home selling Archives - Page 6 of 9 - Real Estate News and Commentary

March 18, 2017October 20, 2020

Misguided house makeover

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.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

July 29, 2016July 12, 2019

Home selling don’ts

When preparing for a home sale, the devil is in the detail. You probably already know about the “do’s,” de-cluttering, curb-appeal, staging, and making necessary repairs. But here are a few home selling “don’ts” that often trap home sellers into making mistakes:

Home selling is not about you. Don’t make a statement. Now is not the time to be bold with renovations and staging; but rather stay focused on getting your home sold. Stay away from trendy features, and bold designs. Although bright and dramatic colors seem tempting, stick with neutral color schemes. Besides making rooms feel awkward, making a statement with trendy fixtures and bold colors may turn off home buyers. Bold style statements make home buyers fixate on the style, rather the space and potential of each room.

Home selling is not about being cheap. Don’t hire a contractor because they are the cheapest. When it comes to home repair, the idiom “you get what you pay for” typically holds true. Home buyers have a discerning eye and can spot poor workmanship. Don’t be tempted to hire the unlicensed handyman to save a few dollars either; you and the future buyers won’t have recourse if there is a problem with the repair. Don’t also be talked into a cheap renovation that is meant to appear as a luxury amenity. Poor workmanship, sloppy installation, and/or inferior materials will turn away many home buyers.

Home selling is not about being amateur. Don’t assume all house painters are alike. A good paint job can make a room look terrific and create positive emotions; while a poor paint job makes a room appear shabby and unstylish. And even though you may be tempted to save a few dollars, don’t paint your home on your own – hire a professional. The amateur paint job appears sloppy and has the telltale uneven edges, painted over light switches and receptacle covers, and painted shut windows.

Home selling is not about guessing. Don’t assume your prepping will bring you a big return on your investment. If you deferred regular maintenance, you may have to make repairs regardless of the return. Likewise, if your home is outdated, you may consider making some updates to lure home buyers. Before getting in too deep on a prepping project, have a budget in mind and do a cost benefit analysis.

Consider checking out this year’s Remodeling Magazine’s Cost vs. Value Report (costvsvalue.com) to find out what updates and renovations make sense and which ones can bring you the biggest returns. Although most renovations won’t bring you a dollar-for-dollar return, they may add to the overall aesthetic and make your home more appealing. However, some renovations may not only lose money but can also blemish your otherwise beautiful home. For example, adding a backup generator may seem as if it is a much needed amenity, however, the report indicated that for the Washington DC region, you would only recoup about 57.5% of the cost. And it is possible that the home buyer will remove it because of it was poorly installed and too noisy.

The purpose of preparing your home before a sale is to not only to compel home buyers to make a top-dollar offer on your home, but to also get it sold quickly. Consider planning out how you will prepare your home. Do the research. Don’t fall into the traps that ensnare many home sellers because it can cost you. You may not only have to correct poor workmanship, but your negotiated sale price may be lower than expected.

By Dan Krell
Copyright © 2016

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June 3, 2016November 23, 2021

Housing bubble countdown

The March S&P/Case-Shiller U.S. National Home Price Index (spindices.com) was announced May 31^st to reveal a 5.2% increase in home prices. Although down from last March’s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year price increases of 12.3%, 10.8%, 10.0% respectively). As home prices climb, so too are the claims that we are experiencing a housing bubble.

Those concerned about the next bubble have been ringing the alarm bells since last fall, when the combination of limited inventory, multiple offers, and rising prices created an environment in some regions that was reminiscent of the go-go market just prior to the last market bust. And like the broken watch that is correct twice a day, those naysayers may eventually be correct – but it may not be for another eight years.

