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The Actual Cost of A Home

by Marc Fox

When you begin scouring local listings, the cost, or asking price, of the home appears to be right there at the top. All the other details about the property are there too, but they usually get close attention only after that dollar amount at the top falls within your target budget.

As soon as the shopping starts to narrow the field, the financial implications of those other details begin to reveal themselves. In fact, the true bottom line cost of your new home will be greatly affected by them.

Many buyers work with the details exactly as presented—but as a purchase grows more likely, they should consider them simply as starting points. Back when home prices were racing steadily upward, it may have been okay to assume that price appreciation would make up for any exaggerations or oversights about the property (whether inadvertent or not), but today’s more cautious buyers appreciate how the disclosures impact the real cost of a property. They know how expensive it can be to correct inaccuracies later on.

When comparing properties, it’s time well spent to confirm as much of the information as practical. It will give you confidence that you aren’t missing potential expenses or devaluing factors when figuring the cost of a home versus its true value. Some relevant factors:

  • Even when there are laws requiring sellers to disclose obvious repairs, those that are less obvious can come as a surprise after the keys are handed over. Some may not even be known to the seller; for example, mold in walls caused from earlier flooding may not be visible, or termites that are just starting to colonize the structure might not be obvious. That’s why consulting with a home inspector is so important. The best ones know the places to look for the telltale signs it takes an expert to uncover.
  • If the property you are considering belongs to a homeowner’s association or is subject to any kind of maintenance fees, be sure to factor in those costs. Ask for copies of receipts for the last few payments—then find out what plans have been announced that might mean future increases. 
  • Property taxes will obviously figure in your home cost calculations, but it’s good to know the basis upon which the property is taxed. Unrecorded improvements could raise that figure, so take a look at the recent bills. If you have questions, check in with the assessor’s office should settle them.
  • Don’t just have a chat about the cost of utilities—you should request copies of the utility bills for at least the last full year. Water and power (and sometimes sewer and other utility expenses) can be more substantial than you’d expect, significantly increasing the cost of your home’s annual operation.

These factors all play parts in determining the true cost of a home—its current purchase price and a sound projection of the cost of living in it. Accurate estimates of both are what you need to guide your decision about whether to make an offer—and what that offer should be.

 

Action Plan for Pinpointing Ideal Neighborhoods

by Marc Fox

There’s a lot you can change about a house. You can repaint it, renovate the interior, or landscape the yard. The one thing you can’t change is its location—and there’s abundant truth in the familiar list with the three most important words in real estate: location, location, location…

That’s why getting to know as much as possible about the neighborhoods is so important when you’re searching for the right home. The characteristics of your choice of neighborhood will affect the quality of life your family enjoys—as well as the capital appreciation and resale value of your property (a good example is the strong positive correlation between house prices and school quality).

Begin with a Plan

A good place to start is by making your personal list of what you think will make a great neighborhood for you and your family. Ideally, one of the neighborhoods will check off all the requirements. In any case, you do want to make sure that your highest priority needs are met. For some, that might mean access to quality schools. For others, it might be the availability of public transportation—the kind that makes the commute to work a breeze, or ready access to indoor or outdoor social and recreational activities. Know what you want before you start looking, what you’re willing to compromise on, and what’s a deal-breaker!

Make the Most of Your Budget

There are desirable neighborhoods that almost everyone wants to live in. But for some buyers, budget constraints put these neighborhoods out of reach. But that doesn’t mean you still can’t find a great buy! Try looking for neighborhoods that are on the periphery of more popular areas—neighborhoods that are showing signs that the homeowners are upgrading their properties. Targeting adjacent neighborhoods on the way up is more than just a way to get a better deal on a home today. Ideally, it means investing in a property that stands to increase in value as its neighborhood improves through the years.

Use Online Tools

Thanks to the Internet, finding information about neighborhoods is only a mouse click away. Our site allows you to research the profiles of individual neighborhoods. You can find information on local schools in the area. Another useful online tool is Google Maps, which shows proximity to shops, schools, transportation and other facilities.

After you have researched the area neighborhoods that look most promising, plan to devote enough time to exploring them in person—weekdays and weekends, daytime and nighttime. Make sure the actual places measure up to their reputations, and find out which ones feel like places you’d like to live.

Overpricing Your Home

by Marc Fox

A crucial part of Selling your home comes right at the outset—when you set your asking price. It boils down to a decision to go high or low, with a number that is just under neighborhood “comparables.”

