Real Estate Guide: Part 1
From curb appeal to creative financing, we present plenty of community real estate resources and tips on buying your dream home, and getting the deal that’s right for you.
What Buyers Want
Today, home’s features can make or break the sale
By Vicky Katz Whitaker
Copley News Service
If your house, condo, or townhome doesn’t have central air, an oversized garage, or a walk-in closet in the master bedroom, you may have a long wait finding a buyer.
That’s the reality of today’s buyer-driven marketplace, according to a new report on buyer preferences compiled by the National Association of Realtors. The findings are based on responses to a random survey of 40,000 buyers around the country who purchased a home from late 2005 through early 2007. About 2,800 home buyers participated in the survey, a 6.7 percent return that is about double the amount normally obtained in professional polling, an association spokesman says.
The survey was weighted according to each state’s share of home sales in 2006. While there are regional, age of buyer, and type of housing differences in what home purchasers are looking for, the survey shows that some amenities such as central air-conditioning translate into a quicker sale while others, like a tennis court, can make a home languish on the market.
It’s especially true for those who are looking to sell homes in and below the $205,000 national average. They’ve been hardest hit by the nation’s current economic woes, the subprime lending crunch, tighter credit, and a marketplace glutted by foreclosed homes. Sellers of high-end homes in coveted locations have not been as affected by the economic crunch as have others in the market, says economist Paul Bishop, managing director of the National Association of Realtors Survey Research and National Center for Real Estate Research in Washington, D.C.
“The vast majority of homes on the upper end have been more resistant to the changes in the last 18 months,” Bishop points out.
Well-heeled buyers still plunk down thousands more for waterfront properties and upscale amenities like hardwood floors and high-end kitchen appliances, features that are not as likely to be found in less- expensive homes.
“For a cul-de-sac lot and proximity to shopping or public transportation, those buyers with above median-priced homes were willing to pay almost twice as much as those with homes below the median price,” the NAR study found.
What helps sell an average or low-cost home besides central air-conditioning? Those buying a home, even if it’s for the first time, want big garages with space for two or more vehicles, cable television/satellite hookups, high-speed Internet connections, and a backyard or play area above all else. If you want to sell a house that’s new or just a few years old, you’re in luck. All groups preferred a house less than 10 years old.
With the cost of fuel skyrocketing, nearly half of recent buyers (46 percent) said energy efficiency was “very important” when they searched for a home, says the NAR report. A home’s energy efficiency was of greater concern to older house-hunters experienced in homeownership than younger people buying a home for the first time. It was also significantly more important to those purchasing new homes than those who bought previously owned homes.
Eighty-two percent of the home buyers surveyed for the report looked for a detached single-family home, the NAR says, the pattern fairly consistent no matter what their age. Even though they represent a smaller segment of the home-buying market, 18- to 24-years-olds and those 75 or older constitute the largest segment of those who purchase townhomes or condos in multiunit complexes.
Nearly three-fourths of those surveyed choose a single-family house in a suburban setting, a suburban subdivision, or a small town.
As might be expected, although they share some preferences in shopping for a house, townhome, or condo, younger home buyers look for some amenities less important to their older counterparts, including extra-wide doorways, hardwood floors, a backyard or play area, fencing, or being close to work, schools, recreation, cultural activities, public transportation, and shopping. Seniors 75 and older are more likely to look for a home on a lot with few trees, skylights, a kitchen island, granite countertops, and a whirlpool bath.
Not that they get what they want.
“Home buyers rate many features as important when searching for a home, but they sometimes need to compromise when purchasing their home,” the NAR study points out. “Repeat buyers are more likely to purchase a home with most of their preferred features including many luxury items. Compared to first-time buyers, they compromised most on neighborhood features such as proximity to work, a park or playground, and public transportation. Buyers of new homes more often made compromises on neighborhood features such as proximity to cultural activities.”
Subprime meltdown changes home refinance climate
By Vicky Katz Whitaker
When interest rates start to drop, financially savvy homeowners usually head straight for their banker or mortgage lender. They know the time may be ripe to refinance that higher interest rate fixed mortgage or renegotiate terms of an adjustable-rate mortgage.
But in the wake of the subprime meltdown and today’s turbulent economy, it’s gotten tougher to get what you want. Before approving refinancing, lenders are scrutinizing credit scores, the amount of equity that the homeowner has accrued, even employment and payment patterns.
What does this mean to you?
Plenty, if you’re stuck with a high mortgage payment and a house that has taken a double-digit plunge in value over the past year. If you put nothing down when you bought your house, made a small down payment, or have little equity, you may find it impossible to take advantage of lower interest rates. If you have less than 5 percent equity in your home or a credit score below 680, you may not be able to qualify for refinancing or refinancing cash-out packages that in the past could have provided you with a lower mortgage rate and money over the value of your home to pay off credit cards, finance a major purchase, even pay for your child’s education.
Even if you can find a lender willing to refinance your existing mortgage, a poor credit history and lack of equity could leave you facing additional fees and rates higher than what is offered to better credit risks. That could undermine any benefit derived from refinancing your mortgage now.
If you are in good financial shape, when does it make sense to seek refinancing?
When rates drop by one-half to one point, provided you stay in your home for at least five years to recoup the closing costs.
“In some cases, you may be able to do that in a year or two,” says American Bankers Association spokesman John Hall. To really benefit, you need to keep your home long enough to pay the costs of the refinancing process, which can run several thousand dollars, depending on how much you borrow.
