The Pitfall of the Pricing Game

Which do you think matters more when waiting for the right time to buy a home? Is it securing a low purchase price, or locking in a great financing rate?

Most buyers become focused on purchase price when they’re considering whether or not to buy. The question you often hear is the same: “Has the market bottomed out yet?” The idea of getting “the best deal” on a home is paramount to these price shoppers, and indeed for cash buyers, this may be the primary concern.

While negotiating a great price is an important part of the equation, the value of securing great financing terms cannot be overstated. The inherent risk in waiting for the market to hit bottom is that you’ll also miss out on the best interest rates available.

Imagine, for example, you’re waiting for homes to drop an additional X% in value. While you’re waiting, mortgage rates rise Y%. Sure, you might secure the home at a better purchase price, but what you’ll pay over the life of the loan will be significantly higher than buying when the market was more expensive (but rates were lower).

Perhaps the most punishing part of missing great financing is the net impact on your monthly payment. Even a 1% increase in your mortgage rate can end up costing as much as a brutal 10% increase in your monthly payment.

Buying a home is not like buying a nice coffee table. Price is not the sole concern. Given the complexities of price, property taxes, financing terms, and the larger tax implications of home ownership, it truly pays to consult with an agent who can help you weigh the pros and cons and help you make the right move.

I’m always happy to work with you to navigate the market, negotiate price, and put you in touch with mortgage professionals who will help you get the best rate possible. Contact me today and I can help you explore your options: 

Teresa Butler

Worthington Realty

614-565-8161

Teresa@TeresaButler.com 

The difference between market and assessed value

MONEY HOUSE“What’s my home worth?”

This simple question is often answered three different ways. Ask your public tax assessor, and you’ll get one number (usually low). Look up your house on Zillow and you’ll get another number (usually too high). The third answer is market value, and if you’re selling your house, you’ll usually figure out what that number is (for good or ill) in 30 to 90 days.

Many people are confused about assessed value versus market value. Assessed value is a number placed on a property by a public tax assessor for the purposes of taxation. Some percentage of your assessed value is used to determine your annual tax bill. The rules for the assessment vary, but typically the assessed value has more to do with how much money the municipality needs to raise than it does the number you’d arrive at after putting your home on the market.

Assessed values can lag behind true market values in both directions. They can vary widely from home to home in the same neighborhood, especially if a neighbor has appealed an assessment (usually for the purposes of lowering their tax bill). And by the way: assessed values don’t automatically adjust for you when someone else appeals their assessment.

Market value is the price at which a specific house in a particular location in current condition will sell, typically within 30 to 90 days. Your real estate agent will try and predict the market value of your home based on all of these factors. In a hot neighborhood? It can elevate your home’s value. Have significant repairs to do or other condition issues? It can bring that value back down. The number one reason a home doesn’t sell is often related to a disparity between listing price and true market value. (Overbidding occurs when a home is priced below market value.)

Generally, assessed value tends to be below market value. Sometimes a buyer will attempt to negotiate a lower price on a home by citing assessed value, but this only underscores their lack of understanding about assessed value versus market value.

The best way to understand what your home is worth? Contact me today, and I’ll get to work on helping you determine the right price for your house in today’s market: Teresa@TeresaButler.com or 614-565-8161

How to determine the true value of home improvements

19327666(BPT) – As the U.S. housing industry continues to emerge from the Great Recession, signs are pointing toward positive recovery. In fact, a recent report from the Joint Center for Housing Studies of Harvard University states that the home improvement industry could see record spending in 2015. It’s news like this that may have you contemplating an update to your house. Even if you plan to stay in your home for years to come, it’s important to consider which home remodeling projects offer the potential for a positive return on investment.

“Research shows that more homeowners intend to remain in their homes after remodeling, however, resale value is still a major factor when planning renovations,” says Susan Selle, chief marketing officer of exterior building products manufacturer Ply Gem Industries.

Before spending a significant amount of time and money on your next home improvement project, consider these tips.

