Category: real estate

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This is Chaos – anything can happen

by Dan Krell
DanKrell.com
© 2012

housing developmentThere has been a lot that has been written about chaos theory, and some have even tried to apply it to real estate. More specifically, many have discussed the application of chaos theory to real estate investing. And even more recently there have been attempts to applying chaos theory in figuring out where housing is headed; or to be succinct – when will housing once again begin to realize consistent appreciation?

I’m not one to disappoint, but I can’t predict the future. However, my attempt to explain chaos theory may reveal how its application to the housing market is difficult at best (at least in today’s environment), yet while simultaneously is an exceptional exercise in understanding the underlying dynamics.

Chaos theory is somewhat of a misnomer; a more apt name might have been “pattern to equilibrium theory” as it’s not so much about chaos as it is about predicting natural patterns that seek equilibrium; or put another way – predicting results by looking at dynamic patterns. Equilibrium could be what we typically think it is – a pattern of a self sustaining system; or it could also mean a pattern of inertia to the system’s inevitable demise.

Simplified, chaos theory investigates the relationships and patterns of a system’s trend toward stability. The theory delves into the natural patterns of subsystems so as to predict how patterns develop and unfold to manifest themselves.

housing developmentAlthough mathematicians have been investigating the precursors for chaos theory for many years, one of its first practical applications was in trying to predict the natural patterns of the weather. So it makes sense that you might want to apply the theory to the housing market so you could figure out the best time to buy and sell. The problem in the theory’s application to the housing market is that unlike the weather, housing is not an “organic” system; housing does not follow the natural unfettered patterns of market forces. Rather, decades of intervention and policy have influenced the expressed patterns of the housing market.

But don’t get discouraged, an aspect of chaos theory termed “the butterfly effect” explains that any action, no matter how small and insignificant, can influence a larger system. So, although the housing market is not an organic system, you could theoretically investigate its related influences to work out a market trajectory. So, rather than solely considering supply and demand, you might take into account more wide ranging and complex influences, such as Greek economic policies, German parliamentary elections, EU monetary policy, etc.

By looking at observable influences on the housing market, housing contrarians have been muttering their mantra of “the sky is falling” for years. And when the housing bubble burst, they of course claimed they had it right all along, and many are still waiting for the worst. Was it a coincidence? Of course, in the early 2000’s there were influences on housing and the economy that were inconceivable (such as mortgage CDO schemes).

Chaos theory is as complex as the systems involved. We can also apply it to come up with alternate trajectories and think about what could have been. If for not some small event, someone’s seemingly insignificant decision in the past, there might not have been a housing bubble burst or great recession. But as they say hindsight is 20/20 – but that’s an entirely different theory.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Build your dream home and avoid a nightmare

by Dan Krell
DanKrell.com
© 2012

custom homeThe fact that home sale inventory has dropped off compared to recent years is not news. The reduced number of homes for sale has made it more difficult for increasingly discerning home buyers to find the “perfect” home. And for some, a perfect home even goes beyond a new “spec” home or new home development; so they consider a custom home as a way to uncompromisingly have all the features they really want in their new home.

There are many pros and cons to building a custom home. As you might imagine, one clear advantage of building a custom home over buying a resale is that you can choose your home style and floor plan to fit your taste and lifestyle. Customizing a resale to fit your needs has its limitations; besides the physical limitations of the home itself, you may encounter issues with zoning and/or a HOA. Buying a spec home or a home in a new home development also has limitations; you are typically limited to the home styles and floor plans offered by the builder (and some will not comply with customization requests).

Planning to build a custom home takes time and money. Choosing the right contractor and architect is highly important. Designing the home you want requires time for permitting and construction. Weather is often an impediment; poor weather conditions can prolong the process and possibly increase your construction costs.

Next, you’ll need to find a place to build your dream home. Finding the perfect lot can sometimes be difficult, depending on the type and size of home you’re planning. Among the many things to consider: you need to make sure that the lot is zoned appropriately, as well as being large enough for the home you choose to build. Additionally, you should consider utility availability to the lot: is public water and sewer available; is natural gas available. Other issues that could affect your lot: clearing trees, easements, and/or protection areas.

Custom HomeIf an unimproved lot is not found to meet your needs, another option is to buy a “tear down.” A tear down is an old home that is torn down to build a new home on the existing lot. Of course, there are issues that need to be addressed when going this route as well. Besides encountering building issues similar to those of an unimproved lot, you may encounter additional zoning and permitting constraints with a tear down.

