percent of their costs.

4. Updating the Kitchen

Why it pays off: You really can’t go wrong with remodeling your kitchen, which can net up to 83 percent of the cost. “People know that renovating can be a nightmare, and potential buyers will appreciate that you did the dirty work for them,” says Vern Yip, a designer and the host of HGTV’s Deserving Design. “But stick with high-quality fixtures, like stainless-steel appliances and granite counters, and don’t pair them with a cheaper material, like laminate.” A word of caution: If your house is a tiny two-bedroom bungalow, don’t bother splurging on, say, a high-end stove. “You’ll never get your money back by installing fancy appliances in a smaller home,” says Leslie Sellers, vice president of the Appraisal Institute, an association of real estate–appraisal professionals in Chicago. And if an appliance overhaul isn’t in the cards, “you can easily make cosmetic updates on a kitchen that’s in decent shape,” says Steven D. Bullock, a designer in New York City and a certified member of the National Kitchen & Bath Association, in Hackettstown, New Jersey. For example, if your existing appliances are in good working order, coat them with electrostatic paint to give them a metallic or enamel-type finish. And you don’t have to rip out your cabinets, either.

5. Replacing the Windows

Why it pays off: If you’re experiencing cool and blustery weather…in your living room, it’s time to buy new panes, pronto. Not only are you losing precious heat but your utility bill could also be skyrocketing. “Energy-efficient windows eliminate drafts, so your home feels warmer,” says Sellers. Last year home owners who spent $11,400 on 10 three-by-five-foot insulated vinyl or aluminum-clad windows got an 81 percent ($9,240) return.

10 tips for homebuyers and sellers in 2014

Goodness, is it 2006 again? At the dawn of 2014, it feels like it. 

Homeowners enjoyed double-digit price growth in the first half of 2013, greatly exceeding experts' predictions of a year ago and even settling into pre-recession values in many markets. Though there was some softening in the second half, sellers remain in their element and are turning the screws on anxious buyers who fear further price spikes and escalating interest rates. New-construction home sales are up, previously underwater properties are in positive equity again and investors are turning their attention to "secondary markets" to find value. Economists expect house prices to rise another 4 percent to 5 percent in 2014, meaning remaining bargains will get even more sparse.
With that in mind, here are 10 tips befitting the up-market of 2014.

Sellers: Jump-start the process.You may be an avowed procrastinator, but if you want to sell a house this year, start planning now. The process, say sellers, always takes longer than expected. So get your home inspected now; there may be unseen major repairs to address. Declutter, clean closets and shelves, store extraneous possessions and furnishings and other stuff that might keep sellers from picturing themselves in your space. Attend an open house or two to get an idea of how to stage yours. And move along: Owners still waiting for the market to peak should beware that this real estate cycle may be shorter-lived than last.
Check mortgage interest rates available in your area.

Buyers: Be credit-ready.

There's a lot of competition out there for homes, so tarry not. Get your credit report and start repairing any blips. If your scores are below 620 or so, a conventional loan will be a challenge. But if they're under 740, you still might not get the best rates. Many buyers get a prequalification letter from the lender, but you can one-up them with a preapproval, which comes after a more thorough evaluation of your finances. A preapproval letter shows the seller that you're good to go and can close quickly.

Sellers: Vet your real estate agent, then follow the agent's advice.

Sellers lose time and money by hiring poorly. Interview several potential agents. You'll want a full-timer who is Web savvy and uses mobile technology, because at least 4 in 5 buyers view their homes first online. Your agent should be a proven performer in your submarket and be willing to walk you through the financial aspects of your deal. The more the agent knows about schools, commutes and other local details, the better. Once vetted, accept your agent's advice on pricing, marketing and negotiation.

Buyers: Adjust your negotiating expectations.

Lowball offers are off the table in this environment and could eliminate you from consideration. Respond to counteroffers quickly to keep other buyers from entering the picture; you don't want to encourage a bidding war. If one breaks out, be prepared to get fewer concessions and pay more money. And have a few other homes in mind so you can be willing to walk away if the price soars.
 Sellers: It's your market (finally) so make the most of it.At long last, it's a seller's market! While you're interviewing agents, be wary of those offering too-good-to-be-true price opinions because they may be trying to "buy" your listing. And don't jump at that first (seemingly) generous offer, especially if sellers are getting multiple offers. If you're getting your price and then some, give something back to the buyer in good faith, such as an early move-in date or some personal property you're not attached to. Never let the buyers' agents know what you're willing to do, though. Make them ask.

