A Fix-Up Strategy Works in Long Run: If You Have Time on Your Side, Improve and Enjoy Your Home

By Kathleen Lynn Print Article

RISMEDIA, October 17, 2009—(MCT)—You’re thinking of selling—but not just yet. Let’s say you’ve got a five-year plan to prepare an older, lived-in house for sale. 

Maybe you’re faced with tattered carpets, battered appliances and dingy paint. Or maybe we’re talking about truly scary problems, such as asbestos, underground oil tanks or leaking roofs. 

What should you take care of first? What can wait? What can be ignored altogether? And how do you keep costs under control? 

“Basically what we’re talking about is good, solid preventive maintenance on your home,” said Barbara Weissmann of Friedberg Properties in River Vale, N.J. She recommends that homeowners looking at a sale down the road hire a home inspector to check out the house. “You’re looking to discover defects that you can fix over time,” she said. She and other experts say it’s possible to get a house ready for market without spending a fortune, especially if you have time on your side. And if you’re going to fix up the property anyway, Weissmann said, “why not do it several years in advance so you can enjoy it?” 

The first jobs to tackle include anything that’s a danger to your health or the house’s future. If the roof is leaking, for example, that will damage the ceiling, walls and floors below. Funky wiring or leaky plumbing? Deal with it sooner, not later. “The biggest killer of a home’s value is no maintenance,” Weissmann said.

If there’s flaking asbestos insulation on the pipes, that’s a health hazard, and can also delay or kill a sale down the line. Don’t try to remove it yourself; get a licensed contractor. 

You should also make sure you have working smoke and carbon monoxide detectors. Check with your town; some require that at the time of sale, the alarms must be wired into the home’s electrical system, a job that requires an electrician. Other municipalities will accept battery-operated alarms. Either way, you also want these in place for your own safety, along with a fire extinguisher in the kitchen. 

When you’re ready to sell, the buyer will generally require that certain major issues be addressed. Better to handle them now than risk delaying or losing a deal later. Aside from asbestos, another big environmental concern is an underground oil tank, which can leak. Jeana Cowie, a RE/MAX agent in Oradell, N.J., recently advised a couple who plan to sell in a few years to deal with the tank now. “I felt that buyers will skip looking at the home because of oil heat,” Cowie said. “And a new gas furnace is a huge positive for all homes.” Maybe you’ve already dealt with the oil tank. But if it was only abandoned in place, be prepared: a buyer will often seek to have it taken out because of concerns that the job was not done properly, said Louis Chapman, a real estate lawyer in Wayne and Teaneck, N.J.. You might want to have it removed before putting the house up for sale. Check for radon gas and deal with it if it’s there; this is something a buyer will also insist on. Try your state department of environmental protection for testing and correction companies. 

Basement moisture often is an issue in home sales, said Dominick Laurita of Interstate Home Inspections in Califon, N.J. It can lead to mold, which can scare buyers away. The most common cause: gutters that aren’t draining rainwater away from the house. “It’s a simple fix,” said Laurita. 

A termite problem also could derail a sale, so you want to act quickly if you find evidence of that. Though inspectors can’t see termite damage hidden behind walls, the insects sometimes leave visible trails. Keep the paperwork on all these jobs to show an eventual buyer. 

Once you get past the most pressing projects, there are a cluster of jobs where you have to weigh the benefits against the costs. In general, home sellers get back only 60% to 80% of the money spent on home improvements, according to Remodeling magazine. “You’re not getting a dollar back for every dollar you spend,” Weissmann said. “Don’t do any remodeling whatsoever, but anything that has to be replaced should be replaced,” said Dick O’Connor, a Dumont, N.J., real estate broker. “You can spend $50,000 to remodel and get only $30,000 back. Just be sure everything is in working order.” 

Michael Fitzpatrick, a Hackensack, N.J., real estate lawyer, said it’s okay to leave some issues to be handled in a negotiation between the seller and buyer, rather than spend a lot to upgrade the house before you even put it on the market.

Most experts recommend against major kitchen or bath renovations. But less ambitious upgrades, such as replacing scratched countertops or outdated appliances, could make sense, they said. “You’ve got to make it look good,” said Maria Rini, a RE/MAX agent in Oradell. “But the spruce-up bill can be a lot less than you imagine.” 

