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Home Improvements That Still Pay Big Returns
Home improvements are obviously investments in your home, and most homeowners have a list of things they'd like to do to their home to make it their dream home. Things like: gutting the kitchen, reconfiguring the bathroom or repainting the entire outside of the home.
The key to home improvements is doing them wisely. You don't have to spend a ton of money to add value to your home when it comes time to sell it.
Home Improvements With the Biggest Return on Investment
The National Association of Realtors (NAR) and Remodeling Magazine recently released their 2011-2012 Remodeling Costs vs. Value Report.
Exterior renovations dominated the list of the most cost-effective projects, those expected to recoup close to 70 percent of the cost.
1 – Siding replacement is already part of long-term home maintenance, but upgrading to fiber cement siding replaced the previous number one remodeling project of replacing exterior doors.
2 – An entry door replacement pays for itself. Replacing a wood door with a strong steel door not only pays for itself with cost recovery when you sell, but adds safety and security to your home while you're still living there.
3 – An attic bedroom addition, although not for everyone, adds value to your home, and is considered one of the least expensive ways to add another bedroom, without adding on to the existing structure.
4 – Replacing old worn out garage doors jumped on the list this year, mostly due to the cost of doing so dropping about 15 percent from last year.
5 – Window replacements are definitely a long term investment. Replacing old wooden windows with newer vinyl models will help you save on utility bills, and you'll recoup some of that investment when it comes time to sell your home.
New Attitude About Home Improvements
Many homeowners don't fret over paybacks from home improvements. Most owners want assurances that their renovations will enhance the property's market value, but expectations of 100 percent return on their money is no longer there.
Most people are happy with modest returns. For many consumers, fixing up their house now fits their sentiments — and their finances — far better than selling or buying. Useful enjoyment of their home improvements now seems to outweigh the old "how much will we recoup from these home improvements when we sell?" mentality..
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Appraisals: What They Mean For Your Mortgage
Appraisals are more important than ever before when it comes to determining the value of a house.
You've heard the scenario: You find the home of your dreams, you're already pre-approved for a mortgage, closing is all set, then, a low appraisal comes in and the deal is off.
Even though some of the tough mortgage standards have been easing up in recent months, getting an appraisal for what the house needs to be in order to make your lender happy, has not eased.
If a buyer signs a purchase agreement to buy a $250,000 home, but the appraisal only comes in at $220,000, the lender will only agree to finance on the lower value, not the purchase price. It's up to the buyer to come up with the rest, or find another house.
Banks are the main reason appraisals are coming in low. If they end up having to repossess a home (short sale or foreclosure), they don't want to be stuck with a a home that is worth less than the mortgage.
Are Banks Dictating Appraisals?
Lenders are not telling appraisers, "We want you to come in low", it's more like, "We want you to account for everything…" and many appraisers hear that and overcompensate on the low side.
There's even a box on standard appraisal forms indicating "declining value", which indicates falling home prices in that market. Banks will then cut another 5% off the loan just to protect their investment.
Any Options After a Low Appraisal?
One path buyers can take if a bad appraisal is about to kill their purchase is to renegotiate the sale price of the home. Often times, once a seller sees their home appraised for less than the sales price, they will agree to lower the price to save the sale. Low appraisals will only carry forward to the next potential buyer anyway, so it may be to the seller's advantage to come down on their price and get the deal done now.
So don't let a low appraisal mean the end of the road for your home purchase. Talk to your agent about renegotiating with the seller to see if anything can be done to help you still get that dream home..
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Home Prices Rising: Three Straight Months
Home prices rising means good news for the economy, or so everyone thinks.
Standard & Poor's closely watched Case-Shiller index declined in January for the fifth straight month, but according to John Burns Real Estate Consulting, that news doesn't reflect what's really happening in the market right now.
The independent research company conducted its own analysis of home prices in 97 markets and found that over the period of January to March, prices were up in 90 of those 97 markets by an average of 1.1 percent, or 4.5 percent annually.
One of the reasons many industry indices still shows a picture of gloom and doom is because most home indices are on a three-month lag for reporting.
JBREC's "Burns Home Value Index" calculates home values based on prices that are set at the time purchase contracts are negotiated and signed. Nearly all other indices are based on when the transaction closes, which can lag 2 to 3 months behind contract signings.
