10 Home Improvement Myths

Recently, I found an article on Trulia that, on the surface, seemed like a straightforward fluff piece. When I read the article, I found there is some value in the authors comments. While I don't agree with everything as written, it's still very informative.

The one point that I think may have been lost in the article is value versus sale-ability. I cannot count the number of times a homeowner has said to me "We added ______, so that increased the value of our home by $$$." While this statement is sometimes true, more often it is incorrect.

How could that be? You have invested money into your home, so that should surely add to the value. 2 + 2 = 4, right? Not always. The two forces at work are the perceived standard and saleability. Understanding those two forces is critical BEFORE you invest money in your home.

Perceived Standard
When you drive into a neighborhood to view a home, you automatically have expectations of what you will or will not see. In a middle class neighborhood, you don't expect to find the same features as an upper class or lower class neighborhood. You automatically know from personal experiences that there are differences and you at least have an idea of what those differences may be.

If your home is lacking features or the quality of features that potential buyers expect in your area, then spending money to meet that level of expectation does not add value to your home. You are simply meeting the perceived standard of the area. Unfortunately, if you do not make those improvements, the value of your home is likely less than the average because of the deficiency. 

Saleability
Another force in home selling that works in tandem with price and features is saleability. Quite simply this is the desire created by your home for potential buyers. If you add features or make changes, you invariably affect the saleability of your home. Whether or not that affect is positive or negative is the question.

One example that frequently comes up is a pool. Should you add a pool or not? What will happen when you sell the home? In the case of a pool, saleability is affected both negatively and positively.

By adding the pool, you have immediately removed a large portion of potential buyers who dislike or are inexperienced with pools. Unless the pool can be removed and the impact of the removal repaired, those buyers will walk away.

The flip side of the coin is for buyers who want a pool or who have wished for a pool, you have increased their desire in your home. They money they would have spent to install a pool is no longer relevant.

Conclusion
While a pool is an extreme example, the same theory holds true for every other potential change you can make to your home. Be selective and smart about making changes and you can come out ahead rather than disappointed.

Your best course of action is to consult with us before spending the money. We can guide you to make the best decisions before they can potentially harm you. Regardless of if you are selling your home now or ten years from now, why wouldn't you call us to make certain that you are realizing the most return for your investment?

Now on to the article from Trulia!

Warmest regards,

Dan

2012 Home Sales Projected the Highest in 5 Years

The National Association of Realtors has issued a news release projecting the home sales for 2012 based on January and February sale contracts. This information seems to support my previous post which covers significant inventory reductions.

The release predicts a national home sales increase of 7 to 10 percent for 2012. This is eclipsed by the projected 19.0% increase for the Midwest. Those are huge numbers, especially for out part of the country.

What does this mean for you as a home seller? It means there is a wave of buyers hitting the market and the wave has already started. While I expect that it will be some time before we see any significant increase in home values, a more competitive buying market will help to stabilize prices. It will also help to reduce the time it takes to sell your home. If you are in the market to sell, we need to talk now in order to have the property properly prepared and on the market for the bulk of this surge.

Read the NAR new release here: http://www.realtor.org/press_room/news_releases/2012/03/phs_feb

Warmest regards,
Dan
(314) 484-7467

Good News for the Housing Market

I am frequently asked, as you might imagine, how the housing market is doing. Usually, that is followed up with where do I think the market is headed. Today I am going to focus on the second question and look into the future.

Generally, I have been more bearish on the market than the media, the government and the National Association of Realtors. While it may not help my immediate business, it's my job to offer my honest opinion. In fact, recently, I told a client that I thought the St Louis metro market was as much as a year from seeing real improvement in home values as I felt like we were just reaching the bottom of the downward trend. Maybe I was wrong.

When we read or hear stories, they are often based on opinion or spin. The stories I have read lately, the ones I believe anyway, are based on statistics and laid out as honestly and simply as possible. One of those stories lays out basic statistics and illustrates some good news. The stats can be found here at the Department of Numbers website: http://www.deptofnumbers.com/asking-prices/missouri/st-louis/.

There are two very good indicators of the health of the real estate market, inventory and prices. Where are they currently and how are they trending. Finally, we are seeing improvement in inventories and a more moderate improvement in sale prices. This indicates to me that the bottom of the curve may be fast approaching, maybe as much as 12 months ahead of where I expected.

If you check out the link to the Department of Numbers link above, you will see that single family and condo listing inventories are at a 4 year low. In fact, the year over year inventories are 10.9% lower as of March 19, 2012. Remember, lower inventories means buyers have fewer options and they are more willing to pay asking price or even a premium for what they want. This is especially true as the spring season hits it's stride and the buyer pool increases. We will begin to see properties snatched up more quickly than in recent history. As a seller, are you in a position to take advantage of this trend?

Let's move to sale prices. If you again refer to the Department of Numbers link, you will see that sale prices are still dropping on a year over year basis. You might wonder how I can see that as a good sign. The sign I like is not the current but the trend. The price drops are slowing and have been slowing for some months. Now that we recognize this early, it allows you to be in the drivers seat when making your next home purchase. Are you in a position to buy now before prices even out in order to find the best deal?