Five home improvements with the highest ROI

The 2015 Remodeling Magazine Cost vs. Value report identifies these top five mid-range exterior home renovations as beneficial investments that allow homeowners to recoup a substantial percentage of their investment when they resell their homes:

* Replacing the front door (steel 101.8 percent)

* Adding manufactured stone veneer (92.2 percent)

* Replacing the garage door (88.4 percent)

* Replacing the siding (vinyl 80.7 percent)

* Adding a deck (wood 80.5 percent)

The cost-value ratio compares resale value to construction cost. The higher the percentage, the more of the job costs you are likely to recoup when selling your home.

“Homeowners want lasting value from their exterior renovation projects, so it’s important to select the best materials for the job upfront,” says Jerry Blais, senior vice president of marketing for Ply Gem Industries. “For example, when choosing siding for the home, vinyl siding provides overall better performance than wood, engineered wood and fiber cement and requires less maintenance both in the short and long term, allowing homeowners to complete their renovation and enjoy it, hassle-free, for years. In addition, vinyl siding provides the styles, textures and stylish colors homeowners want to create beautiful curb appeal.”

Budgeting for success

Once you’ve decided which replacement and remodeling projects will offer the best ROI, develop a schedule and a budget to ensure the home makeover remains financially sound. The budget defines the project’s scope, estimates overall costs, and helps to establish priorities. Generally, renovation costs should not exceed 30 percent of your home’s value and should be consistent with housing trends in your neighborhood.

What should the budget include? Websites like www.plygem.com offer comprehensive advice for creating a renovation budget and sticking to it. To start, consider these likely-to-occur expenses:

* Contractor costs. These include labor and may incorporate employee benefits, professional fees, permit and inspection charges and, of course, profit. Get at least three contractor estimates to ensure your contractor is cost-effective and reputable.

* DIY costs. Should you forgo a contractor? Keep in mind you will need to rent or buy power tools and equipment and potentially learn new skills.

* Hidden costs. For example, bringing outdated electrical or plumbing installations to code, or removing lead paint.

* Site preparation costs. For exterior renovations, this may include tree trimming, clearing land, and renting a haul-away container.

* Interim housing costs. If you plan to relocate, you will need living expenses for the project’s duration.

* Material cost. These include large expenses and small ones (ex. nails, trim) and could account for as much as half to 75 percent of the total cost. Factor in an extra 6-to-10 percent for waste for materials that are cut and fitted.

Bringing it home

If you’re interested in near-term resale value, it’s important to make sure that selling your home will at least recoup the cost of any completed projects. If you plan to stay in your home for many years, however, you’ll not only benefit from an improved resale value down the road, but you’re also more likely to appreciate the improved comfort and curb appeal in the meantime.

Home Prices Are Accelerating

SOLD HOUSEThe number of metro areas seeing double-digit price appreciation doubled in the first quarter of this year compared to last quarter, according to the National Association of REALTORS®’ latest quarterly housing report.

Strong demand mixed with tight inventories of homes for-sale continues to push up home prices nationwide. The median existing single-family home price rose in the first quarter in 148 out of the 174 metro areas NAR tracks. Only 25 areas recorded lower median prices compared to a year earlier, while 51 metros saw double-digit increases – a sharp increase from the 24 metro areas in the fourth quarter of 2014.

At the end of 2014, home prices had mostly moderated to healthier, more sustainable levels of growth, but now prices are picking up again, says Lawrence Yun, NAR’s chief economist.

“Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market,” Yun says. “However, stronger demand without increasing supply led to faster price growth in many markets. Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth.”

The median existing single-family home price in the first quarter was $205,200 nationwide, up 7.4 percent from the first quarter of 2014. Meanwhile, total existing-home sales decreased 1.8 percent to a seasonally adjusted annual rate of 4.97 million in that time frame.

Inventories remain tight. By the end of the first quarter, there were 2 million existing homes available for sale, with the average supply during the first quarter at 4.6 months – down from 4.9 months a year ago. Most economists consider a 6- to 7-month supply to be a healthy balance between buyers and sellers.

“Home owners throughout the country have enjoyed accumulating household wealth through the steady rise in home values in the past few years,” Yun says. “However, some home owners are hesitant to move up and sell because they aren’t confident they’ll find another home to buy. This trend – in addition to subpar homebuilding activity – is leading to the ongoing inventory shortages and subsequent run-up in prices seen in many markets.”