Unless you’re willing to pay for your project with cash, you’ll have to secure financing. Depending on your project, there are various loans are available so consult your lender about terms and qualifying criteria. Some loans may combine the acquisition of the land and the construction; and other loans could provide the loan for the construction, and then convert to a permanent mortgage.

Although it’s great feeling to build the home of your dreams, you should also consider its resale. Tastes vary, so your idea of a dream home may not be everyone else’s. A large amount of non-traditional customization could not only turn off future home buyers, but could very well hurt your sale price.

Building a custom home requires due diligence. The Maryland Home Builder Registration Unit (of the MD Office of the Attorny General)provides consumer information about purchasing new homes and the Home Builder Guaranty Fund (www.oag.state.md.us/Homebuilder/index.htm).

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This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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What’s your relationship with your home; how homes impact our lives

by Dan Krell
DanKrell.com
© 2012
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homesHave you considered your relationship with your home?  Just like the relationships we have with our family, friends, and acquaintances, we also have relationships with inanimate objects such as our cars, computers, and our homes.  Granted, the relationships we have with our cars and homes are not the same as our human relationships, and it may sound farfetched; but if you think about it for moment, these relationships can affect our moods and lifestyles just the same.

Your relationship with your home can sometimes make you feel satisfied or frustrated, and maybe both.  But chances are that you were not always ambivalent about your home.   At one time you might have thought your home was perfect.  Or you may have decided that you were ok with the quirks in the home because you once planned to fix them.

But the reality is that over time you change: your lifestyle changes; your use of space changes.  Likewise, your home changes too: the systems become less efficient; the rooms may feel too small/large; the kitchen becomes dated, etc.

Just like your human relationships, your home requires maintenance.  Regular maintenance of your home’s systems can help assure that you will be comfortable day to day.  Ignored systems can fail when you rely on them the most, leaving you miserable and wondering about your home.  Commonly ignored systems include (but certainly not limited to) HVAC and the roof.  Having a licensed HVAC professional check the home’s furnace and air conditioning as recommended may not only ensure the system works when you need it the most, but may also help lower energy bills.  Regular inspection of the home’s roof gutters and downspouts could prevent future water penetration issues.

homeOf course, as we continually change and develop, we want our relationships to grow as well.  So, it is possible that one day you might look around your home and feel that it’s time to spice up the relationship a little – You might be thinking of some renovations, updates, and possibly expanding the home.

Unless you plan to make renovations regularly, don’t make a mistake and focus solely on making your home “trendy.”  Before you decide on a major project, experts recommend you consult with a professional interior designer and/or architect to assist in making choices that can prolong the “freshness” of the renovation.

Kitchens and bathrooms are usually where the most money is spent, and that’s because those rooms tend to get the most traffic and use.  When designing a kitchen or bathroom, it is easy to go overboard on the renovation, but even a modest refurbishment can increase your enjoyment of the home.

As you renovate the interior, don’t give the exterior the short shrift.  Upgrading the home’s windows and siding not only increases the home’s efficiency, but may also increase the home’s curb appeal when it’s time to sell.

Relationships change and sometimes end; even the most meaningful ones.  This is no different with your home.  One day you may find that although your home may have sheltered you and your family without fail for many years, you may find that your needs may have changed; you may need more or less space, or may need to live in a different city.  And just like old friends, you may one day find yourself fondly thinking about your “old” home where you once lived.

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This article 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 November 26, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Think about the parking before you buy a home

by Dan Krell
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DanKrell.com
© 2012

New HomesIn light of the increased attention of predatory towing in Montgomery County, it’s become apparent that parking is one of those things we often take for granted; parking doesn’t seem to be a consideration until we are hassled about finding a spot to leave our car.  Sure, we may think ahead about parking when we venture downtown or to the metro, but what about when we get home?  Parking can sometimes be a challenge as well as the source of neighbor conflict.  When buying a home, make sure you’re aware of the neighborhood parking conditions.

To ensure that residents have a parking space, many townhome and garden condo communities offer at least one, if not two, reserved parking spaces.  This may sound good, but if your family has multiple cars parking may still be a challenge.  However, if you think parking your extra cars in the unreserved spaces (often labeled “visitor”) solves your problem; consider how many other neighbors who own multiple cars are parking in these spaces as well – which could make the neighborhood feel like you’re parking in a busy downtown area.

Making matters worse, imagine how inconsiderate neighbors or visitors who park in your reserved space can affect your day.  Returning home late in the evening to find an unauthorized car in your reserved space, and no other parking spots available can not only be frustrating but leave you angry and resentful.

