About Dan Krell

June 23, 2009November 23, 2021

What are the risks of owning a home?

Accepting the Risks of Home Ownership
by Dan Krell © 2009
www.DanKrell.com
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For many, owning a home is part of their long term financial and personal plan. Unfortunately for some, the responsibilities and risks of home ownership are not well thought out; many first time home owners are unprepared. The benefits of home ownership are often presented to first time home buyers, how about the risks?

During the recent real estate market boon, it seemed as if there were no risks to home ownership. Homeowners, who felt that their home was too much of a financial burden, were able to sell their home quickly and sometimes made a profit. However, when home values began to depreciate, it become all too clear that there are inherent risks to being a home owner, which include decreasing property values, increasing home related expenses, and poor home maintenance.

The real estate market, like other financial markets, is cyclical. There have been escalating market cycles, like the recent “seller’s” market; and there have been depreciating market cycles, some down cycles being much like what we are currently experiencing. Many first time home buyers, who bought homes as a commodity often analyzing their purchases as if it were a mutual fund, are now finding that (unlike mutual funds) selling a home may not be as easy as previously thought. Selling a home in a down market has many considerations, such as an increased marketing time and the possibility of owing more on a mortgage than the value of the home.

During an escalating market, it is easy for people to talk about home value appreciation as one of the benefits of home ownership. Unfortunately, in the recent boon market, many home buyers were caught up in the exuberance of rapid appreciation such that they believed that home value appreciation is guaranteed- no matter the type or condition of the home. Some home buyers are now lamenting their purchases because they bought homes they did not much care to live in but rather for the perceived “investment” value.

Many first time home buyers are also not prepared for increasing monthly housing expenses. Keep in mind that a first time home buyer’s monthly mortgage payment is already more than their monthly rent. Because of rising property tax and increasing utility costs, home buyers need to consider that the associated cost of home ownership will most likely increase over time. Although some of the initial increase may be offset by an interest tax deduction, the increases often add more to monthly expenses than the savings of the deduction.

Maintenance is an ongoing expense that is often overlooked by home buyers; all homes, including new homes need regular maintenance. Lack of home maintenance becomes a threat to anyone’s home leaving the home’s systems, walls, and foundation vulnerable to the elements, which can erode the home’s value.

Be prepared to take on the risks of home ownership. Take into account the reasons for owning a home as well as the financial responsibility you place upon yourself. Although long term home ownership has proved to be a good investment for many, value appreciation is not guaranteed. Additionally, the cost of home ownership along with future increases should be anticipated. You can get more information about the benefits and risks of home ownership by visiting HUD (HUD.gov), Fannie Mae (FannieMae.com) and Freddie Mac (FreddieMac.com).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 15, 2009. Copyright © 2009 Dan Krell.

June 17, 2009October 5, 2019

Downsizing is the new real estate trend

Looking to lower expenses, homeowners are looking to downsize

by Dan Krell, Realtor &copy 2009
www.DanKrell.com

When you think of downsizing, you might think of empty nesters trading down from a suburban home to a smaller, more convenient condo. The downsizing stereotype has long gone by the wayside as downsizing isn’t just for older adults; downsizing has become the focus of anyone wanting to pare down their expenses.

Looking for ways to save money in the current economy, many home owners are re-evaluating their expenses- including their mortgage. The rally cry of “bigger is better” is no longer heard from home buyers. Even home owners are discovering that “less is more;” the less the mortgage payment, the more cash they have at the end of the month for such items as savings, travel, or paying down debt.

The benefit of downsizing is not just the potential of lowering your monthly mortgage obligation; the property tax, maintenance and utility bills are typically scaled down along with the home. In order to gain the financial benefits of downsizing, finding the right home to meet your needs is important. When searching for your new home, considerations in size, style and location will not only affect your financial picture but your lifestyle as well.

Your first thought might be to look into condos because of the low maintenance and convenient living. Nevertheless, the low maintenance and convenient amenities come at a price in the form of a condo fee, which can sometimes negate the savings of downsizing. Additionally, downsizers often experience “size shock” due to the limited living area and scant storage that a condo offers.

Other downsizing options may include a townhome or a smaller single family home. You might find these options more appealing because there is no condo fee associated with this type of housing (although there may be a HOA fee). Even though you are seeking to reduce your “housing footprint,” these options seem roomier than most condos; however, these homes typically have higher maintenance and utility costs than a condo.

