Remodel instead of Move?

Moving up has been a right of passage for families for years. Families have been moving up for one reason or another, usually because of the need for space or just to move to a new neighborhood. However, spiraling home prices made many to rethink the usual move up, and instead make improvements on their homes. Rather than buying the four bedroom colonial they need due to a growing family, homeowners are adding rooms and enlarging the spaces they already inhabit. They’re thinking remodel instead of moving.

If you are unsure of making improvements or selling your home, there are some factors to consider. RemodelorMove.com (www.remodelormove.com) lists the top reasons for remodeling instead of moving includes: you like remodeling; you like your home floor plan; you like your neighbors; you like your yard; you have a great location; you will get exactly what you want; and you feel that it can enhance the value of your home. If you’re trying to decide whether remodel or move, you may find some of the reasons to remodel resonate.

If you decide to remodel rather than move, there are some considerations. According to RemodelorMove.com you should consider how long you are going to be in your home, the costs involved, and the timing of the remodeling before you move.

If you are planning to stay in your home less than a year, you should consider the actual cost of the improvements against the return you may get on your upcoming sale. However, if you plan to be in your home for a few more years or longer consider the factors of personal pleasure and comfort.

If you are concerned with cost vs. value, a great resource that every turns to for their annual report is Remodeling Magazine (remodeling.hw.net). According to Remodeling Magazine, return on investment depends on the value of the house itself, the value of similar homes in the immediate area, and the rate property values are changing in the surrounding neighborhoods. Some projects will recoup more than 100% of the original investment, however overall in 2004 the return of investment was 80.3%.

The following are the top improvements listed listed in this year’s Remodeling Magazine annual report in order of return on investment: minor kitchen remodeling -92.9%; siding replacement-92.8%; midrange bathroom remodeling- 90.1%; deck addition- 86.7%; upscale bathroom remodeling- 85.6%; and window replacement- 84.5%. You can view the rest of the 2004 report on the website.

Both selling and remodeling can be large propositions that can bring a lot of joy. There are many resources available to help make your decision. But you should verify the information you get, especially from the internet. Additionally, you should consult a local contractor and a Realtor to assist with costs of improvements and neighborhood home values.

By Dan Krell © 2005.

Home Selling Tips

Because not all listed homes sell, you should be strategizing how to make the most of your sale. What to do? Here are some home selling tips .

Think about the basics that go into a successful home sale. The first is to price the home according to the comparables in the neighborhood. The second is to consider the condition of the home. The third is to have a marketing plan. And lastly, you should have a close working relationship with your Realtor.

Home selling tips

Of course your home should be priced according to the comparables in the neighborhood, and progress should be gauged with the other homes on the market in the neighborhood. That means besides pricing according to the homes that are comparable, your Realtor should expect results within the parameters based on those sales also. Regardless of what you hear, the seller sets the selling price. Your Realtor is only an advisor providing you the data and opinion.

Sale price

Comparing your home to similar homes that sold is critical in deciding a sale price. Comparables are homes that match your home in style and size. If you have a three bedroom rambler, you should compare your home to other three bedroom ramblers in then neighborhood.  Typically, comparables are restricted within a subdivision or within about 0.5 mile to 1 mile. And sales not older than six months (unless there is a lack of home sales).

Home condition

Why is your home’s condition important when deciding a sale price? If your home has deferred maintenance or hasn’t been updated for twenty years, it’s not going to get the same price as the renovated similar home across the street. Be honest with yourself about the home’s condition.  If your home is not in move-in condition, think about the cost of renovating in the price along with market conditions.  If it’s a buyer’s market, you may have to consider a lower price or the home will languish waiting for a buyer.  If it’s a seller’s market, there are more home buyers willing to buy a home with the intention of renovating it.

Marketing plan

You need a roadmap to success. If your Realtor has not yet presented you with a marketing plan, ask for one. Your Realtor should have a plan of action to sell your home. Putting a sign in front of your home and entering the information in the MLS is not typically enough sell a home. Market conditions frequently change, and your Realtor should have a concrete plan to sell your home. The plan should include not only how the home will be marketed, but how the agent will take you from contract to closing.

Your listing agent

The final aspect that is important in selling your home is the relationship between you and your Realtor. Besides having confidence in your Realtor, you should feel comfortable being honest (for good and bad).  It’s not a good sign if your Realtor is often defensive when you express concerns and needs. Your Realtor, on the other hand, should also be honest, as well as timely with information concerning your home. Besides communicating the activity of the potential home buyers, they should also keep you up to date with the neighborhood market keeping an eye on the other homes on the market.

How will you market your home and what will you do if the market changes? When you are interviewing Realtors to sell your home ask about their marketing plan. Ask about a home pricing strategy.  Ask how your home’s condition affects the price.  Ask how the agent communicates and what you should expect from them.

Disclose disclose disclose

It is not unreasonable for home buyers to seek assurances about the homes they purchase. One method for obtaining a sense of confidence about the home is having a home inspection. Sometimes it is not as much as wanting to know what needs to be fixed as much as wanting to know what they were getting into, as one of my clients casually stated. However, home inspectors are not perfect and there are numerous conditions in the home that could go undetected.  The home seller golden rule is disclose-disclose-disclose.

In the past, it used to be buyer beware. Unscrupulous home sellers racked up complaints. Consumer advocates pushed some legislatures to enact a property disclosure law. Property disclosure laws have been enacted in about thirty states. Here in Maryland, the law has been was around since 1994.

It had been incorrectly thought by home sellers (and some real estate agents), that if the disclaimer is given, the homeowner did not have to provide any information at all about the home- including relevant material facts and latent defects. In fact, some home sellers would wrongly choose the disclaimer statement to not reveal material facts or latent defects.