Parking issues are not only a phenomenon of high density communities, but can also occur in neighborhoods comprised of single family homes.  Regardless whether you have a driveway or not, off street parking can sometimes be tricky.  Much like the scenario of having an unauthorized car in a reserved parking space: you might encounter situations where people park in your driveway without asking (usually when neighbors have parties), or more often someone blocks the entrance to your driveway making it impossible to leave or enter.

If you’re planning to buy a home, don’t wait until it’s too late to think about parking.  Experts recommend you visit potential homes in the evenings and weekends to see how the parking is impacted when most people are home.  Circumstances that could impact a neighborhood’s parking availability might include recreational and commercial vehicles, as well as a neighbors’ home based businesses.  If you have a chance to interact with some of the neighbors, ask about the parking situation and how the neighborhood copes with parking issues.

Additionally, if you’re considering a home that’s located in a home owners or condo association; the association rules and bylaws are recommended reading.  Familiarize yourself with the rules and bylaws so you know the association parking regulations and how the management company deals with unauthorized vehicles.

In many areas there are parking restricted neighborhoods, like some in Montgomery County MD that are included in the Residential Permit Parking Program, which helps limit non-resident parking in neighborhoods that are impacted by nearby high traffic public areas and facilities.  Ask your real estate agent about obtaining resident and visitor permits as well as asking about the parking situation.

When purchasing a home you should consider the parking conditions, as well as how the neighborhood deals with unauthorized parking.  Many high density communities have strict towing policies, which makes someone think twice about unauthorized parking after being towed.  However, most neighborhoods solely rely on the residents’ thoughtfulness of their neighbors.

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This article 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 November 19, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Coping with buyer’s remorse

by Dan Krell
DanKrell.com
© 2012

Coping with buyer’s remorse: regretting your home purchase

homeDid you ever have the nagging feeling, after buying something like an expensive piece of clothing, that maybe you should’ve saved your money or waited for the sale? If you’ve experienced buyer’s remorse, then you know that doubting feeling. Did you know that the likelihood of experiencing buyer’s remorse increases as the expense of the item purchased increases? Buyer’s remorse from buying a home can sometimes leave you feeling uncertain and hesitant.

Buyer’s remorse is sometimes referred to by consumer experts as post purchase dissonance, and is often caused by a discrepancy between a home buyer’s experiences and their beliefs. Simply stated, buyer’s remorse is when the home buyer feels regret about their home purchase. Although many home buyers may experience buyer’s remorse to varying degrees; not all home buyers experience buyer’s remorse.

Consumer behavior experts concur that the probability of experiencing buyer’s remorse is more likely to occur when the decision is binding and/or has a long term commitment, while there are other viable options available, along with a concerted effort in choosing the perfect home, placing a high level of emotional significance on the purchase, and the buyer’s propensity to experience anxiety.

As a home buyer, you might think that the home buying process is ripe for buyer’s remorse because: a real estate contract is not easy to back out of; you might feel that there is a considerable financial commitment; after making a thoughtful choice of home, you fantasize of the home with the features your home does not have, and with a lower price tag; you have placed an emotional investment on buying the home; and you’re feeling the pressure of the home buying process.

If you’re planning a home purchase, be aware that most people may feel some amount of buyer’s remorse sometime during the home buying process. However you can reduce the negative impact of the experience if you:

Respect the buying process: You should recognize that buying a home can be stressful, and can create feelings of anxiety when the unexpected occurs. Do what you can to minimize any additional stress and pressure created by the demands of buying a home.

Choose the right real estate agent for you: The interaction you have with your agent is subjective. The worst feeling you could have is when your agent is MIA when you need them. Working with a responsive agent, who makes themselves available when you need them, can reduce any additional anxiety that is created from ambiguous situations that can pop up during the process.

Don’t continue searching for homes: Once your offer is accepted, you should stop looking at available homes. You are more likely to increase doubts about your purchase if you compare how homes on the market differ from yours. However, consumer research indicates that your confidence about your purchase increases if you recognize how those homes are similar to yours.

Take what others say with a grain of salt: It’s difficult to be discreet about your home purchase, especially with your family and close friends; and, of course they won’t withhold their opinions about it either. Having the opportunity to listen to another’s view point about the home and the process could solidify your confidence about your home purchase- when you put their input in perspective and recognize that their advice may not apply to your situation.

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This article 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 October 29, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.
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