Home remodeling to stay or sell

home remodeling
Home remodeling (infographic from census.gov)

The Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts expanded growth of home remodeling and renovations through most of 2018.  That’s a good indication that the economy has picked up and the many homes that fell in disrepair after the Great recession are getting the much-needed attention to extend their functionality.

It wasn’t that long ago when Kermit Baker wrote about a crisis of the declining housing stock due to extensive deferred maintenance (The Return of Substandard Housing; housingperspectives.blogspot.com; February 27, 2013).  The article written for the Joint Center for Housing Studies of Harvard University highlighted the considerable reduction of home maintenance as measured by home owner “maintenance spending” during the Great Recession.  This seemed to be a low point for the country’s housing stock.  The 28 percent decrease in maintenance spending between 2007 and 2011 essentially nullified the renovation spending during the housing boom.

Home remodeling activity
Home remodeling activity Q3-2017 (graph from jchs.harvard.edu)

The Remodeling Futures Program releases a quarterly data for Leading Indicator of Remodeling Activity (LIRA). The LIRA is a “a short-term outlook of national home improvement and repair spending to owner-occupied homes.”  The most recent data indicates that home remodeling and repair spending will escalate from the fourth quarter of 2017 into the third quarter of 2018, estimating an increase from 6.3 percent to 7.7 percent.  The significant increase in home improvement spending is attributed to a strengthening economy, home equity gains, and low home re-sale inventory.  Chris Herbert, Managing Director of the Joint Center for Housing Studies is optimistic about maintenance spending.  Herbert said:

“Recent strengthening of the US economy, tight for-sale housing inventories, and healthy home equity gains are all working to boost home improvement activity…Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance.

The current LIRA data doesn’t include the effects of recent hurricanes.  It is expected that those recent disasters will significantly increase the anticipated projected maintenance spending.

Home owners really have no choice but to spend on renovations, remodeling and repairs, especially if they are planning on selling their home.  Most home buyers want a turnkey home, where the home is fresh and new and offers minimal maintenance during the first year of ownership.  The desire for a turnkey home is probably why new home sales are at a ten-year high.  This week, the US Census Bureau (census.gov) released new home sale data that indicates a month-over-month increase of 6.2 percent, and a year-over-year increase of 18.7 percent!  To compete with other re-sales and new homes, home sellers must factor in the cost of home renovations.

There are many home owners who still can’t afford to move.  The fact that many are still priced out of the move-up market has been a major issue holding back the housing market.  This phenomenon is also responsible for continued low home re-sale inventories.  As a result, many home owners are staying in their homes much longer than anticipated.  The National Association of Realtors indicated in the Home Buyer and Seller Generational Trends Report 2017 (nar.realtor) that home buyers anticipate staying in a home about twelve years.  This is an increase of about five years compared to a decade ago.

Although many home owners still can’t move, they are deciding to do home “make overs.”  The make overs will give their homes a fresh look, that typically include new floors and paint schemes.  Additionally, kitchen and bathroom renovations modernize the home.  However, home owners needing more room, are opting to expand their homes to give them larger spaces.  Some home owners are going beyond the basics and creating different spaces by moving walls.

Regardless of your reasons for home renovations and repairs, home improvement experts recommend to create a budget and stick to it, and always hire licensed contractors.

Copyright© Dan Krell
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Winter ready home

Winter Ready Home
Be Winter Ready (infographic from cdc.gov)

After several years of brutal winter weather, we were given a reprieve of mild weather last year.  The warm weather trend has moved into the fall with some balmy days.  But you shouldn’t become complacent thinking that winter weather is a long way off.  Yes, it’s the time of year to take stock in your home and prepare for winter.  Is your home winter ready?

Of course, at the center of your winter ready home is the comfort your heating system delivers.  Regardless of the type of heating system you have, have a licensed a licensed professional inspect your home’s furnace.  The inspection can identify any issues that can cause your furnace to be inefficient and/or fail.  The inspection can also root out potential safety issues, such as carbon monoxide buildup.  If the system does not need to be repaired or replaced, the HVAC professional will tune the furnace to optimize the its performance.