Buyers: Find life after foreclosure.

Have a foreclosure in recent years? Join the crowd. Though you might think you have to wait seven years to get another conventional mortgage, Fannie Mae, Freddie Mac and the FHA say they actually require just a three-year waiting period if the foreclosure was caused by extenuating circumstances. There are plenty of nonconforming lenders -- often called "shadow bankers" -- out there if you can endure a big down payment (around 20 percent) and above-market interest rates. Or consider a lease-purchase or lease-option where you pay the homeowner a monthly premium above your rent for the right to buy at a set price later.

Sellers: Hesitate to renovate.

We hear that newly renovated homes are easier sells, and that's true. So is it time to remodel that outmoded kitchen? Not if you plan to sell soon. According to remodeling surveys, the average renovation project returns only about two-thirds on investment. For example, a major bathroom remodel costing $15,000 yields about $10,000 in resale value. The same goes for a major kitchen remodel. In most cases, it would be cheaper to issue credits to buyers or drop your price a few grand. Lighter jobs like new doors are more practical and return about 85 percent. But feel free to spend a bit on paint (basic colors), curb appeal and fence replacement to enhance exteriors.

Buyers: Ask and you won't receive (an unpleasant surprise).

You'd be dismayed at the things sellers aren't obliged to disclose in most states, including on-premises felonies, suicide, murder or a neighboring sex offender. Don't be afraid to thoroughly question the selling party in writing before signing the contract. Some questions: Is there a cell tower, water tower, natural gas well, oil well or other non-residential construction scheduled to be built in this neighborhood (then define "neighborhood")? Is there commercial zoning on nearby vacant land? Is the yard prone to flooding? Are train whistles or other regular loud noises audible there? Did known criminal activity occur in the house? Have there been reported hauntings? Are there loud neighbors, dogs or other noise pollution? Are there registered sex offenders or other known criminals living nearby? If the selling party refuses to answer any of these questions, that's a bright red flag.

Sellers: Tailor your local game.

Folks who base their selling decisions on trends on cable news are often left wondering, "Why can't I sell at this price?" The truth is, all markets are different and all real estate is local, and prices can vary greatly even in adjacent subdivisions. Home prices are dictated largely by demand, land availability, foreclosures and employment. Most local real estate offices will provide market stats and at least a few recent comp sales in hopes of earning your business. Additional trend data can be found online or in local newspapers and business journals. A polite call or email to a local real estate appraiser might net more info or links to local statistics.

Sellers and buyers: Heed changing trends.

Pay attention to trends and react accordingly. Thinking of laying carpet? Agent surveys in the past few years show homes with hardwood floors or faux wood laminate floors are far faster sells. You still want to be in suburbia? Millennials don't. Numerous cities -- such as Austin, Texas; Portland, Oregon; and Minneapolis -- have watched this more environmentally conscious generation flock to "mixed-use" urban districts served by trendy cafes, nightclubs, bike paths, civic events and mass transit. For now, they're not buying condos, which haven't recovered like the single-family market. They're renting -- but watching the condo market ever so carefully.

Economic update for week ending February 21, 2014

Stocks were mixed this holiday-shortened week responding to a mixed bag of news. Inflation reports show inflation remains low. In January, overall prices rose 1.6%  from a year ago. Prices of most commodities rose modestly while the shelter index was up at 2.6%  compared to a year ago because rents are rising. 

 

The Dow closed out the week at 16,103.30 down -0.32%  from last week’s close of 16,154.39. The Nasdaq was up, ending the week at 4,263.41 up 0.45% from last week’s 4,244.03 close. The S&P 500 was down very slightly, closing the week at 1,838.63, down -0.13% from last week’s 1,838.63 close.

 

The  10-year Treasury note yield rate was down slightly to 2.73% after ending last week at 2.75%. It was 1.99% a year ago. 

 

Mortgage Interest rates rose slightly this week. The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate up to 4.33% from 4.28% last week.  The 15-year-fixed inched up to 3.35% from last week’s 3.33%. A year ago the 30-year fixed was at 3.56% and the 15-year was at 2.77% interest rates on loans over $417,000 are around 4.625% for 30 year fixed and 3.625% on 15 year fixed.