When it comes to cost-effective fix-ups, most housing experts have three favorites: clear out clutter, paint the walls and rip up old carpet. If the wood floors under the carpet are in good shape, great; otherwise, they can be refinished at a cost that typically ranges from $1.50 to $3 a square foot. Bob Olson, a contractor with Home Resources in Ridgefield Park, N.J., said updating doors, moldings and trim can give a home “a fresh new look” at a reasonable cost. 

Improving the landscaping, especially the front yard, is crucial. But it doesn’t have to look like a manicured estate. “Clean up the flowerbeds and trim back the bushes to expose the house,” Rini said. Plant flowers, especially in the front, for curb appeal, advised Barbara Ostroth, a Coldwell Banker agent in Oradell. In winter, you can plant cabbage plants with colorful leaves. 

If your furnace or hot water heater dies, obviously you must replace it. If those items are old but still working, however, most real estate experts advise that you leave them in place and adjust the home price to reflect their age. “If the heating system is old but works, don’t touch it,” O’Connor said. 

One option is to buy a home warranty when you’re ready to sell. A warranty “is a great way to overcome buyers’ objections to older appliances, pipes, electric systems, furnaces and hot water heaters,” Ostroth said. 

New, energy-efficient windows? That’s a costly job that many sellers would rather just leave to the buyers, even it means getting a lower price for the property. “If you’re getting out of the house you would almost never redo the windows, unless they’re rotted through,” Rini said. 

If you decide to renovate a kitchen or bath for your own enjoyment, keep resale in mind. “Try to pick something that is salable. Keep it neutral; don’t put in a green countertop,” said Margrit Vogler of Margrit Vogler Properties in Oradell.

Finishing a basement could be worthwhile if the house is small and there’s no other family room or play space for the kids. But otherwise, most real estate advisers recommend just tidying up instead, by throwing out clutter and painting the walls and floor. 

(c) 2009, North Jersey Media Group Inc.

Distributed by McClatchy-Tribune Information Services.

Short Sale Reforms Could Speed Recovery – RE/MAX Chairman Lauds Government Action

RISMEDIA, December 3, 2009—The U.S. Treasury Department recently announced new guidelines to the short sale process that could speed the housing market recovery, a move RE/MAX Executives have been promoting in Washington D.C. for the past year.

Short sales, transactions that can occur when a lender accepts the sale of a home at a price below the actual amount owed on the home, have become an increasing part of the real estate business as besieged homeowners look for alternatives to foreclosure. RE/MAX Chairman and Co-founder Dave Liniger has promoted a streamlined short sale process since foreclosures began flooding the market and has presented specific proposals to government officials.

Liniger believes that a streamlined short sale process would help many families avoid the trauma of foreclosure and help the housing market remain on the road to recovery. “Short sales are absolutely critical as more and more people continue to face foreclosure and as our housing market struggles to recover,” said Liniger, who’s closing out a 28-city, cross-country speaking tour encouraging thousands of agents to become educated on the short sale process. “While not all of our recommended changes were implemented, the Treasury’s new guidelines go a long way in incentivizing both lenders and homeowners to work together to keep homes from falling into foreclosure.”

Until now, the short sale process has been cumbersome for all involved and took upwards of eight to ten months for a transaction to close. But, through the Foreclosure Alternatives Program and the recently issued guidelines, short sale transactions will increase dramatically, which means less vacant and vandalized properties in neighborhoods across the country.

The new guidelines enhance the short sale process in several ways:

-Speeds up the process – Mortgage servicers have 10 days to say yes or no to a short sale request, and after the transaction is complete, the borrower could be completely released from debt.
-Provides financial incentives – Borrowers are eligible to receive a $1,500 moving allowance if they sell their home through a short sale, and mortgage-servicing companies will in turn receive $1,000 for every completed short sale transaction.
-Limits proceeds to second lien holders – Second mortgage holders can only receive up to $3,000 of the sales proceeds to release their liens and investors who hold the first mortgages can collect up to $1,000 for allowing such payoffs.

The program also facilitates the transfer of ownership by a borrower through a “deed in lieu of foreclosure,” another helpful alternative to assist home owners forego a foreclosure.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

New-Home Sales Rise 6.2% in October 2009

By Ruth Mantell

RISMEDIA, December 1, 2009—(MCT)—Sales of new homes rose 6.2% in October 2009 on strong results in the South, the Commerce Department estimated recently.