Success in Selling your home quickly is commonly understood to correspond with the lower price strategy, it’s true. But are there ever reasons why you would want to set a price that’s significantly higher than your neighborhood usually commands? When might it be reasonable to ‘test the market’? Here are a few:

No true “comparables”: If you have a home that’s verifiably one of a kind in the area, comparisons based on size, number of bedrooms and baths might be misleading. In such a case, it’s important that the differences be blatant—obvious to everyone—because banks and other lenders are likely to need considerable persuading, “Comps” are easy to justify, which is why they are the usual reference points that make loan officers comfortable. But keep in mind that it’s an absolute ‘must’ for Selling your home with a higher-than-comparable listing price: it’s got to be a gem!

Uniqueness: Selling your home at an elevated may be justified when it offers features that aren’t duplicated anywhere else in the area. This can be the case when the location is unique, as when the views from the living room are breathtaking, or a long driveway or dense plantings offer seclusion in an otherwise crowded neighborhood. To warrant the elevated price tag, those unique features should be easily describable in marketing materials. 

No need to sell: If demand for properties in your area are intense—but you have no urgent need for Selling your home right now, you might decide to list at a price that would warrant a move for financial reasons. This is the weakest reason to price high: it usually ends in wasted effort without much to show for it.

The list of reasons why overpricing is usually a terrible idea would include showings lost, appraisals that come in at lower than sale price, offers from prospective buyers discouraged, etc. The fact is, when it comes to Selling your home, you’re probably looking for a speedy sale at a fair price. 

Summertime Listings

by Marc Fox

The listings aren’t dominated by any particular kind of seller—like local listings everywhere, all kinds of homeowners are represented. One attribute they generally have in common is the motivation to make their sale happen quickly. Sometimes that’s because they have settled on a new home purchase and want to avoid months of paying double duty on multiple residences. Sometimes a seller is relocating; sometimes there’s been a death or divorce.  Regardless of the reason for entering their property in the local market, most sellers are strongly motivated to do what it takes to accomplish a sale.

Even in what has proven to be a generally strong market, a quick sale can be harder to accomplish during the summer months when buyers have other priorities on their minds—like vacations or the impending start of school. It might seem to be a less than optimum environment to buy, but the fact is, sales DO happen during the vacation months: and they can happen quickly—especially when the seller avoids some common missteps:

Not Perfecting the Homes Appearance

Sometimes it’s actually fairly easy to make minor remodeling changes that will make a home appear nearly “like new”—in person and in the listings. Another commonly missed step is a one-time extremely detailed deep cleaning (professionally when necessary). A home purchase is an emotional investment as well as a rational one, with the ‘clean as a whistle’ dimension sure to add considerable appeal to prospective buyers.

Not Taking Advantage of the Home Staging Industry

Based on statistics, professional home stagers give homes a look that buyers prefer. Of course, the decision to stage depends on the home sellers’ budget—but some stagers work within all budgets, so a consultation may be worth considering in any case. Consider staging as interior design for the sales process. It’s also true that staged interiors also tend to display better in the listings. 

Being Present During the Buyer Visit

No matter how sensible being there to answer any questions a potential buyer might have, remaining present during a showing is usually a misstep. Experts state that in practice, this tends to discourage substantive movement toward a sale.

Ignoring Offers

You may be on vacation and have trouble getting to a place where documents can be signed—but that’s not a reason why ignoring a low offer becomes a good idea. Yes, there are some offers that are just too low, but the way to respond is to counter the offer. By ignoring any legitimate offer, a home seller could be walking away from a buyer who has financing and may actually be willing to negotiate for a home. Sellers who benefit most from this kind of negotiation are likely to have done the work necessary to make their home sellable at top price. 

Sniffing Out Some of the Best Investment Properties

by Marc Fox

When promising investment properties are well-promoted, you can count on them drawing a crowd. Why wouldn’t they? Investment properties that perform well are like money machines: put in a quarter, get back a quarter and a nickel (and another nickel, and another, and another…). What’s not to like?

But not all investment properties are well-promoted. There can be any number of reasons why, but the bottom line is that some of the best ones are hard to sniff out. In that case, they may take a “Bird Dog” to discover.  

Ask any hunter about the value of a good bird dog, and you’ll get an earful. Those canine sleuths use their highly-evolved senses to locate and retrieve the quarry—even when it is all but invisible to their human companions. Without a good bird dog, hunters would be the ones thrashing through swamp and forest to find supper.

