Home Equity Still Trumps Facebook Equity

Now that facebook has gone public, it seems like everyone (and their mother) is scrambling for a piece of the pie.  However, we’re curious to see how facebook shares stack up against good ole’ home equity. , writer for HouseLogic.com, seemed similarly cautious as she shared some interesting considerations about the two types of investments.

Her take:
“The fact is, more of us are getting rich by buying and paying off our homes than by picking the next Facebook.”

DeZube goes on to offer up some a few interesting statistics from the National Center for Real Estate Research:

  • 6 in 10 of us have more home equity than stock equity.
  • A fifth of Americans’ total net worth is home equity.
  • Home owners accumulate, on average, $167,000 in their lifetimes, compared to $42,000 for renters.
  • The median wealth for the poorest American home owners, those earning less than $20,000, is 81 times that of renters with similar income.

A recent study into the fluctuations in home prices found that, “Buying was still more likely to generate wealth than renting, simply because renters are more inclined to spend instead of save and invest in stocks.”

The fact is that even though renting may feel like the cheaper route, the “forced savings” incurred via home ownership is far more likely to lead to wealth than renting.

“Many of us simply don’t have the willpower or motivation to save our discretionary income and invest it in stocks.So unless you’ve got the inside track on the next hot future IPO, keep making your mortgage payments.”

CNN’s “Tips on Cashing in on the Housing Slump”

Earlier this week, CNN Money posted this video highlighting a few ways buyers can make the most of their money in today’s real estate market.

The panel here makes some very valid points about the positive effects of recent housing trends.  For example with mortgage rates so low, buyers that are waiting for prices to drop more should consider what could happen if mortgage rates increase.  If the price drops but the mortgage rate increases, they could very well end up paying more for the house in the end.

Bottom line:  With the long term outlook for buyers right now so good,  it’s never been a better time to invest in a home.

Inspection Basics

While the majority of real estate sales and purchases include a  physical inspection, it can be a gray area for many people.   Whether you are buying/selling a rehabbed bungalow in Venice, a brand new home in Playa Vista, a tear-down oceanfront home on the Marina Peninsula, there’s a few basics to keep in mind when it comes to your home inspection.

What is it and why do I need one?

According to the California Real Estate Inspection Association (CREIA): “An inspection is a visual examination of the structure and systems of a building.”

As a buyer, it’s important to make sure your agent includes an inspection contingency clause in the real estate contract, which will allow the buyer to proceed based on what the inspection reveals.  As a seller, it can help identify potential problems that were previously unknown.   As the CREIA points out, “Many problems frequently encountered after the buyer moves in, are a routine discovery for a qualified home inspection.”

At the very least, the inspection is a key part of what should be an informed real estate process for everyone involved.

What does it include?

According to the CREIA:

A complete inspection includes a visual examination of the building from top to bottom. The inspector evaluates and reports the condition of the structure, roof, foundation, drainage, plumbing, heating system, central air-conditioning system, visible insulation, walls, windows, and doors. Only those items that are visible and accessible by normal means are included in the report.

What happens if there are problems?

Depending on the type and severity of any discovered problems, the buyer may or may not decide to request that the seller make repairs, and the seller may or may not agree to make them.  For some buyers, its enough just to know what types of maintenance to expect in the future.   Other buyers might feel that the potential maintenance might be too much of a financial burden and opt not to buy the property after all.

Do I need an inspection even if the house is brand new?

A home inspection, advises CREIA, is always a good idea, even if the home is brand new.  As they point out:

No home, regardless of how well it is constructed, is totally free of defects. The construction of a house involves thousands of details, performed at the hands of scores of individuals. No general contractor can possibly oversee every one of these elements, and the very nature of human fallibility dictates that some mistakes and oversights will occur, even when the most talented and best-intentioned tradespeople are involved.

What can I do to maintain my home?

One of the best things homeowners can do to ease the inspection process and minimize property damage is through regular maintenance.    The CREIA offers a number of excellent tips for cost effective home maintenance:

  • Clean both rain gutters and any roof debris and trim back excessive foliage from the exterior siding.
  • Divert all water away from the house (for example, rain-gutter downspouts, sump pump discharge locations, and clean out garage and basement interiors.
  • Clean or replace all furnace filters.
  • Remove grade or mulch from contact with siding (preferable 6-8 inches of clearance).
  • Paint all weathered exterior wood and caulk around trim, chimneys, windows, doors, and all exterior wall penetrations.
  • Make sure all windows and doors are in proper operating condition; replace cracked windowpanes.
  • Replace burned out light bulbs.
  • Make sure all of the plumbing fixtures are in spotless condition (toilets, tubs, showers, sinks) and in proper working order (repair leaks).
  • Provide clear access to both attic and foundation crawl spaces, heating/cooling systems, water heater/s, electrical main and distribution panels and remove the car/s from the garage.
  • And finally, if the house is vacant make sure that all utilities are turned on. Should the water, gas or electric be off at the time of inspection the inspector will not turn them on. Therefore, the inspection process will be incomplete, which may possibly affect the time frame in removing sales contract contingencies.