The rise in U.S. new-home sales to a seasonally adjusted annual rate of 430,000 was well above the 390,000 pace that economists surveyed by MarketWatch had expected.

Sales rose 23.2% in the South. By contrast, monthly sales fell by 20% in the Midwest, and by 5.1% in both the Northeast and the West.

“On the surface, one would have assumed that the surge in sales activity was induced by the rush of first-time home buyers trying to get ahead of the originally scheduled end of the first-time homebuyers’ tax credit at the end of October,” wrote Millan Mulraine, economics strategist with TD Securities, in a research note. “However, given the lopsided regional dimension to the increase in home sales, we are not entirely convinced that this was the only story.”

The government cautions that its housing data are subject to large sampling and other statistical errors, with large revisions common. It can take up to six months for a trend in sales to emerge.

The pace of new-home sales in September also was revised slightly higher, to a level of 405,000. New-home sales are up 5.1% compared with a year ago, the government’s data showed.

The supply of homes on the market fell to 239,000 in October, representing a 6.7-month supply.

The median sales price in October hit $212,200, compared with $213,200 in the prior year.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

Affordable Prices Draw Investors to Real Estate

RISMEDIA, November 21, 2009—Affordable prices and foreclosures are attracting investors to the housing markets today, and the number of consumers interested in investing in real estate has doubled since March 2009, according to the new Move.com Homeownership Survey recently released. Low prices and foreclosure bargains have also become the most important reasons motivating buyers today to purchase a home.

According to the Move.com survey, one out of eight (12.1%) homebuyers today plan to purchase a home as an investment property, compared to 5.6% seven months ago. Of those interested in buying a home for investment, 15.8% were men and 8.1% were women.

Foreclosure buyers, accounting for 25.3% of consumers interested in purchasing a home, are a major source of potential investment activity for today’s housing market. Forty-two percent (42%) of potential foreclosure buyers regard their purchases as investments, while 57.6% plan to live in the foreclosed home themselves. Foreclosure investors, according to the Move.com survey, intend to convert their foreclosures into rentals (13.2%), fix them up for re-sale (11.3%), or house a family member until the home can be sold at a profit (17.4%). Of the 42% interested in purchasing a foreclosure as an investment, survey respondents ages 35 to 49 (52.6%) were by far the largest demographic.

Expected Profits Gained From Purchase Discounts and Appreciation
The Move.com survey found foreclosure buyers expect to profit from both deeply discounted purchase prices, as well as healthy appreciation rates over five years. Most foreclosure buyers (58.2%) expect to pay 20% or less than market price for a foreclosure, while 38.5% expect a 25% or greater discount. While, 73% expect their properties to appreciate ten percent or more in five years, 28% expect their purchases to appreciate 20% or more during that same investment horizon.

According to the Federal Housing Finance Administration’s Purchase Index, homes have appreciated an average of 15% nationally since 2004. According to the Move.com survey, the most important reasons motivating prospective home buyers and investors to purchase a house include concerns that prices are as low as they will go (23.6%) and the desire to take advantage of foreclosure bargains (18.7%). The second most important reasons motivating property purchases include taking advantage of the great selection of homes for sale in their community (21.2%) and concern interest rates will rise (14.2%).

“This latest Homeownership Survey validates what many had hoped to see in the housing markets – affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first-time home buyers to enter the market,” said Move, Inc., Chief Revenue Officer, Errol Samuelson. “In today’s environment, regardless of whether you’re an investor or interested in purchasing a home to live in yourself, residential real estate is a more attractive investment today for many than it has been in recent years.”

Fear of Foreclosure Fades
While foreclosure filings reached record levels in the third quarter in 2009, with one in every 136 American homes receiving a foreclosure filing, homeowners today are actually less concerned that they or someone they know may be facing foreclosure as compared to seven months ago. In March 2009, 52.5% of all survey respondents said they were concerned that they or someone they know may face foreclosure in the next 6 to 12 months. That number dipped slightly to 45.1% in October 2009. According to the survey, fear of foreclosure today is greater among women (49.3%), with people earning $50,000 or more annually (43.9%), and with people living in the South (42.6%) and West (55%). The six states today with the highest rate of foreclosures are California, Florida, Arizona, Nevada, Illinois, and Michigan. These six states accounted for 62% of the nation’s total foreclosure activity in the third quarter of this year.

For more information, visit www.move.com.