Another consideration of downsizing is that you will most likely have to downsize your possessions as well. The first step, as with any home sale, is to reduce your clutter. Going through all your items in storage and throughout your home to dispose, sell, or donate items that you do not use and will most likely not use. A widely accepted de-cluttering tip is to identify and discard items you have not used in a year or more. Items once thought of as collectibles and keepsakes may now seem just a token of a forgotten time. As you soon realize that items such as pieces of furniture, forgotten collections, and tacky beach gear won’t make the trip with you to your new home, you will most likely feel the ambivalence of holding on vs. freeing yourself from the past.

It is important for you to discuss downsizing with your financial adviser, accountant and/or financial planner to see how it fits into your larger financial picture. After looking at the numbers, you may realize that downsizing may not be for you because there may not be enough savings from downsizing, you may not be able to net enough from your sale, or you simply owe more on your mortgage than the value of your home.

June 8, 2009October 5, 2019

Imported Chinese Drywall Investigation – Update

by Dan Krell (c) 2009.
www.DanKrell.com

If you missed the flood of media reports late last year about imported drywall possibly emitting toxic and corrosive fumes, the story has not gone away. Although initially, some of the problematic drywall was reported as being imported from other countries, imported Chinese drywall has become the focus. The growing number of health complaints along with financial losses (due to the abandoning of suspected toxic homes) has prompted an intensive multi-agency investigation, recent congressional action, and an increasing number of class action suits.

The imported drywall problem drew national attention in 2008, when throughout the year reports of home owner complaints of severe respiratory ailments, oxidized jewelry, and corroded pipes were highlighted. Although the bulk of the reports of problems associated with the imported Chinese drywall emanate from Florida, the Consumer Product Safety Commission (CPSC) has collected over 365 reports from eighteen states and the District of Columbia. A majority of the complaints reported that affected homes were built in 2006 and 2007; which coincided with a time when building materials were in high demand due to a considerable increase in construction and the rebuilding of hurricane-damaged states (cpsc.gov).

An Associated Press release (By Cain Burdeau; May 19, 2009) estimates that the defective drywall was installed in “more than 100,000 homes.” Problems become evident in hot and humid environments, so there is a potential for additional complaints from homes in cooler climates.

In testimony given on May 21, 2009 to the Senate Subcommittee on Consumer Protection, Product Safety, and Insurance, Acting Deputy Director of Superfund Remediation and Technology Innovation of the U.S. Environmental Protection Agency, Elizabeth Southerland, stated that the EPA completed the initial analysis of drywall samples, and detailed further analyses from affected areas by the EPA, CDC and the CPSC. The initial analysis compared two samples of Chinese drywall from homes in Florida to four samples of U.S. manufactured drywall. Ms. Southerland cautioned that because the sample was small, the results “may not be representative of all drywall products” (epa.gov).

The results of the initial EPA analysis detected compositional differences between the sampled Chinese drywall and the U.S. manufactured drywall. Among the significant differences were higher levels of sulfur and strontium found in the Chinese samples. The analysis also detected organic compounds associated with acrylic paints in the Chinese samples (but not in the U.S. samples).

The health and financial aspect of the imported drywall problem has also attracted the attention of lawmakers. A bi-partisan amendment to assist affected home owners was presented by Florida Congressmen, Robert Wexler (D-FL) and Mario Diaz-Balart (R-FL). The amendment was added to the Mortgage Reform and Anti-Predatory Lending Act and passed the House of Representatives on May 7th. The amendment required a study to determine the effects of the Chinese drywall problem on regional foreclosure rates, as well as studying the availability of insurance for homes containing Chinese drywall (wexler.house.gov).

The drywall problem has become a national priority prompting the CPSC to create an informational website (www.cpsc.gov/info/drywall/index.html). The CPSC is committed to provide home owners with a resource to understand the problems and common health symptoms associated with the imported drywall, updates on the drywall investigation, directions on how to handle a suspected drywall problem, and the ability to report suspected problems in a home.

June 4, 2009October 5, 2019

June is Home Safety Month

by Dan Krell (c) 2009.
www.DanKrell.com

The Home Safety Council (homesafteycouncil.org) estimates that there are approximately twenty thousand deaths and 21 million emergency room visits each year. To help educate about home safety, the HSC declared June to be “Home Safety Month.” Home safety is often taken for granted by home owners and home buyers; even the tidiest of homes can improve on home safety. Whether or not you are planning to buy or sell a home, the HSC recommends scheduling a home safety evaluation.

There are many safety considerations within your home. Some safety issues depend on age (e.g., if there are infants present), while others confront you on a daily basis. Among the many fire, health and general safety considerations within the home, some of the commonly overlooked safety items include: handrails, chimneys, carbon monoxide and smoke detectors.