It is current because it uses what is happening in MLS databases all over the country, as well as some leading indicators the research firm has determined are reliable.
JBREC has calculated BHVI index values for the United States and 97 major metro areas, with history going back to January 2000.
According to the U.S. Census Bureau, the pace of new home sales rose in January, exceeding forecasts and revised the December stats to reflect a higher rate of home sales, all of which is good news for a suffering new home construction sector. This growth is in line with recent reports of builder confidence levels rising across the nation.
New Home Sales Inventory
The inventory levels of new homes for sale fell, marking the eleventh consecutive month of decreasing supply levels. The current supply sold at the current sales pace represents a 5.6 month supply, down considerably from the 7.2 month supply just one year ago. Compared to January 2011, the number of new homes sold has risen 3.5 percent nationally with particularly strong sales in the South which has increased 15 percent.
The median number of months a new home sits for sale after completion is at 7.1 months, down from 7.4 months last January and down dramatically from the peak last summer of 10 months.
More Buyers Paying Cash
Meanwhile, even more American homebuyers are paying cash to acquire homes, according to a new survey from Campbell/Inside Mortgage Finance. The group's Housing Pulse Tracking Survey said between October and January, the number of homeowners purchasing residences with cash grew from 30.8% to 34.1%.
This trend is occurring at a time when mortgage rates are holding low. The survey noted that all-cash buyers are getting discounts of approximately 10%.
Homebuyers who turned to cash purchases are doing so because of the slow underwriting process, late appraisals and long-wait times when dealing with certain loans, the report said.
In most areas of the country, it is taking about 60 days to close a non-troubled FHA loan. About 30 days longer than usually a year ago.
To release its report, the Campbell/Inside Mortgage Finance Housing Pulse Tracking survey interviewed 2,500 real estate agents across the country.
Ben Bernanke presided over his first meeting as Federal Reserve chairman in March 2006 believing the nation's economy could pull off a "soft landing" from falling home prices…
Questions or comments? Click the comment link below and sound off. We'd love to hear from you.
Year-end data from CoreLogic shows home prices fell by 4.7 percent over 2011. It marks the fifth consecutive year the company has recorded an annual decline in residential property values.
CoreLogic performed a separate calculation, which illustrates just how big an impact distressed sales are having on home prices. The company excluded all short sale and REO transactions from 2011 and found that when the distress factor is taken out, prices declined by just 0.9 percent.
Commenting on the company's latest results, Mark Fleming, CoreLogic's chief economist said, "While overall prices declined by almost 5 percent in 2011, non-distressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices."
Here again, the company illustrated the weight of distressed sales, noting that when short sale and REO transactions are factored out, the home price decline from April 2006 through December 2011 narrows to 24.0 percent.
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Home Inspections: Deal Breakers or Makers?
A home inspection is simply a visual examination of a house's overall condition. The home inspection report describes a house's physical shape and identifies what might need crucial repair or replacement. Although what's covered in a standard report can vary by inspector, typically the status of the following will be included:
- heating system
- central air conditioning system
- interior plumbing and electrical systems
- roof
- attic
- visible insulation
- walls
- ceilings
- floors
- windows
- doors
- foundation
- basement
- all structural components.
A home inspection is not an appraisal, which determines market value, and it's not a municipal inspection, which verifies local code compliance. Inspectors won't survey inaccessible areas of home; they don't do any kind of destructive testing — only non-invasive visual assessments. The report won't include the condition of every nail, wire or pipe in the home. The report also does not guarantee a home's components will never fail or need repair in the future.
So, what are the deal breakers of a home inspection? That depends entirely on you. What is and is not a deal breaker depends on each person's preferences and needs. For example, an inspection that identifies damaged floor joists might be a deciding factor for one person who feels the problem is too expensive or time-consuming to fix.
However, the same trouble with joists might be absolutely acceptable for another client who has resources to fix the issue. A home inspector does not tell a customer whether or not to buy a house. Rather, it's his or her job to provide all the available information so home buyers (or sellers) can make the decision that's right for them.