Existing-Home Sales Surge in Many States in Third Quarter, Metro Prices Moderating

RISMEDIA, November 16, 2009—Most states continued to experience rising existing-home sales in the third quarter 2009, with prices moderating in many metro areas, according to the latest survey by the National Association of Realtors®. Total state existing-home sales, including single-family and condo, increased 11.4% to a seasonally adjusted annual rate of 5.30 million units in the third quarter from 4.76 million units in the second quarter, and are now 5.9% above the 5.01 million-unit pace in the third quarter of 2008. Sales increased from the second quarter in 45 states and the District of Columbia; 28 states and D.C. saw double-digit gains. Year-over-year sales were higher in 32 states and D.C.

Lawrence Yun, NAR chief economist, said the tax credit is a significant factor. “We can’t underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector,” he said. “It’s given buyers the confidence they needed to get off the fence and take advantage of extremely affordable housing conditions. The buying conditions this year are the most favorable on record dating back to 1970, but the tax credit is allowing buyers to set aside any reservations about waiting for a better deal.”

During the third quarter, 123 out of 153 metropolitan statistical areas reported lower median existing single-family home prices in comparison with the third quarter of 2008, while 30 areas had price gains.

The national median existing single-family price was $177,900, which is 11.2% below the third quarter of 2008; the median is where half sold for more and half sold for less. Distressed sales- foreclosures and short sales- accounted for 30% of transactions in the third quarter, which continued to weigh down median home prices because they sell at a discount relative to traditional homes.

“The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market,” Yun said. “Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 5.16% in the third quarter from a record low 5.03% in the second quarter, but was dramatically lower than the 6.32% average rate in the third quarter of 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said he is encouraged by recent actions in Congress. “Extending and expanding the tax credit to more buyers through the middle of next year is the right medicine,” he said. “Congress understands the impact of housing on the economy, so consumers who aren’t able to complete a transaction before the end of this month now have a second chance but must have a contract in place by April 30, 2010.”

The biggest sales gain between the second and third quarters was in North Dakota, up 42.3%; followed by Rhode Island which rose 26.5%; and Pennsylvania, up 25.6%. The largest single-family home price increase in the third quarter was in the Cumberland area of Maryland and West Virginia at $122,100, up 19.2% from the third quarter of 2008. Next was the Davenport-Moline-Rock Island area of Iowa and Illinois, where the median price increased 14.3% to $115,600, followed by Oklahoma City, at $144,100, up 9.1% from a year ago.

“The wide range of market performance and reversals around the country, ranging from double-digit gains to double-digit losses in both sales and prices, underscores just how local real estate truly is,” Yun said. “The wide changes and mix of numbers also indicates a market in transition, hopefully to one that is becoming more balanced and stable.”

Median third-quarter metro area single-family home prices ranged from a very affordable $61,400 in the Saginaw-Saginaw Township North area of Michigan to $566,000 in the San Jose-Sunnyvale-Santa Clara area of California. The second most expensive area in the third quarter was San Francisco-Oakland-Fremont at $538,100; followed by the Anaheim-Santa Ana-Irvine area of California at $498,800.

Other affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $70,700, and Lansing-East Lansing, Mich., at $86,600.

In the condo sector, metro area condominium and cooperative prices- covering changes in 55 metro areas- showed the national median existing-condo price was $178,000 in the third quarter, down 15.4% from the third quarter of 2008. Four metros showed annual increases in the median condo price and 51 areas had declines.

The metros experiencing condo price gains were San Diego-Carlsbad-San Marcos, at $215,100, up 13.3%; followed by the Cincinnati-Middletown area, up 2.0% to $119,700; the Toledo, Ohio, area, where the median price of $130,400 rose 1.7% from the third quarter of 2008; and the Indianapolis area at $114,400, up 0.8%.

Metro area median existing-condo prices in the third quarter ranged from $67,600 in Las Vegas-Paradise, Nev., to $432,800 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was New York-Wayne-White Plains at $297,500, followed by Boston-Cambridge-Quincy at $293,700. Other affordable condo markets include Reno-Sparks, Nev., at $81,300 in the third quarter, and Jacksonville, Fla., at $91,600.