Low inventory continues to have a constraining effect on California home sales. The California Association of Realtors^® reported that closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 363,640 units in January, marking the third straight month that sales were below the 400,000 level and the sixth straight decline on a year-over-year basis. Sales in January were up 0.3% from a revised 362,430 in December but were down -13.8%  from a revised 421,780 in January 2013. Inventory at the higher end of the market, priced $1 million and higher did increase 11.1% from last year. The statewide median price of an existing, single-family detached home fell -6.2%  from December’s revised median price of $438,090 to $410,990 in January.  January’s price was 22.1% higher than the revised $336,650 recorded in January 2013, marking 23 consecutive months of year-over-year price increases and the 19th straight month of double-digit annual increases. The available supply of existing, single-family detached homes for sale rose in January to 4.3 months, up from December’s Unsold Inventory Index of 3 months. The index was 3.5 months in January 2013.  The median number of days it took to sell a single-family home also increased to 44.3 days in January, up from 40.2 days in December and from a revised 36.7 days in January 2013.

In Los Angeles County alone, the median sold price of existing homes was down -3.7% in January from December’s $439,830 to $423,570 which is up 21.1% from January 2013’s $349,720 median price. Total sales were down- 21.2% month over month and down -13.3% from January 2013.

Data from the National Association of Realtors^® showed that existing-home sales fell by -5.1%from December to January to a seasonally adjusted annual rate of 4.62 million the lowest level since July 2012. Home sales were also down -5.1% year over year. The cold weather, low inventory, and rising mortgage rates are cited as potential reasons for the lower numbers. Inventory improved modestly, up 2.2% month over month to 1.9 million homes and up 7.3% from January 2013. The current inventory supply rate is now 4.9 months, up from 4.6 months in December and 4.4 months a year ago. The median existing home price for all housing types nationwide in January was $188,900, up 10.7% from January 2013. The median time on market for all homes was 67 days in January, down from 72 days in December and 31%  of homes sold in January were on the market for less than a month. Existing-home sales in the West dropped -7.3%  to a pace of 1.01 million in January, and are -13.7% below a year ago. The median price for the West was $273,500, up 14.6% from January 2013.

The latest foreclosure data from RealtyTrac shows that one in every 1,058 U.S. homes received a foreclosure filing in January. Foreclosure filings are down -18% from January 2013 but up 8% from December 2013. The rise in foreclosure activity was caused by a surge in starts, properties just entering foreclosure, as well as scheduled foreclosure auctions. The report did show that foreclosure starts in California actually rose 57% from a year ago after 17 consecutive months of annual decreases.

 

The extreme weather that has hammered much of the country seems to have also impacted homebuilder confidence. The National Association of Home Builders/Wells Fargo Builder Sentiment Index is now 46, down from January’s 56 reading and the lowest level since May. Economists had been predicting a number similar to the one they saw in January. Generally a reading below 50 indicates that more builders see sales conditions as poor rather than good. Builders’ prediction for sales over the next six months also fell by six points to 54.

 

U.S. housing starts saw their biggest drop in nearly three years last month. The U.S. Census Bureau and the Department of Housing and Urban Development reported that single-housing family starts were down -16% in January to a seasonally-adjusted annual rate of 880,000 units below economists’ predictions of 950,000. This was attributed to the unusually cold weather gripping much of the country and in fact in the hard-hit Midwest, starts were down a record -67.7%.  Groundbreaking for single-family homes, the largest segment of the market, fell 15.9 percent to a 573,000-unit pace in January, the lowest level since August 2012. Permits to build homes were down by -5.4% in January, the largest drop in since June.

The National Housing Trend Report from realtor.com® showed that the median list price for January rose 8.3% compared to last year but only up 0.1% from the previous month. The number of properties for sale was up 3.1% for the year but down -3.3% from the previous month. The median age of inventory was essentially unchanged. For the Los Angeles-Long Beach MSA the median price was $449,000 up 25.1% from a year ago but down -0.20% from the previous month. The amount of total listings was 18,600 up 3.40% from the previous year and up 5.10% from the previous month. The median age of inventory was 74 days, down -5.1% from the previous year and down -1.3% from the previous month.

We are heading into the selling season which will be a welcome relief when it comes to real estate related data. Expect to see the month over month indicators pick up after March! Not only do they pick up at that time every year, we are beginning to see the pick up in the marketplace.  

While inventory levels are still near record lows we are beginning to see many more homes listed in many of our markets. That alone should increase the number of sales as we still see stronger demand than inventory supply which is evident by the high number of multiple offers. Obviously, not all homes are getting multiple offers, there is a limit to how high a home can be priced. Homes that are not well priced are sitting on the market.