Some of the most dangerous falls you can take is in your home. The National Safety Council (NSC.org) reports “falls are the leading cause for injury related death” among elderly Americans. The NSC reports that in 2003 thirteen thousand Americans age 65 and over died and 1.8 million received injuries requiring a trip to the emergency room all resulting from a fall in the home. Anyone can have a nasty fall in the home, many do not realize how easy it is for someone to slip and fall down a flight of stairs. Having secure and stable hand rails along the stairs can not only prevent a fall, but possibly lessen the severity of an injury resulting from a fall.

Unfortunately, chimney maintenance is another overlooked home safety item. Not cleaning the flue with regular use can allow creosote to build up and create a safety and fire hazard. Sometimes improperly vented or used fireplace can produce excess carbon monoxide, which is potentially lethal. Regular professional inspections and cleaning can prevent fires and possibly reduce health risks associated with carbon monoxide.

Carbon monoxide is invisible, odorless and tasteless; you may have been poisoned by carbon monoxide in the past and not have known it. The symptoms of carbon monoxide poising can mimic flu symptoms (headache, fatigue, nausea and dizziness); however prolonged exposure can result in brain damage and death. Carbon monoxide poisoning can be prevented by properly installing carbon monoxide detectors in any home that uses liquid, gas or solid fuel (e.g., propane, natural gas, wood, etc.).

Smoke detectors have been widely available for several decades, however you still hear about the tragic fire where someone’s death could have been prevented if there was a working smoke detector installed in the home. Besides not having a smoke detector, fire related tragedies occur because people remove dead batteries from the chirping detectors and forget to install a fresh battery; or the smoke detector itself needed replacement due to its age (a smoke detector’s life span is about eight to ten years).

The Montgomery County Fire and Rescue Service (montgomerycountymd.gov) recommends that smoke detectors be installed on each level and outside each sleeping area. The MCFRS recommends testing the detectors regularly and replacing the batteries each fall along with the change of the clock.

Take the opportunity to make June a Home Safety Month by scheduling a home safety evaluation. Montgomery County residents can schedule a home safety evaluation by calling the Home Safety Hotline (240-777-2476).

May 29, 2009October 5, 2019

Online Foreclosure Searches

by Dan Krell (c) 2009.
www.DanKrell.com

It’s no secret that foreclosure rates continue to climb. It is unfortunate that many home owners have lost their homes, but for some it is an opportunity to buy a home at a potential bargain price.

In past foreclosure markets the secret to finding a great deal was to communicate directly with the bank. If you knew where to look or whom to call, you could get each bank’s list of foreclosures and present your offer directly to the bank’s foreclosure department. In some cases, you could negotiate to buy a home as soon as the bank took title.

In today’s market, the game has changed significantly such that banks no longer directly deal with home buyers to sell their bank owned homes. These days, for a variety of reasons, banks hire real estate agents to list their foreclosures on the MLS. Even HUD lists their FHA foreclosures with real estate agents. You can still find each lender’s list of bank owned homes on their websites, but instead of providing the contact information of a bank representative the bank will refer you to the listing agent.

In an attempt to remain anonymous, many home buyers turn to the internet for information to minimize intrusions from seemingly aggressive real estate agents. The internet is chock full of websites advertising foreclosure listings, information and training; some services are free, while others charge a subscription fee. Two popular websites offering foreclosure listings are Realtytrac.com and Foreclosurepoint.com.

Along with the flood of foreclosures comes the increase of consumer complaints about foreclosure related businesses- including internet foreclosure web sites. Some companies may deceive the public to make money or to collect personal information. Some foreclosure sites use false advertising to lure home buyers to subscribe to their service; some attempt to attract and “hook” home buyers seeking foreclosure information to sell other real estate and/or ancillary services. Sometimes companies attempt to compile personal information to be sold to third parties.

On May 1st, one national company (operating multiple websites- including Foreclosuretown.com) was issued a “cease and desist” order by the North Dakota Attorney General for allegedly misleading the public (www.ag.state.nd.us). Wayne Stenehjem, Attorney General of North Dakota, followed up on many consumer complaints including the misrepresentation of foreclosures. The company over represented the number of foreclosures to lure consumers to pay a monthly fee to receive foreclosure lists. One consumer complained that his home was listed as a foreclosure even though he never missed a mortgage payment. Additionally, photos used to depict the listings were often not the actual homes; the photos may have misrepresented the actual size of the home by associating a much larger home than the actual listing.

If you are serious about buying a foreclosure or just interested wanting to seek information, why not work with a licensed Realtor? Local Realtors not only have access to the local MLS (where bank owned homes are listed for sale), but also have access to tools to identify pre-foreclosures as well as foreclosure auctions.

However, many accept the fact that home buyers wanting to remain anonymous will continue to turn to the internet. If you plan to use any internet foreclosure listing service, do your homework to make sure the company is legitimate and delivers what is advertised.