For a homeowner with an adjustable-rate mortgage and good credit, refinancing to a fixed-rate loan can guarantee that the interest rate will be fixed for the life of the loan. If you want to stick with an adjustable-rate mortgage, refinancing may let you negotiate for a better rate and payment cap than what you have now. By converting to a shorter-term loan, refinancing also can allow some homeowners to build up equity more quickly.
Mortgage experts offer these other suggestions:
• If you’re thinking about refinancing, make the first stop the lending institution that gave you your existing mortgage. Since you have a track record with them and they with you, it can work to your advantage. But if you’re not satisfied with the service or the package they are offering, shop around. “It’s a very competitive market,” the ABA’s Hall points out.
• Don’t have your property appraised in advance of sitting down with the lender. As a result of the problems with the subprime market and an almost nationwide dive in real estate values, financial institutions are less inclined to accept appraisals submitted by a property owner. Expect to pay for the services of an appraiser selected by the lender as part of the refinancing process.
• Don’t seek cash-out mortgage refinancing to pay for intangibles like a vacation or a big-screen television set. Instead, use the money to make repairs or upgrades that add value to your home.
• A cash-out mortgage refinancing can be a lifesaver if you’re deep in credit card debt. Use the money to pay off high-interest credit card bills. Just make sure that once those bills have been paid, you don’t run up others.
• If you can’t qualify for refinancing but still need to reduce your carrying charges, there are other alternatives, industry officials say. They recommend that you approach the lender that gave you your existing mortgage and ask if them if they can modify the terms. Today, most lenders would rather rework terms if you don’t qualify for refinancing than get stuck with one more house that’s in foreclosure.
• Despite some sites that are scams, legitimate and attractive mortgage refinancing offers can be found online. But you may be viewed as a one-time customer. Working with a local lender can let you build a long-term financial relationship.
Making an Impression
In a buyer’s market, owners focus on curb appeal
By Frank Wagner
Copley News Service
As the saying goes, you never get a second chance to make a first impression. In real estate parlance, that first impression is called curb appeal, and it has taken on an increased importance in the current buyer’s market.
In its annual “Cost vs. Value Report,” Remodeling magazine suggested homeowners wanting to sell should concentrate improvements on exterior upgrades. That’s a switch from recent years’ focus of rehab resources on kitchen and bath improvements.
According to National Association of Home Builders surveys, kitchen remodeling, bathroom remodeling, room additions, and whole house remodeling had been the top choices for homeowners. But shifting market conditions appear to have changed home improvements’ focus and return on investment.
Of the six projects cited by the “Cost vs. Value Report” where national recovery rates exceeded 80 percent, only one was strictly an inside job, a minor kitchen remodel. Findings were based on 2007 surveys for the National Association of Realtors of real estate appraisers, sales associates, and brokers in 65 markets.
“We don’t have any hard data behind the shift,” says NAR spokesman Walter Molony. “But it may indicate that with more options for buyers to choose from in much of the country, curb appeal and making a good first impression are even more important.”
Nationally, the improvements that netted more than 80 percent recovery were:
• Upscale siding replacement using fiber cement materials (88.1 percent).
• Wood deck addition (85.4 percent).
• Midrange vinyl siding replacement (83.2 percent).
• Minor kitchen remodel (83 percent).
• Midrange wood window replacement (81.2 percent).
• Upscale vinyl window replacement (81 percent).
According to the report: “In a typical real estate transaction, the ‘cost recouped’ for a given remodeling project depends on a variety of unpredictable factors, many of which are more important than the construction cost. These factors include the condition of the rest of the house, the value of similar homes nearby, and the rate at which property values are changing in the surrounding area. A home’s urban, suburban, or rural setting also affects its value, as does the availability and cost of new and existing homes in the immediate vicinity.”
While no project broke the 90 percent mark nationally, there were regional variations. In the Pacific region, Realtors estimate cost recovery of more than 100 percent for these projects.
“Consumers are spending less on their homes and are taking more time to sign on for large remodels,” observes Kelly Mack of NAHB Remodelers. “Part of it may be decreasing available home equity, but it also seems just tightening on household spending.” Even so, NAHB estimates that Americans spent $235 billion in home remodeling in 2007—up from 2006’s $233 billion.
“Our most recent consumer survey shows 55 percent of sellers remodeled or made improvements within three months of placing their home on the market, spending a median of nearly $3,000,” says the NAR’s Molony.
What is spent and how much is recouped depend on a number of things: condition of the rest of the house, value of nearby homes, and the urban, suburban, or rural setting of the house. There are also a number of regional variations. A bathroom remodel that recovered 85 percent of its value in the South only recouped 63 percent in the Midwest, according to the report.
“On most projects, the value of remodeling trended down in 2007 compared with 2006,” observes the magazine. Even so, as the NAHB’s Mack observes, “some value-increasing projects can be relatively small and inexpensive.”
Molony concurs. “Historically, the biggest bang for the buck is simply taking care of cosmetics—painting, cleaning out clutter, trimming the landscaping, etc.” he notes.
“Bringing a home that is substandard up to neighborhood norm generally provides a good return,” says Molony. “However, overimproving a home to make it one of the most expensive in the neighborhood generally is counter productive—you won’t receive a proportionate return.”
Complete city data from the Remodeling 2007 “Cost vs. Value Report” can be downloaded for free at www.costvalue.remodelingmagazine.com.