Another thought for being winter ready is the fireplace.  Unfortunately, many homeowners overlook fireplace and chimney maintenance.  However, putting off fireplace and chimney maintenance can become a safety issue.  Wood burning fireplaces should be cleaned, inspected, and repaired if necessary.  Gas fireplaces require a licensed technician to inspect the pilot and electronics in the firebox.  Both wood and gas fireplaces require flue and chimney maintenance.  Creosote buildup can combust and cause a chimney fire.  Birds and other animals or debris can lodge in the chimney and prevent proper venting.  Defective fireplaces or improperly vented fireplaces can produce excess carbon monoxide in your home, which can be deadly.

You’re not winter ready unless you’re prepared for emergencies.  Test the smoke and carbon monoxide detectors in your home, replace them if necessary.  If your heating system and/or fireplace burns liquid, solid, or gas fuel, then you need to have carbon monoxide detectors installed.  Carbon monoxide is invisible, odorless and tasteless and prolonged exposure can result in brain damage and death.  Experts recommend installing carbon monoxide detectors throughout the home, primarily near bedrooms.

Hose bibs are often ignored because many people don’t use them, or are not aware of how to maintain them.  However, hose bibs that are not winter ready are probably the number one source of winter pipe leaks.  If not winterized properly, the pipes leading to the hose bibs can freeze and expand.  This expansion can cause the pipe to burst, creating an unwanted winter leak.  If you’ve never winterized the hose bibs, or are not sure how, contact a licensed plumber.  Attempting to operate pipe valves that have been idle or not operated in a while can create or exacerbate an undetected leak.

Make sure your home’s roof system is winter ready.  Have a licensed professional inspect your home’s roof.  If shingles are not secure, melting and freezing snow can create ice dams.  Ice dams can lift and dislodge shingles allowing water to penetrate your home.  Water penetration from ice dams can cause damage to your home’s interior.  Besides damaging ceilings, water penetration can also damage walls and windows.

While your roof is being checked out, inspect the roof flashing, gutters and downspouts.  Roof flashing is often ignored, however is as important as shingles.  Roof flashing is used to transition from shingles (or other roofing) to other materials (such as brick, metal or PVC).  The flashing prevents water to leak between the roof and chimney or vent pipes.

Clean and repair clogged gutters and blocked downspouts.  Poorly maintained gutters and downspouts won’t allow for proper drainage of water from snow and rain.  Improper drainage can allow water to penetrate the foundation, creating structural and mold issues.

Preparing for winter will reduce the probability of having surprises.  Being winter ready will allow you to enjoy the winter months in your own winter wonderland.

Copyright© Dan Krell
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Misguided house makeover

house makeover
House Makeover (Infographic by Allianz Australia Home Insurance allianz.com.au)

Do you really need to spend money to make money?  Deciding what renovations and updates to make prior to your home sale can be tormenting.  It’s easy enough to say that your home needs a facelift; but, the repairs, updates, and painting costs money – and usually lots of it.  The suggestion of making renovations and updates to your home before you sell is everywhere, it’s on TV, the internet, and magazines.  And if you ask friends and real estate agents, they will also give you a list of “must do’s.”  Regardless of how you decide to do a house makeover before the sale, chances are that you’re not doing it right.

There is no doubt that many home buyers are looking for a turn-key home.  If your home is not “out of the box brand new,” you probably need to freshen it up, as well as make some repairs and updates.  But before you embark on the house makeover by making those renovations, you need to ask yourself two important questions: “How much money can I realistically allot for a makeover?” and “How much am I expecting to net from my home sale?

Does a house makeover really get you top dollar? Spending money on renovations will certainly make the home sell faster, but not necessarily make you more money.  And there is no guarantee that the house makeover renovations you make are to home buyers’ tastes.  So if you’re goal is to get top dollar, don’t look at the sale price.  Instead keep your eye on your estimated net (the amount you’re left with after the sale minus total renovation costs).