You can find more commonly asked questions on the FAQ page of CREIA’s website.  For more information about inspections and what to expect, visit CREIA’s Homebuyers/Sellers page, or email us at debraandpat@bermankandel.com.

Study Finds Homeowners Having Trouble Accepting Fallen Values

The New York Times reported on Tuesday that, according to a recent study by Zillow, homeowners are having trouble accepting how much their property’s value has fallen in the years post-real estate bubble burst.

The Zillow study found:

Current sellers who bought their homes in 2007 or later, an analysis of the site’s home listings shows, are overpricing their properties by an average of 14 percent.

Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value

One explanation offered by the study suggests that many sellers who purchased their homes post-2008  feel that they were able to avoid for the most part, the damage done to the housing market, and thus tend to overprice their homes as a result.   Warns, Stan Humphries, Zillow’s chief economist, warns:

Traditionally, people tend to overprice their homes a bit anyway, to allow room for negotiation. But unrealistic overpricing in the current environment means properties stagnate.

One of the overpricing downfalls sellers often make when pricing their home is taking into consideration how much they paid for the home and how much they owe.  This practice does not take into consideration present market conditions, and the market is what determines interest from potential buyers.  As Humphries points out, “The buyer doesn’t care what you paid or what your mortgage is.”

What should you consider when pricing your home?  Sellers should focus mainly on what comparable properties are selling and asking for in your neighborhood.

Full article available here.

Top Mistakes of Sellers

Selling your home can be a tough process, especially in this market.   As a seller, there are certain things you should– and shouldn’t–do to help make the process easier.   RealtyTimes.com recently posted this article, Top Five Mistakes Sellers Make by Phoebe Chongchua, discussing some of the most common mistakes and misconceptions that sellers have about selling their home.

1 – Underestimating Cleaning Up

Tidying up around the house when you know potential buyers will be viewing it can seriously make a world of difference.  First impressions can be everything.  As Chongchua points out, “If you can’t take the time to wipe the grime off the refrigerator doors, tidy up the kids’ rooms, take out the messy diapers, put away the food, and take the dogs out of the house for a while, then you’ll likely find buyers will quickly move on to the next home on their list.”

2 – Lingering During Showings

It can be tempting for sellers to want to hear what feedback potential buyers may have after a showing, or hang around to hear how the open house went.  Generally this is not a good idea: “Sellers who tend to linger during showings often make the buyers uncomfortable. Buyers like to have time to explore the home at their own pace and without feeling any pressure.”  You can always find out all of the details from your agent as soon as the open house or showing is over.  After all, says Chongchua, “That’s what you’re paying your agent for! Let them do their job. Just make sure that your agent has all the home’s selling points and any additional features that make this home standout.”

3 – For Sale By Owner Trap

While many people feel that they’ll be able to do it themselves, selling your home is rarely a by-the-book process.  Indeed, “maybe they can sell their own home, but it likely won’t happen without some headaches. Trained specialists are called ‘experts’ for a reason. An expert real estate agent knows the market, has connections, guides you through the process, negotiates on your behalf, and will make the process of selling your home simpler.”   A great example:  the unqualified buyer.   Without an agent, you may be getting tons of traffic through your home, but it’s not really important if none of them is a serious buyer–”Instead they’re just looking and satisfying their curiosity at your expense. Agents know to ask the right questions to make certain the lookers are truly potential home buyers.”

4 – Not Interviewing Agents

Not all agents are the same, not all will have experience with properties like yours, not all will offer you the same services for the same result.    Oftentimes, “choosing the wrong agent for the job will be a headache and slow the process down. There must be a connection, understanding, and good communication between the seller and the agent.”  You will be much happier in the end if you take the time initially to seek out and interview the top real estate agents in your neighborhood.

5 – Pricing a Home Incorrectly

This is one of the most serious mistakes a seller can make.  Your agent wants you to get the best price for your property just as much as you do.  As Chongchua notes, “Real estate agents see homes every single day. They know the neighborhoods and the comps. They are there to help you understand what homes have sold for in the recent past and what they’ll likely sell for during the current market conditions.”  Get a market evaluation from your agent and have a discussion about what your home is worth.

“Pending Home Sales Turn Around in May”

In a press release issued Wednesday, June 29, 2011, Realtor.org reported that May’s housing activity indicates a rise in home sales in the second half of the year.  The projected increase is due to a strong rise in Pending home sales in May, with all regions showing gains from a year ago.  According to Realtor.org:

“The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 8.2% to 88.8% in May from an upwardly revised 82.1 in April and is 13.4% higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.”

The article implies that this “absorption of inventory” will play an important role in stabilizing prices, a sure sign of improvement for the housing market, and welcome news for homeowners and buyers.