The four focus items you should take away from my comments are:
- Interest rates are at all time lows and possibly poised to go higher,
   especially if inflation kicks in.
- Inventories are at a 4 year low.
- Sale price drops are slowing.
- Financing is loosening for buyers.

If you are considering buying, let's talk about whether it makes sense for you to jump in now or risk being behind the curve as prices start to rise.

If you are considering selling, let's talk about how to position your home to sell quickly, especially if you have been on the sidelines afraid that buyers were going to beat you up on price. Is now the balance between a decent sale price and leveraging a low buying price on your next home?

Call me and let's talk!

Warmest regards,

Dan

Donations for Your School or Charity

Today, we are very pleased to announce our new program called Donation Drive. We have worked very hard to design this program to have the greatest financial impact with the least amount of work for the school or charity.

Most schools and charitable organizations struggle to have enough funds to support their various programs. Often, parents and volunteers must sit at tables, knock on doors or hold bake sales to help out. Our program allows us to help families connected with these Schools and Charities, while providing additional funds for their activities with very little effort by parents, organizers and volunteers.

Here are the three simple steps to make it work:

Talk Up The Program
On average, 1 of every 5 people is buying or selling a home or knows someone who is. Anyone that you know can mean a donation to your school or charity. When you think about how many people you know, that adds up. All you need to do is introduce us so that we may interview for the job of representing them.

We Help Them
If someone you introduce us decides to work with us, we will enroll them in the Donation Drive program. Our clients say great things about us, so rest assured they are in capable hands.

They Close and We Donate
Once the sale or purchase of their home closes, we make a donation to your selected school or charity for $150 or $200, depending on the agreement with your school or charity.

Simple, right?
The quicker you enroll your organization, the quicker you will have donations made to your school or charity. Call or email us today and we can help explain the program and get the ball rolling.


  Cornerstone Academy
We are very excited to announce that Cornerstone Academy on South St Louis County is now participating in the Donation Drive program. If you or someone you know is connected to Cornerstone, contact us and we can answer all of your questions!

Credit Crisis Easing

I just read an article about the easing of lending standards for borrowers. (http://www.dsnews.com/articles/housing-crisis-to-end-in-2012-as-banks-loosen-credit-standards-2012-01-24) I am going to stay cautiously optimistic. While I see positive signs, there are some signs that still worry me. I believe this spring will tell us quite a bit about how strong our economic recovery is and if the housing market is really on the upswing.

The flip side is that there have been lots of buyers in the market during this downturn. Maybe not as many as we would like, but savvy sellers have been able to capitalize on their strengths and engage these buyers. Even if sellers took a hit due to lower prices, they have been able to leverage those low prices when buying. Often, it has been a wash. For those on sound footing with their loan to value ratio, they have been able to move up into homes they once couldn't afford.

The lesson is, don't take the negative news at face value. You situation is unique to you and has it's own challenges and opportunities. Let's talk about how to leverage those.

Warmest regards,
Dan

Client Satisfaction

One question that you should be able to ask when interviewing a real estate agent is, "How do your customers feel about your service?" While this is a great question to ask, it is more difficult to obtain a verifiable answer. Surely there is a way to know what the agent's past clients think of him or her. Here is how we provide potential clients with usable information:


Referral Rate
Our team averages approximately a 70% referral rate. That means that 70% of our clients are referred to us by past clients. That number speaks volumes about the level of service we provide.

Client Satisfaction
Beginning in 2012, we started sending satisfaction surveys to each of our clients after the close of their purchase or sale. To date, we have been scored excellent by our clients. The comments they provide illustrate how pleased they are and that they would happily refer us to their friends and neighbors. Review our surveys here: http://www.getteamhaynes.com/ap.aspx?p=9593&page=Client-Surveys

Vintage Stock Resale Store

Robin and I just sold some books at the V Stock store. They have tons of movies, games, books, music, comics & trading cards in the old Borders space at South County mall. They buy your used stuff or pay you 50%more in store credit.

It is perfect as Robin reads lots of books. She's reading right now, in fact!

Warmest regards,
Dan

Seller Paid Closing Costs

One subject that comes up frequently is closing costs and asking the seller to pay them. Over the years, we have often asked for the seller to pay closing costs when writing offers for our buyers. I thought I would post a little information about the subject to help clear up a few things.

What are closing costs -
Closing costs are the fees associated with purchasing a home, outside of down payment. Some examples are inspections, points, title fees, lender fees, etc. These fees can add up to a hefty amount, depending on your credit score and the value of the home you are purchasing.

If you have little cash over and above your down payment, closing costs can be insurmountable. By asking the seller to pay some or all of these costs, you can reduce your out of pocket expense at the closing table.

Pros -
The benefit to seller paid closing costs is, obviously, the cash you save during closing. Being able to avoid the closing costs at closing can provide extra cash to use after closing for repairs, moving expenses or furniture.