Of course, the best way to maintain your home’s value is to perform regular maintenance.  It would certainly make the home prep easier too!  But the reality is that many home owners defer maintenance until they feel it’s absolutely necessary.  Deferring maintenance can actually cost more in repairs down the line, and lower your home sale price.  Spending money to correct all the years of neglected repairs and updates prior to the home sale won’t necessarily get you top dollar.

Not all buyers are looking for renovated homes.  One of Stephen B. Billings conclusions in his recent research (Hedonic Amenity Valuation and Housing Renovations; Real Estate Economics; Fall 2015, 43:652-82) was that during the past “healthy” housing market, there was a balance between renovated and non-renovated homes that sold.  However, he also found there was an increase in renovated home sales during the housing downturn of 2007.

Selling your home “as-is” would certainly decrease your sale price, but could net you the same or even more if weighed against extensive renovations of the house makeover.  Consider that you would only recoup a fraction of the cost of a minor kitchen and bathroom remodel; which averages about $20,122 and $17,908 respectively (according to 2016 Cost vs Value Report; remodeling.hw.net).

Concentrate on the basics of decluttering first. Decluttering can make your home look different and feel larger.  Decluttering can set the stage for fo you decide on renovations, and maybe even home staging.

If you decide on freshening up your home before the sale, start with the basics.  Focus on deferred maintenance, and make necessary repairs.  Consider a fresh coat of paint, and maybe new carpets.  Wood floors don’t necessarily have to be replaced or sanded; flooring professionals use state of the art processes to “renew” wood floors.

If you decide on a house makeover, focus first on making repairs and freshening your home. Work out a budget and get several quotes from licensed contractors.  Don’t automatically go for the cheapest quote, even if you’re on a tight budget.  Focus on quality, even if it means limiting the scope of work.  Poor workmanship can sabotage your home sale by making your home look shabby and in need of additional repairs and updates.

Copyright © Dan Krell
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Property Brothers option to home buying

The Property Brothers option
The Property Brothers option when buying a home – home improvement infograhic (from census.gov)

If you’re looking for the perfect turn-key home, you may find that the already limited home inventory is further limited by the many homes with deferred maintenance and those that are in need of updates.  If you’re like the many frustrated home buyers in today’s market, you may decide to take the route of buying a home that includes the Property Brothers option.

As you know, HGTV’s Property Brothers is one of the most popular real estate shows on cable.  What makes the show work is the concept of transformation; creating a model home from one that is crying out for TLC.  Of course, the magic of TV makes it seem easy; home buyers appearing on the show put their trust into the dynamic duo to find the right home and to make it perfect.

A warning, however, this process is not for everyone.  Undergoing this type of project (buying and rehabbing a home) is taking an already exasperating process and making it an emotional and financial challenge.  It is also a time consuming, as you’re totally involved – from buying to rehabbing the home.  Your experience may be similar to those on TV, nevertheless it is more likely to feel like the movie “The Money Pit” or somewhere in between.

Unlike the Property Brothers, you don’t need your real estate agent and your contractor to know each other.  Each has a distinct role; one is helping you acquire the home, and the other is remaking it.  However, it’s a good idea to make sure each is licensed and experienced in this type of process.  Ask for references; some contractors will even have a portfolio of their work.

Before you begin taking the Property Brothers option, make sure you have the funding and your real estate agent and contractors are ready for action.

Talk to a lender about a renovation loan.  Besides providing the money to buy the home, a renovation loan will provide funding for renovations.  Loan programs and mortgage limits vary, so it’s a good idea to get qualified before you write a contract to buy a home.  Make sure your contractor can provide details about the renovation, as the underwriter will review the plans.  Consider a FHA 203K program, which also offers a “streamline” version for less expensive renovations.