How to predict a housing bubble

According to Ted Nicolais, the real estate cycle has been steady since 1800 (How to Use Real Estate Trends to Predict the Next Housing Bubble; dce.harvard.edu; February 20, 2014). Writing for the Harvard University’s Department of Continuing Education’s The Language of Business blog, Nicolais maps out Homer Hoyt’s cycles and found a regular 18-year cycle to the bubble and bust housing market (albeit two exceptions).

The 18-year cycle, as it turns out can be observed by analyzing trends. An applying Henry George’s four phases of the real estate cycle (as modernized by Glenn R. Mueller), Nicolais can determine how and when the next housing bubble will occur. (Henry George was a nineteenth century economist who studied the boom-bust cycle of the economy).

The first phase is the “recovery.” Home prices are at the bottom, and demand increases. Real estate vacancies decrease as economic activity increases, which fuels the economy.

The second phase is the “expansion.” Housing inventories dwindle, there is little is available to buy, and finding a rental becomes difficult. Nicolais explains that an issue with real estate is that once demand increases, filling inventory takes a long time. New development can take two to five years. Until new inventory is added, price growth accelerates; and rather than valued at market conditions, real estate becomes priced to future gains. During a real estate boom, people buy into the prospect of “future growth” and believe the escalating prices are reasonable.

Phase three is “hyper supply.” When the completion of new development begins to satisfy demand, inventories fist stabilizes and then swells. Price growth begins to slow. Nicolais stated that the amount of continued development will determine the severity of the impending recession; while demand is satiated, new inventory comes to market and vacancies increase. He asserted that “wise” developers stop building during this phase.

Phase four is the “recession.” New development is stopped, while projects coming to completion add to a growing inventory. Occupancy rates and prices fall; property values and profits dwindle. Developments in mid-construction may not be completed because they are no longer financially feasible.

Following the four phases and the 18-year cycle; Nicolais stated that the great recession was not caused by external forces, but rather occurred on schedule! He figures that the current housing market is transitioning from recovery to an expansion phase. And with the exception of the occasional slow down, he predicts that the next housing bubble will be in 2024.

Original published at https://dankrell.com/blog/2016/06/03/housing-bubble-countdown/

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January 22, 2016December 13, 2022

Selling your home is always about the price

Pricing a home for a sale is not always easy. There is an abundance of empirical research that has confirmed the many variables that affect sales price. Some influences are manageable and some are not. The top factors to consider when pricing your home to sell include location, condition, features, and timing.

Your home’s physical location is one of the top factors that will affect its sale price. Although home prices vary from neighborhood to neighborhood, your home’s location within the neighborhood could also impact the sale price. Homes located on commuter routes typically sell for less because of the traffic and noise. Even homes located just off of the thoroughfare can be impacted by the perception of traffic and noise; the sale price could be lower than a similar home situated further away from the main road.

A home can sell for more when located close to neighborhood amenities; however, the price could drop if perceived too close. Neil Metz’s research (Effect of Distance to Schooling on Home Prices. The Review of Regional Studies 45.2 (2015):151-171.) indicated that homes located close to schools tend to sell for more. However, the opposite was found with homes within 1,000 feet from schools; the home sale price decreased as the distance from the school closed in from 1,000 feet (probably due to congestion and noise). This effect is typically true for other neighborhood amenities such as shopping areas.

Repairing and upgrading your home prior to listing can increase the sale price. In contrast, deferred maintenance can not only deter home buyers – it could attract low offers; especially if the home has been on the market for a lengthy period. Many home buyers are looking for a “turn-key” home, where they don’t have to be concerned about immediate maintenance; while some are willing to put in the time and effort to personalize a home. If you’re making updates to your home, consider that the quality and installation of upgrades can impacts price as well; cheap fixtures and sloppy workmanship can have a similar affect as deferred maintenance.

Your home’s amenities can also impact the sale price. For example, features such as a finished basement or deck can be appealing and add value. Even green amenities can impact sales price. Research conducted by Cadena and Thomson (An Empirical Assessment of the Value of Green in Residential Real Estate. The Appraisal Journal 83.1 (Winter 2015): 32-40.) concluded that homes that were designated “green” increased sale price by 1%, while certified green homes increased sale price about 2%; however, energy efficient features increased sales price by about 6%!