Regional Breakdown

Here’s a closer look at how existing-home sales performed across the country in the first quarter:

  • Northeast: Existing-home sales fell 11.2 percent in the first quarter but are 2.2 percent higher than the first quarter of 2014. Median price for single-family homes: $245,000 in the first quarter, up 2.4 percent from a year ago.
  • Midwest: Existing-home sales dropped 2 percent in the first quarter but are 6.3 percent higher than a year ago. Median home price: $156,600, up 8.9 percent from a year ago.
  • South: Existing-home sales dropped slightly by 0.5 percent in the first quarter but are 7.8 percent above the first quarter of 2014. Median home price: $182,300, up 8.2 percent compared to a year earlier.
  • West: Existing-home sales rose 1.5 percent in the first quarter and are 5.4 percent above a year ago. Median home price: $295,500, up 5.8 percent above year ago levels.

Source: National Association of REALTORS®

Tips for Increasing a Home’s Property Value

2815308_401_20With the Spring selling season in full swing, now is the time for your clients to start making changes to improve their home’s comfort level and the way it functions to make it more appealing to potential buyers.

Where should they start? Peter Chovanes, a REALTOR® withVan Guard Properties in San Francisco, advises that clients start with the four home improvement basics: foundation, roof, plumbing, and electrical.  Of these the roof is the most important. “I am almost always asked ‘How old is the roof?'” he says. “And keeping the roof in good shape alleviates other problems; for example, water can run laterally and once a leak starts it can follow plumbing and even electrical conduits. So what you think is a plumbing leak might really be a hole in the roof.”

  • Repair: First take a good look at the state of the home, inside and out. Fix the obvious areas that need maintenance.
  • De-clutter: Find ways to store odds-and-ends in containers and cabinets or donate belongings to charity.
  • Lighten up: Brighter, light-filled rooms are more appealing and make a house feel more spacious. Consider replacing heavy drapes with shutters, shades, or blinds.
  • Add eco value: Replace old windows with energy-efficient versions to reduce home energy costs and add value.
  • Update: Water heaters, furnaces, and toilets are also good to update for energy and water conservation but probably will not add significantly to the home’s value.
  • Refinish: If wood floors are looking tired, refinish them. Replace worn carpeting where possible.
  • Kitchen clean-up: The kitchen is an obvious focal point for buyers. Consider a light upgrade in the kitchen, by replacing the sink or replacing cabinets. If you are planning to replace counters try solid surface quartz-based materials, which have become the popular alternative to granite.
  • Better bathrooms: Bathrooms are typically less expensive to remodel than kitchens so there is more potential for a return on the investment. Buyers frequently request double vanities and a walk-in shower so consider upgrading accordingly.
  • Remodel: It is usually more cost-effective to remodel attics and basements than to add entirely new rooms.
  • Spruce up: Add curb appeal by weeding and sprucing up the garden with low maintenance, drought-tolerant plantings — also called xeriscaping. Giving the front door a new coat of paint is a low cost way to add curb appeal.

Source: Houseplans.com

5 Ways to Raise the Value of Your Listing

210002339_901_18A seller may be able to boost the value of their home by an additional 12 percent, with just a few smart pre-listing repairs, according to a new survey of 300 residential real estate professionals by the Consumer Reports National Research Center. On a median, single-family home priced at $205,000, that could be a potential gain of $24,600.

Best time to sell: The best single month to sell a home is from April through June, with the best selling month identified as April, according to the Consumer Reports survey of real estate professionals.

“You don’t have to spend a ton of money to increase the value of your home,” says Dan DiClerico, senior editor for Consumer Reports. “Some simple, inexpensive fixes throughout the house can make it more appealing to potential buyers.”

Here are some of the fixes that the Consumer Reports survey of real estate professionals uncovered as being the most important:

1. Declutter

Cost range: $0 (do-it-yourself) to $2,500 (pro)

Potential return: 3% to 5%

Clear away any clutter and depersonalize the space as much as possible.