Article in full available here.

Short Sale: 101

The latest edition of the CAR’s bi-monthly magazine, California Real Estate, is focused entirely on understanding the short sale process.  One article in particular, “Anatomy of a Short Sale,” did an excellent job of breaking it down.  

“With nearly 1 out of every 3 homeowners nationwide owning homes that are worth less than their mortgages, the number of short sales tatewide is expected to increase as owners and banks seek a solution to the underwater market dilemma.”

Navigating a short sale  can be daunting and time-consuming process.  As a seller, the right agent–one with exceptional negotiation skills, who is overly-attentive to paperwork, and whose patience never seems to end–can make a WORLD of difference.

Experts in the short sale process advise that it would be wise for sellers to seek a Realtor with short sale training, “on the issues, options, and solutions involved in handling these transactions, which are changing from minute to minute in today’s economy.”

Step 1: Is a short sale right for you?

The 1st step in the process is determining whether or not a short sale is even the best option available.  Sellers should speak with a CPA or attorney BEFORE listing their home with an agent to determine the right course of action for their particular situation.

Step 2: Who is the lender?

The process for a conventional short sale will be different at every bank, while FHA loans will use the same guidelines every time.  Negotiating a short sale with Wells Fargo will be different from Bank of America, or Citibank.

“Sellers may also qualify for the Home Affordable Foreclosure Alternatives (HAFA) program, a government-sponsored program that sets certain standards for the short sale process and provides financial incentives to lenders that participate. Requirements, however, are numerous. If a seller does not qualify for the HAFA program, short sale terms can still be negotiated with the lender outside of HAFA.”

Step 3:  Offer and Approval

In a short sale situation, the short sale involves the seller’s lender approving a loan payoff that is less than the balance owed.  Once the seller is presented with an offer that they subsequently accept, the offer and other paperwork–i.e. documentation of the seller’s financial hardship, status of their finances–are submitted to the lender to review.

“Unfortunately, that first offer is usually a teaser…The agent is forced to do this in order to find out what offer the bank will accept. If the bank counters with a price that’s higher than the buyer can afford, the agent will have to go through the process again, resubmitting all the paperwork with a new offer.”

As a Seller:

It is up to your agent to make sure that the bank receives all of your documents for submission.  Time is of the essence, and delaying at any point could seriously impact your short sale eligibility.  Ultimately, the sooner that you contact agents regarding a short sale situation, the better your position will be.

As a Buyer:

Waiting for a decision from the bank on a short sale can take a lot of time.  It’s not uncommon for buyers to continue seeing other properties even after the contract has been entered into.  In the interest of protecting the buyer,  the standard short sale contract will have a 45-day commitment clause, which allows the buyer to walk if, after 45 days, they see other opportunities.

You can find this month’s edition of California Real Estate in full here.

Sellers Q and A: Making your Home Market Ready

For a lot of people, there’s a lot to consider before and after making the decision to list their home or condo. Here’s a question we hear all the time from people all the time:

 

We will be selling our home sometime this year and are in the process of gathering information regarding what we should and should not do to our home to make it market ready.  I guess what I’m asking would be what improvements should we make to get the biggest bang for our buck? I love watching all the television shows about redoing your home but my budget doesn’t allow for too much of a makeover.

 

The first thing we would tell you is “the way you live in a home is not the way you sell your home.”  The two words you will hear us repeat over and over when we meet a potential listing client are “de-clutter” and “de-personalize.”  Here is a room by room guide of little or no cost improvements for you.

Curb Appeal:

This is the most important whether you’re in a single family home or a condominium.  During the walk to the front door and the sometimes awkward “finding of the key” by the Realtor, it’s important that everything look perfect.  This is where you put your money into plants whether in pots or in the ground.  This is the first impression the buyer will develop of your home and if it doesn’t look good, you may have already lost the buyer.

Living Room:

Remove some furniture then remove some more.  Everything you take out makes it seem larger.  Also, get rid of personal photos and keep surfaces clean.  We like to use the rule of three which means no more than three items on any surface.

 

Bedrooms:

Push the headboard to the far wall so buyers can see the top of the headboard when they enter the room which makes the room seem larger.  Buy new bedding and keep it simple—no big fancy designers.  In photos we don’t want the bed to stand out too much.

Bathrooms:

Get rid of anything dated such as brass cabinet handles and 80s light fixtures.  The bathroom should be spotless so a fresh coat of paint might be in order.  Buy new towels and bath mats.  Lock up and hide all prescription drugs.

Kitchen:

Ditch refrigerator magnets.  The counters should be clean and appliance free.  A cheap way to update a kitchen is with new hardware.

Closets:

Clean and organize them.  After you do that, take another third of your stuff and stash it elsewhere.  It will make your closets appear much roomier.

Paint:

It should be neutral but that doesn’t mean you should paint every wall beige.  Pick warm muted colors.

 

Hope some of these tricks help you without spending too much money!