Northeast

Regionally, existing-home sales in the Northeast surged 16.7% in the third quarter to a pace of 930,000 units and are 6.9% higher than a year ago. The median existing single-family home price in the Northeast declined 9.4% to $244,500 in the third quarter from the same quarter in 2008. The best price gain in the region was in Buffalo-Niagara Falls, N.Y., where the median price of $119,700 rose 4.8% from the third quarter of 2008; followed by Manchester-Nashua, N.H., at $237,600, up 2.6%; and the Pittsburgh area, where the median price rose 1.5 percent to $124,600.

Midwest

In the Midwest, existing-home sales jumped 13.2% in the third quarter to a pace of 1.20 million and are 5.2% above a year ago. The median existing single-family home price in the Midwest was down 5.5% to $150,200 in the third quarter from the same period in 2008. After Davenport-Moline-Rock Island, the next strongest metro price increase in the region was in Cedar Rapids, Iowa, where the median price of $145,700 was 7.6% higher than a year ago; followed by Bismarck, N.D., at $157,200, up 7.5%; and Ft. Wayne, Ind., where the median price rose 6.9 percent to $102,500.

South

In the South, existing-home sales rose 11.3% in the third quarter to an annual rate of 1.97 million and are 5.9% higher than the third quarter of 2008. The median existing single-family home price in the South was $160,000 in the third quarter, down 7.9% from a year earlier. After Cumberland and Oklahoma City, the next strongest price increase in the region was in Shreveport-Bossier City, La., at $152,300, up 8.6% from the third quarter of 2008; Jackson, Miss., at $141,200, up 4.6%; and Durham, N.C., where the median price rose 3.6% to $184,300.

West

Existing-home sales in the West increased 5.6% in the third quarter to an annual rate of 1.19 million and are 4.6% above a year ago. The median existing single-family home price in the West was $224,000 in the third quarter, which is 16.4% below the third quarter of 2008. The best metro price performance in the West was in Yakima, Wash., where the median price of $158,400 rose 2.7% from a year earlier; the Denver-Aurora area at $229,100, up 1.8%; and the Kennewick-Richland-Pasco area of Washington, where the median price rose 0.7% to $172,200.

For more information, visit www.realtor.org.

Housing Affordability Hovers Near Record-High Level for Third Consecutive Quarter

RISMEDIA, November 23, 2009—Nationwide housing affordability, bolstered by affordable interest rates and low house prices, hovered for the third consecutive quarter near its highest level since the series was first compiled 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 70.1% of all new and existing homes sold in the third quarter of 2009 were affordable to families earning the national median income of $64,000, down slightly from a near-record 72.3% during the previous quarter and up from 56.1% during the third quarter of 2008.

“At a time when housing is at its most affordable, we applaud the recent actions taken by Congress and President Obama to stimulate housing by extending the federal tax credit beyond its Nov. 30 deadline and expanding it to a wider group of eligible home buyers,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “With interest rates now lower than last quarter, the tax credit will encourage even more home buyers to enter the market and help stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices.”

Indianapolis was the most affordable major housing market in the country during the third quarter, a position the metro area now has held for 17 consecutive quarters. Almost 95% of all homes sold were affordable to households earning the area’s median family income of $68,100.

Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa., and three Michigan metropolitan areas, Detroit-Livonia-Dearborn; Warren-Troy-Farmington Hills; and Grand Rapids-Wyoming.

Five smaller housing markets posted even higher affordability scores than Indianapolis, with Kokomo, Ind. outscoring all others. There, 96.7% of homes sold during the third quarter of 2009 were affordable to median-income earners. Other smaller housing markets near the top of the index included Springfield, Ohio; Bay City, Mich.; Mansfield, Ohio; and Elkhart-Goshen, Ind.

New York-White Plains-Wayne, N.Y.-N.J., was the nation’s least affordable major housing market during the third quarter of 2009, the New York metro area’s sixth consecutive appearance at the bottom of the list. Slightly more than 19% of all homes sold during the third quarter were affordable to those earning the New York area’s median income of $64,800. 

The other major metro areas near the bottom of the affordability scale included San Francisco; Honolulu; Santa Ana-Anaheim-Irvine, Calif.; and Nassau-Suffolk, N.Y.

San Luis Obispo-Paso Robles, Calif. was the least affordable of the smaller metro housing markets in the country during the third quarter. Others near the bottom of the chart included Ocean City, N.J.; Santa Cruz-Watsonville, Calif.; Santa Barbara-Santa Maria-Goleta, Calif.; and Brownsville-Harlingen, Texas.

For more information, visit www.nahb.org.

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