2. Makeover the kitchen

Cost range: $300 to $5,000

Potential return: 3% to 7%

The kitchen was rated as the most important room to have in top shape before selling, according to the survey. Real estate professionals recommend focusing on minor repairs that center on the function of the kitchen first, such as repairing leaky faucets, loose light fixtures, or blemishes on the countertop. Then, they recommend small enhancements, such as painting the walls, updating the cabinet hardware, adding new curtains, or light fixtures.

3. Freshen up the bathroom

Cost range: $300 to $1,000

Potential return: 2% to 3%

Make simple improvements, such as caulking the tub or re-grouting the floor or adding new bathroom fixtures to brighten up the space. Updating the mirror and lighting also can have a big impact, the real estate professionals surveyed said.

4. Paint

Cost range: $100 (do-it-yourself) to $1,000 (pro)

Potential return: 1% to 3%

Sixteen percent of the real estate professionals surveyed said that interior painting is an important part in bringing about a sale of a home. But the seller likely doesn’t need the entire house repainted, but maybe just a redo of one or two rooms to curb costs. The two prime candidates for being repainted: Kitchens and bathrooms. Paint in whites and off-whites and a neutral palette – such as grays and beiges — help buyers focus on the home’s features more than be distracted by bright colors, agents note.

5. Exterior touch ups

Cost range: $150 to $7,500

Potential return: 2% to 5%

Agents recommend that their clients concentrate on basic maintenance first, such as to mowing the lawn, trimming overgrown shrubs, and applying a fresh layer of mulch to the garden beds. They also recommend making any minor repairs, such as replacing cracked siding boards or repointing brick walls. The real estate professionals also recommended taking careful note of any repairs needed with the roof: 31 percent of agents surveyed said the roof is one of the most important parts of the home to have in good shape.

The latest Cost vs. Value Report, produced by Remodeling Magazine in conjunction with REALTOR® Magazine, uncovered some of the top home remodeling projects that offer some of the largest returns at resale. Many of the biggest payback projects had to do with enhancing the exterior of the home.

The following are the top five projects nationally in terms of cost recouped, according to the Cost vs. Value report:

1. Entry door replacement (101.8%)

2. Manufactured stone veneer (92.2%)

3. Garage door replacement (88.5%)

4. Siding replacement, fiber cement (84.3%)

5. Garage door replacement (82.5%)

Check out the latest Cost vs. Value Report to learn more about the top home remodeling projects for resale. Also, read more about easy enhancements sellers can do to help increase the value of their home in Consumer Report’s full report, “How to Make Your Home More Valuable,” which can be accessed online or found in the March 2015 issue of Consumer Reports magazine.

Source: “Top 5 Ways to Boost the Value of Your Home,” Consumer Reports

90% of Mortgaged Homes Have Equity Again

About 273,000 homes returned to positive equity in the third quarter of 2014, bringing the total to 44.6 million of all properties with a mortgage, according to a newly released equity report from CoreLogic using data from the third quarter of 2014. That number represents around 90 percent of all mortgaged properties nationwide.

If home prices rose by 5 percent more—which is largely predicted to happen this year—an additional 1 million home owners now in negative equity would also move into positive territory, CoreLogic reports.

“Negative equity continued to decrease in the third quarter as did the level of homes mired in the foreclosure process,” says Anand Nallathambi, president and CEO of CoreLogic. “This should hopefully translate into less friction in the housing market as we move forward. Better fundamentals supporting home ownership in the face of higher rents should attract more first-time home buyers to the market this year and next.”

The largest declines in the negative equity share of home owners occurred in Nevada, Georgia, Michigan, and Florida.

MORTGAGE CALCULATORSSome home owners holding equity are still considered “under-equitied.” About 9.4 million—or 19 percent—of properties with positive equity have less than 20 percent of equity, and 1.3 million have less than 5 percent of equity in their homes.

Overall, about 5.1 million homes—or 10.3 percent of all residential properties with a mortgage—were still in negative equity territory in the third quarter. That is a slight drop from 5.4 million in the second quarter, but down 3 percentage points year-over-year when the total stood at 6.5 million in the third quarter of 2013.