The disclosure addenda are constantly changing. A significant change at the time of this writing to the required Maryland disclosure still requires the homeowner to provide either the disclosure statement or disclaimer.  Except the added burden of disclosing known latent defects is also required, even if you disclaim.

If you are selling your home or thinking of selling your home in the future, you should discuss with your Realtor the Maryland disclosure/disclaimer statement and recent changes to the disclosure laws. If you have any doubt about your obligations as a home seller or do not understand the disclosure law, you should consider consulting an attorney.

The golden rule of disclosure is to disclose. An issue that is disclosed to a home buyer before they enter into a contract with you is a piece of information that the home buyer will keep in mind as they purchase the home. However, undisclosed issues can come back to bite you, even after the sale.

by Dan Krell © 2005

Real estate market report 2005

Many experts are not only talking about the real estate bubble, but how it’s about to burst. I was interested in finding out how many articles and proclamations exist about the bursting bubble, so I googled “housing bubble Washington, DC.” There were over 800,000 links to people and articles (some going back to 2002), talking about how the bubble is about to burst. Many talk about concerns of financial impact and others talk about a doomsday scenario when the bubble bursts. Here’s the real estate market report 2005.

Real estate market report 2005

If you look at the mid year statistics, it seems that the Washington D.C. real estate market is still in full swing. You can decide for yourself based on the statistics for single family homes in Montgomery County. So, here is the mid-year report card, based on the statistics compiled by the Greater Capital Area Association of Realtors (GCAAR). Homes listed for sale for June 2005 totaled 2,004, up from the 1,971 homes listed in June 2004, an increase of 1.7 percent. The fact that more homes are coming on the market sounds encouraging, however, the total active listings in June 2005 (homes listed for sale but not under contract) are down 4.5percent from the same time last year. So, although the supply of homes being listed for sale rose, the actual amount of homes available on the market has reduced because there are home buyers ready to gobble these homes up as they come onto market.

It seems as if the home buyers’ appetites for homes are insatiable so far this year. The number of contracts and settlements are up for the period of January to June 2005 as compared to the same time period in 2004. The number of houses where status changed from active to contract during the first six months of 2005 increased 1.3percent compared the first six months of 2004. Additionally, the number of homes that were settled during the first six months of 2005 increased 2.5percent compared to the same six month period in 2004.

Interestingly, I would like to note the sales of homes that sold for $1,000,000 or more increased from last year. There were 389 of these million dollar plus homes that sold in the first six moths of 2005, compared to the 265 sold in the same time period in 2004, that is a 46percent increase! So far, for 2005, the average sale price in Montgomery is $544,719. Compared to $477,937 for the same time period in 2004, it is an increase of $66,782! (stats from gcaar.com).

Will there be a correction or a full blown crises?

Looking at the statistics above, you may ask yourself, “can prices continue to climb and record numbers of sales continue year after year?” The market can’t continue double digit appreciation forever.  Will there be a correction or a full blown crises? Whatever happens, there will always be a real estate market.

by Dan Krell © 2005

Finding a real estate bargain

Many first-time home buyers and investors whom I encounter typically ask about foreclosures and handyman-specials. Essentially they are looking to buy a real estate bargain. When is the best time to by a real estate bargain?

A foreclosure is a home that has been repossessed by the holder of the mortgage note, usually a bank. The process of foreclosure varies depending in which state the foreclosed home exists and what type of mortgage document exists on the home. To make a long story short, the home is either auctioned to the highest bidder, or the home is taken over by the bank to be sold on the market. The foreclosed homes that are put on the market are also called REO, which stands for real estate owned by bank.

Foreclosed homes can also be bought at auction. Auctions are usually conducted at the courthouse by a local auctioneer. These types of auctions are also known as a trustee’s sale or substitute trustee’s sale. If you are interested in attending an auction, you can find the advertisements for the auctions in the local papers’ classified section. To bid on the home, you must have the minimum deposit in the form of certified funds. The minimum deposit is usually posted in the advertisement. If you are buying a foreclosed home at auction, you are essentially buying it “as-is” without the ability to do a home inspection prior to close.

When the bank has taken title to a foreclosed home, a Realtor is usually hired to list the home on the Multiple List Service (MLS). In this scenario, you have an opportunity to view the home before you decide to submit your offer. The home is generally sold “as-is.” Hopefully, you will have a Realtor of your own to advise you of the value and general condition of the home.

Generally, the process of buying a foreclosed property can be bumpy due to foreclosure process. Sometimes the previous owner will damage the home (sometimes on purpose), or take valuable materials out of the home such as copper or other fixtures. Additionally, the home is locked up for months, often without utilities. Mold growth is typical due to water penetration, and/or other structural and environmental concerns.

A handyman special is a term that is often used when a home is sold by the owner. The home can have deferred maintenance or other damage.  The home could be a rental property in need of “TLC.” Many times, a handyman special will require mostly a great deal of cosmetic work, such as painting, carpet, etc. Sometimes, there are some structural concerns, such as (but not limited to) replacing a roof, or fixing walls.

Overall, when considering a real estate bargain whether you will have to determine if the home is worth the price you want to pay. In addition to the acquisition cost, you will have to consider the total cost to repair the home, as well as the costs to make updates. It is also important to look at the recent neighborhood comparables to see if the price or adjusted price (price plus costs for repairs) is in line.

If the market is depressed or a buyers’ market, there may be some choices in a real estate bargain.  However,  if the market favors the seller, there are fewer bargains. In a sellers’ market, distressed properties can sell for close to market value.

by Dan Krell © 2005