If you're thinking of buying a house and a home inspector finds problems with it, this doesn't automatically mean you shouldn't buy it. The findings simply mean you now know what you're getting into. If the plumbing needs to be replaced in six months, at least you won't be surprised when it happens. If major problems like this are found, the seller may agree to make the repairs. Of course, no house is perfect. It's quite normal for a residence to have some glitches. It just depends on how many faults you're willing to deal with before you walk away from the sale.
Home inspections differ based on the person or organization conducting them. The American Society of Home Inspectors (ASHI), for example, is not required to check for wood-destroying organisms or diseases harmful to humans, including mold or moldlike substances. Many inspectors offer services to check for these things, although some will charge an additional fee.
Besides having the right things covered in an inspection, you should also make sure you hire the right person for the job. Unfortunately, there's no surefire way to vet an inspector's complete history. However, there are a number of steps you can take to make an informed decision.
Consult your real estate attorney or ask friends, business acquaintances or professionals who understand the housing industry for a recommendation. If you already have someone in mind, ask the inspector for professional references and call the people on this list with specific questions about the inspector and the services provided. Before you hire someone, make sure you're comfortable with him or her first. Have a conversation ahead of time and review sample reports to make sure you can understand them.
Besides checking with ASHI, there are other reputable resources such as the National Association of Home Inspectors (NAHI) and the National Association of Certified Home Inspectors (NACHI).
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Could Your Shaky Personal Finances Get You Fired?
According to a recent study by the Society for Human Resource Management, some 83% of HR professionals think personal financial challenges have at least some impact on employees' performance. Those same HR professionals aren't blind to economic reality — 80% of them believe employees at their organizations are facing more financial challenges than they were five years ago.
Though the consequences are unpleasant, the logic is fairly straightforward: If someone can't maintain control of their own financial situation when their personal money is on the line, what would make them motivated to be a better steward of the company's money belonging to nameless and faceless shareholders?
That said, at most companies, having personal money troubles are not a fire-able offense. But if your performance is slipping, the odds are slim that your boss will pick you for the next available role of increasing responsibility. If the company also has reason to believe money troubles are behind your performance slippage, you can expect significantly tighter scrutiny on whatever areas you do have any individual discretion over.
Is it fair to have career troubles just because you're having money troubles at home? Probably not, but speaking frankly, whether it's "fair" or not doesn't really matter. It is what it is.
If you are having money troubles, the first step toward regaining control is to stop trying to put on flashy displays of wealth you don't really have. You're neither fooling nor impressing anybody by showcasing your spending, and your employer already knows what you make. Spending money faster than your boss knows you're earning it is a major red flag and can actually invite more scrutiny, not less.
Even in less instantly obvious ways, taking control of your finances is largely a matter of understanding — and making tough choices — on how and where you spend your cash. Brown-bagging your lunch can easily save you between $20 and $40 a week versus eating out, and home-brewed coffee instead of a couple daily cups from the coffee shop can have a similar impact.
No matter how you choose to cut back, doing so will help you take control of your finances. And with control over your finances, you'll gain the opportunity to stop the career death spiral that otherwise threatens to turn some short-term cash flow issues into a serious long-term problem.
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Home Prices Fall More Than Expected
According to the closely watched S&P/Case-Shiller composite index, U.S. single-family home prices fell more than expected in November, highlighting the continuing struggle of the housing market to make a meaningful recovery.
Like most measures of the economy, the S&P/Case-Shiller home price index is not perfect. However, it has a critical shortcoming that almost no one talks about.
We already know the data comes in on a bit of a lag. The data doesn't hit the database until the public filing after closing. But the closing may be months after the agreement between buyer and seller (and the banks that provide financing). Ultimately, the lag can be a long time (sometimes up to six months) between when a price is agreed upon, the mortgage is secured, the closing occurs, and the sale is recorded and available for public use.
The Case-Shiller index is based on closings. However, four to eight weeks from contract to closing is major lag. November home price data reflects September or October prices at contract, which is the more relevant measure for a home buyer or seller. In other words, it would be inaccurate for users of the Case-Shiller data to assume the monthly index data reflects monthly market prices without some additional lag.
Furthermore, the time from contract to closing may vary depending on the city, which would make the Case-Shiller indices even more problematic. Those using such data as the Case-Shiller index data need to be aware of exactly what the data is really saying.
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