Cons -
There are a few negatives to having the closing costs paid by the seller. The most notable is that the seller isn't paying the closing costs. What? Isn't the point of this article "seller paid" closing costs? Yes it is, but the reality is that, in the end, you are going to pay those fees. Plus interest. What is actually happening when you ask the seller to pay the costs is that the fees are rolled into your loan?

Let's say you are making an offer for $100,000 for a home. Closing costs are estimated to be $2,800. When you write the offer, you offer the $100,000 and, in the contract, ask the seller to pay that $2,800. Where do you think the seller is going to get that money? Are they going to run down and cash a check? Absolutely not. They are going to pay those costs out of their proceeds at closing. The full $100k is going to be loaned to you with $2,800 of the sellers profit going to the closing costs. You are financing those costs over the life of your 15, 20 or 30 year note. Sometimes that is the only option, but if you can pay the costs up front, you will save a tremendous amount of money in the long run.

Some items must be paid up front. Often, items such as inspections must be paid prior to the vendor providing services to you. Regardless of whether or not the home sale is completed, those vendors want to be paid. The best way to ensure that is for payment to be made up front. You will then receive credit for that pre-paid money at closing, if your agent wrote the contract correctly and the lender allows those items to be included.

Which brings us to lender limitations. Lenders, especially now, want to make certain that your as a buyer have "skin in the game" when making the purchase. Some lenders, depending on the program that you use for your loan, will dictate the amount or types of items that can be covered by seller paid closing costs. Knowing this up front is part of your agents job and why they need to work closely with your lender.

Seller ramifications -

One possible issue from asking the seller to pay closing costs is that it may irritate seller. Remember the discussion earlier about where the money comes from? Although you are basically borrowing the money that pays the closing costs, you are asking the seller to discount their sale price to offset those costs. That means that the seller is not getting $2,800 of their money.

Whether or not the seller will pay the amount you need, or anything at all, depends on what their final proceeds turn out to be. They have costs to sell their home and they are typically paying all of the commission for both the buyer's and seller's agents. The buyer asking for another large amount of money to be taken out of their proceeds doesn't usually sit well with a seller. There usually isn't an option to raise the sale price to accommodate the closing costs and you are probably trying to get a deal anyway, right?

Final thoughts - 
In the right circumstance, seller paid closing costs can be an effective tool to put you in a home with the least amount out of pocket. Just understand that is isn't like found money. It comes from somewhere and has consequences. It's up to you, your agent, the seller and their agent to structure a transaction that suits both parties so it's a win-win all around.

Warmest regards,
Dan

Home styles

The style of the home that you buy depends largely on your preference, but other factors like cost and available styles influence your decision, as well. Often, potential homeowners are confused by the terminology used to describe a homes style. Here is a quick list of the styles of homes you will find in the St Louis area.

Ranch
Ranch homes are the most common home style for non-urban homes. This style is a single floor, sometimes with a basement and sometimes on a slab floor. This style is generally the most desirable, as well. The single floor eliminates climbing stairs most of the time, so is popular with seniors, families with children and those who just dislike dealing with stairs.

Raised Ranch
This style is one of the most confused styles, but is also far less common, in our area, than other home styles. The raised ranch generally has the same floor plan as a ranch home, but the main living space is above ground level. The main entry remains at ground level with stairs mandatory to access the main floor. This style is conducive to tuck under parking utilizing a portion of the basement as the garage.

Split Level
The split level home typically is utilized for unlevel lots. It is often a less expensive option as the lot is less desirable and there is some floor space lost to the inside stairwell. The front entry is centered vertically on the home and is positioned between the upper and lower floors with access via stairs. Frequently, the basement is divided into a tuck under garage and living space. The split level style is very common in our area due to the hilly topography.

One and a Half and Two Story
These two styles are often confused. Both styles have their front entry located at the same level as the main floor. The difference is in the upper floors. The one and a half story home will have living space above at least some of the main floor, but does not extend over the entire main floor. A two story, on the other hand, will have living space over the entire main structure, including the garage. This style is very common in our area.

Tri-Level
This home style is frequently confused with the Split Level. This style home has 3 floors, although the entry level may be small which causes confusion between styles. The front enter opens to one of the floors which may have living space and there are stairs leading to slightly offset upper and lower floors. Visualizing an elevator that stops between floors gives you an idea of the design.

Bungalow
The bungalow style generally refers to a small home with rooms that branch from the main living space without hallways. This style may be a single story or more. The emphasis of this home is on efficiency and size.

Shotgun
Many city homes, especially multi-family buildings, are designed in what was called a "shotgun style." The outside profile is slender at the front and long to fit the narrow lot lines of urban living. In this style, the building is one room wide and entry leads into each living space successively. Often the order is living room, bedroom and then kitchen. This style is also tailored to the more budget conscious buyer.


While this list is certainly not exhaustive, it covers the majority of the homes you will encounter in the St Louis area. If you have questions or comments, feel free to call, text or email us.

Warmest regards,
Dan