5 States with Highest Number of Negative Equity Properties in Q3 2014

The following five states alone accounted for about 33 percent of negative equity in the U.S.

  1. Nevada: 25.4%
  2. Florida: 23.8%
  3. Arizona: 19%
  4. Rhode Island: 14.8%
  5. Illinois: 14.1%

5 States with the Most Amount of Properties in a Positive Equity Position

  1. Texas: 97.4%
  2. Alaska: 97.1%
  3. Montana: 97.1%
  4. Hawaii: 96.4%
  5. North Dakota: 96.1%

Broken down by metro level, the five areas with the highest amount of properties with equity in the third quarter of 2014 were:

  1. Houston-The Woodlands-Sugar Land, Texas: 97.5%
  2. Dallas-Plano-Irving, Texas: 97%
  3. Anaheim-Santa Ana-Irvine, Calif.: 96.6%
  4. Portland-Vancouver-Hillsboro, Ore.: 96.4%
  5. Denver-Aurora-Lakewood, Col.: 95.9%

Source: CoreLogic Q3 2014 Equity Report

Top School Districts Lift Home Prices

Homes within highly rated school districts tend to have a higher median sales price, sell for a greater percentage over the list price, and sell faster, according to a new study by the real estate brokerage Redfin.

Highly rated public schools were found to have homes with a median sales price of $474,900 compared to $290,000 in an average-rated school zone. Redfin researchers also found that homes in top school districts are more likely to sell for 30 percent above the list price versus 23 percent. They tend to sell faster too: A median of 25 days on the market versus 21 days.

school busHomes in top-level school districts can be more difficult to come by, the study shows. For every 100 homes in a neighborhood, on average, only 5.8 were on the market in the past year compared with 6.5 for the greater metro area.

Redfin analyzed test score data from GreatSchools ratings, provided by Onboard Infomatics, in 22 major metro areas to determine the neighborhoods that have the most highly rated public schools. Redfin also included data on median sales price, and the percentage of homes that sold above the asking price.

The following metros have some of the top rating averages from GreatSchools, and listed below them are the top three neighborhoods containing the most highly rated schools within each metro. (For the full list of 22 metros and the top schools identified, visit Redfin’s research blog.)

  • Orange County, Calif. metro area

Turtle Rock, El Camino Real, Northwood

  • Austin, Texas metro area

Steiner Ranch, Circle C Ranch, East Oak Hill

  • Long Island, N.Y. metro area

South Wantagh, North Syosset, North Baldwin

  • Seattle, Wash. metro area

Queen Anne, Ballard, Factoria

  • Phoenix, Ariz. metro area

Desert Ridge, Hillcrest Ranch, Ahwtukee

  • San Jose, Calif. metro area

Monta Vista, Blossom Hill, North Los Altos

  • Houston, Texas metro area

Shadow Creek Ranch, Kingwood, Sugar Creek

Source: Redfin

Home improvements that make your home more valuable

20094139_web(BPT) – More and more homeowners are embarking upon home improvement projects, spending nearly $200 billion a year on home renovations, according to the National Association of Home Builders. If you’re looking to make some home improvements without breaking the bank, spend smartly and invest time and money now into the projects that will pay back later.

Curb appeal

When it comes to first impressions, house hunters first notice curb appeal, or lack thereof. In fact, according to the National Association of Realtors, curb appeal is important to 71 percent of homebuyers. So beautify the outdoor space to attract possible buyers by focusing on small exterior improvements that’ll pay off big like planting seasonal shrubs, painting the front door, refreshing a rusty mailbox or replacing old porch lighting with updated fixtures. These minor details will make a major and lasting statement. At the very least, you should clean the yard of any debris, trim trees and spread mulch in planting beds.

Take outdoor renovations to the next level by transforming the look of your home completely with a fresh coat of paint. Be mindful of your home’s location when selecting paint colors. Bold or bright colors might be the norm in Florida but wouldn’t look right in a region like the Pacific Northwest where neutral earth tones are popular.