Finally, your sales price can be affected by the timing of the sale. Miller, Sah, Sklarz, and Pampulov (Is there seasonality in home prices-evidence from CBSAs. Journal of Housing Research, 22(1) (2013), 1-15) conducted a comprehensive study of home sales that occurred in 138 Core Based Statistical Areas (CBSAs are geographic population centers set by the Office of Management and Budget for use by Federal agencies in collecting, and publishing statistics) from February 2000 to April 2011. They concluded that monthly price changes can vary through the year; and homes that sell during summer months (April through September) typically sell for more than homes that sell during the winter (October through March). However, they point out that the seasonality effect could be due to weather; there is less price variance in areas with less temperature variation.

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May 8, 2015September 24, 2018

Basements, humidity and dehumidifiers

There seems to be a misconception of the relationship between basements, humidity and dehumidifiers; which probably results in the dehumidifier being one of the most misunderstood and least respected household appliances. This is apparent because many first time home buyers are turned off to any home where they see a dehumidifier, thinking there is a moisture problem. The dehumidifier doesn’t even have to be running; it could be turned off and tucked away in a closet.

The battle that all home owners deal with is keeping moisture out of the basement. Of course, regular maintenance can retard water penetration from the exterior: having the proper grading and extending downspouts will keep rainwater away from the home’s foundation. And serious water penetration issues should be resolved by licensed professionals. However, if the home doesn’t have a foundation or water penetration issue, basement humidity is still an ongoing battle. And if your home has an in-ground basement, chances are you know what I am talking about.

Believe it or not, it’s not necessarily a water problem that dictates humidity in a basement; but rather it’s physics. More precisely: thermodynamics and entropy. Put simply: temperatures in your home seek equilibrium, and warm air will move toward cooler air. Basements tend to be cooler than the upper floors because warm air rises. However, as the temperature seeks equilibrium, the warm air will also move toward the cooler basement air. When warm air meets cold air, the air condenses and develops humidity.

Basements, humidity and dehumidifiers

Although humidity is generally thought of as the amount of moisture in the air; according to Dehumidifier Basics(energystar.gov), it is most commonly referred to as “relative humidity” or RH. “RH is the amount of water vapor actually present in the air compared to the greatest amount of water vapor the air can hold at that temperature.” An RH between 30% and 50% is considered to be optimal. When RH is above 50%, bacteria and mold may grow.

If you don’t have a dehumidifier, you might consider buying one to help maintain the optimal RH in your basement. Dehumidifiers are differentiated by capacity, which is described as pints per 24 hours (measured by the size and conditions of the area where the unit may be placed). Energy Star provides a chart to help you decide the capacity best suited for your needs.

If you already have a dehumidifier, you might be surprised to know that most units are not meant to be operated in areas that are below 65°F (according to Energy Star); however, there are models that are designed for lower temperatures. If you use your dehumidifier in temperatures below 65°F, the unit may not function properly even though you may hear the compressor running. Below 65°F, frost can form over the condensing coils inhibiting the unit from removing moisture from the air. If your unit frosts, it should be unplugged and allowed to defrost.

Although some units are designed to be placed against walls, Energy Star recommends placing your dehumidifier in an area that allows free circulation of air around the unit for optimal operation. And of course, refer to manufacture’s manual for operation and electrical safety warnings.

Maintaining a comfortable RH level in the home can be achieved, and it starts by proper home maintenance. However, a dehumidifier may be necessary for optimal comfort. Energy Star (energystar.gov) provides consumer information about selecting and safely operating a dehumidifier.

Original published at https://dankrell.com/blog/2015/05/08/basements-humidity-and-dehumidifiers-whats-the-problem/

By Dan Krell