Working with a top notch real estate agent is key in not only finding a home, but also negotiating a price.  The ability to think outside the box is very helpful in this phase.  They should be able to find the “diamond in the rough,” that provides suitable space at the right price.  If you’re communicating well with your agent, they will understand your requirements.

Once you identify a home (and before you write the offer), meeting with the contractor will determine if your vision is possible, and its price.  Be realistic and flexible.  Be prepared for bad news and to move on to another home.  Sometimes the home needs too much work and/or the cost of the renovation could be beyond your budget.

Even if you have lots of cash to spare, it’s recommended that you start by creating a budget.  Besides the acquisition cost, consider the renovation costs and carrying costs (if the project is long term).  Also decide on your limitations.  You may decide on limiting renovations to kitchen and bathrooms; or you could broaden the project to be more ambitious.  Consider creating a short term and long term plan for the house; focusing on critical repairs immediately, and making other updates over time.

Copyright © Dan Krell

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Home owner savvy

Home owner savvy
Home maintenance schedule (from homezada.com)

The playwright Oscar Wilde must have been fond of the idiom “nowadays people know the price of everything and the value of nothing,” because he used it in back to back works; first in The Picture of Dorian Gray, and then a variation in Lady Windermere’s Fan.  Today, corrupted forms of Wilde’s phrase are wrongly attributed or misquoted – but the point is well made.  More psychologist then poet, Wilde seemed to characterize a core consumer behavioral trait of seeking short term gain vs long term value – which applies to home owner savvy!

Consumers in the 19th century were much like consumers today, such that they sought out to get a bargain; often times overlooking the costs from which it comes by.  And what may have been in Wilde’s time a conflation of price and value, is still common today – especially for home owners.  While many home owners pride themselves on their frugality in home maintenance, they don’t realize the consequences of their poor choices when it comes time to sell their home.  Home owner savvy is also knowing about value.

Today’s home owner’s frugality comes honestly as a result of the great recession.  A McKinsey Global Institute consumer sentiment survey from a year and half ago sums it up in the title: America the frugal: US Consumer Sentiment Survey (Martinez, Motiwala, and Sher; mckinsey.com; December 2014).  Martinez, Motiwala, and Sher wrote in their economic analysis that “…Multiple years of austerity have left consumers with altered views about spending. Almost 40 percent say they will probably never go back to their prerecession approach to buying…

While looking to spend less on maintenance and home repairs, home owners often ignore the effects of their thriftiness on the long term maintenance costs of their home.  Trying to spend less often means becoming reactive to maintenance issues, instead of proactive.  Reactive maintenance typically means that the plumbing, electrical, or roof issue the owner is repairing, may have been an ongoing problem that may have also affected other systems of the home.  However, proactive home maintenance is an ongoing process that can prevent minor problems from becoming costly major issues and is home owner savvy.

John Riha invoked Ben Franklin’s “An ounce of prevention is worth a pound of cure” when writing about home maintenance and house values (How Much Value Does Regular Maintenance Add to Your Home?; houselogic.com).  He repeats a common theme that regular preventative maintenance doesn’t only save you money down the line, but can add to a home’s sale price.  Riha quotes University of Connecticut and Syracuse University studies that implies the value of a regularly maintained home may increase by 1% a year!

Riha recommends a “proactive maintenance strategy” to help stay on top of necessary repairs and system replacements.  He suggests saving 1% to 3% of a home’s cost for regular maintenance.  To help keep it “interesting,” he suggests repairing and updating one room per year.  If you are unsure where to begin, a home inspection may help identify areas of immediate concern; as well as develop a regular maintenance schedule.  Also, keeping records of ongoing repairs and upgrades will cement in a home buyer’s mind the amount of care you had for your home.

Home owner savvy is not necessarily about being frugal with home maintenance, which is also not about knowing the price of everything; but in reality, diminish the value of their home.  Regular home maintenance can not only keep you comfortable and safe through the year, it may help you sell your home faster and for more!

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