You can also increase the value of your home by giving your siding material an overhaul. Remodeling magazine suggests replacing aluminum and vinyl siding with a durable fiber-cement mixture, which will recoup about 88 percent of its cost upon resale. It resists fire, rotting, moisture and termites – all potential hazards that could otherwise end up costing thousands.

“Let your insurance agent know whenever you complete a renovation project to make sure any new upgrades to your home are properly covered under your existing policy. If not, your agent can work with you to make sure you get the coverage you need,” says Erie Insurance Vice President and Product Manager Joe Vahey. “In addition, some home improvement upgrades may entitle you to discounts, especially if renovations make the home safer or more secure.” For example, Erie Insurance offers discounts for installing smoke alarms or a central station alarm. Erie also provides a discount for installing sprinkler systems in your home.

Bed, bath and beyond

As house hunters head indoors, there are a few things that are likely to increase a sale. Most tend to look at kitchens and baths first. Experts recommend timeless fixtures instead of trendy ones since they hold their own over time and appeal to buyers who favor both contemporary and classic looks. Don’t waste your money on fancy fixtures and features – they rarely make or break a sale.

Most people seem to think that a huge kitchen overhaul is necessary to snag interested buyers. However, Remodeling Magazine reports that you’ll actually recoup 8.5 percent more of the costs of a minor kitchen renovation compared to a major kitchen renovation. So instead of redoing the kitchen completely, accomplish a few minor DIY kitchen updates like changing out faucets and lighting fixtures, painting cabinets, adding new hardware to drawers and cabinets, and replacing old appliances with newer (and often more energy-efficient) models.

Experts also say that adding an attic bedroom and finishing the basement are two of the largest renovations that give you the best return on your investment, allowing you to recoup more than 84 percent and nearly 78 percent of the cost, respectively.

Before jumping into complicated or expensive DIY projects, take a moment to assess which ones are worth your time and money. Test your knowledge of which home improvement projects give you the most bang for your buck at www.eriesense.com.

No matter what updates you end up doing, it’s always a good idea to regularly assess the value of your home. This will assure you’re asking for an appropriate return on investment when you finally decide to put it on the market.

3 Tricks for Finding the Perfect Asking Price

MC910217019[1]Determining the perfect asking price involves psychological reasons as much as practical reasons, The Wall Street Journal reports.

“When you set a list price, you’re sending a signal to the market,” says Michael Seiler, professor of real estate and finance at The College of William & Mary in Williamsburg, Va.

But pricing a home can be a “delicate balance,” says Mike McCann, a real estate professional with Berkshire Hathaway HomeServices, Fox & Roach in Philadelphia. You have to balance the comparables with sellers’ unrealistic expectations about what their home is really worth. Sellers often want to price a home higher than what the market can bare. On the other hand, some sellers or agents may be tempted to set the asking price low in the hopes of generating a buyer frenzy and quick sale.

What strategy works? Research offers a few insights into setting the right asking price.

  1. Getting too precise means you won’t budge. Pricing research suggests that setting an exact asking price — such as $795,475 — sends the message to buyers that the price is less negotiable than, say, a round number like $800,000. “Those using precise pricing show confidence in the price,” Seiler says.
  2. The number nine can be a big influence. Pricing a property at $499,900 rather than $500,000 can subconsciously influence a home buyer. The home “seems way cheaper,” Seiler says. Even if the home winds up selling above the asking price, the buyer will feel like they got a great deal with the initial lower asking price, Seiler says. “The goal is to make it stick in their head that you’re getting a bargain,” Seiler says. “It’s the way our brain looks at numbers.”
  3. Going low doesn’t always mean a higher selling price. While setting a lower asking price may generate a frenzy of offers, it won’t necessarily translate into a higher sales price. “It creates a havoc that doesn’t serve anyone well,” Rebecca Walter, a real estate professional with Redfin in Portland, Ore., told The Wall Street Journal. The lower price won’t necessarily increase what a buyer will offer, since some buyers may compete in other ways, like paying in all cash or waiving the inspection to produce a quicker sale, Walter says.

Source: “Strategies for Setting a Price for Your Home,” The Wall Street Journal

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