In the world of investment properties, the counterpart is the real estate Bird Dog. Like the hunter, real estate investors highly prize a quality bird dog. They may not bring back a duck or pheasant, but the distressed and undervalued real estate that they locate can be orders of magnitude more lucrative.

If you’re thinking of scouting the promising investment properties, a few things about real estate Bird Dogs…and the “woods” they hunt in…may be of interest:

Investopedia offers the most concise definition. It says that a Bird Dog (also known as a ‘deal scout’), finds distressed property deals for a real estate investor and gets paid a referral fee according to the terms of their agreement.   

-  One of the mistaken assumptions that first time investors frequently make is to believe that simply finding property on the local MLS is all that’s needed. Although that can be the case, since everyone else seeking investment properties also has access to MLS, the most promising listings usually draw a crowd of competitors. You need to be able to find deals that every other buyer isn’t privy to. 

-  Success can depend on understanding the historical criteria that have worked best for investment properties that fall within your budget range. Maybe you should target multi-unit properties, or maybe the most lucrative investment properties will be mid-range residential homes. Some investors should be looking for rundown properties to rehabilitate, whereas others might most usefully be scouting out investment properties that are in better condition but with motivated sellers.

For new investors or those with limited capital, thinking like a real estate Bird Dog will put you ahead in the hunt for the most lucrative investment properties. Even better is working with your own real estate bird dog who can source quality deals—and save you a lot of time!

Many people assume that when the kids leave home, their newly empty nest automatically signals that downsizing into a smaller house or condo is the next step. In truth, for such families, downsizing is a common option—one that could very well be the best choice.  But, as the old Gershwin tune says, “it ain’t necessarily so...”

For many of us, once we establish a firm direction in life, a lot of decisions are more or less made without much hesitation. Career, family, and even community needs head us in certain directions, so a lot of choices are obvious. Every once in a while the paths open up, and it’s time to take a breath, clear the head, and realize that there may be a lot more freedom to change course than we are used to. When the downsizing idea bobs to the surface, it’s likely to signal such a turning point. That’s when it’s your true interests and passions should govern your next step—especially with respect to your residential options, which will shape much of what happens next. If this summer you find yourself musing about downsizing, it might be fun to also consider:

Upsize:  It sounds backwards: moving into a larger home with your smaller family. Yet if you have special interests or hobbies that have always called for a lot of elbow room, this could be the chance to add a workshop, rehearsal space, or studio that you’ve never quite been able to wangle. A larger home can also provide extra space you may need to accommodate the rest of the family when they come for a visit (especially if that family is going to be growing!).

Follow your heart: Have you always wanted to live near water, or wake up to a view that looks like it belongs on a magazine cover? Maybe you’d like to move close to a totally new metro area with museums, shows and restaurants you’ve never been able to explore before. Or perhaps it’s a planned community that suddenly doesn’t look so much like a refuge for ‘old people’ as a place that’s loaded with bustling sporting and cultural activities...or a development built around a golf course…or winter sports complex. Downsizing may be able to deliver on your ideal dream refuge…or maybe it beckons from far away. It might involve downsizing, or upsizing, or same-sizing!

Splurge a little: With the children gone, it may also be time for some guilt-free indulging. A luxury home or condo could include some amenities you’ve always wanted: a swimming pool or home spa—or classic architecture set in a storybook garden. Downsizing by Selling the family home and claiming a smaller but more upscale residence might also be a way you wind up claiming the home of your dreams.

Of course, many considerations will go into choosing your next home. As an experienced real estate professional, I’m here to help guide you through the process of Selling and/or Buying, and depending where your move takes you, I can very likely help with referrals there as well. If and when the pull to downsizing strikes, I’m here to discuss all the many possibilities!

How to Find the Right Realtor

by Marc Fox

When you set about Buying a house, you will have already taken as a given that this will be among the most expensive purchases you will ever make. It’s going to be your house on the line; you’ll want to make sure you have the top resources in your arsenal. Chief among them will be having a Realtor® who understands your goals, respects your bottom line—and who sees the joint goal the way you do: recognizing the right properties when they become available, and helping to remove any and all obstacles to securing it. Just how will you recognize the Realtor® who fits the bill?

Who Do You Know?

The right Realtor knows every leading vendor in the business and can introduce you to as a valued client. Need an inspector, attorney, or maybe a floor guy to price out staining the hardwood? The right Realtor will know the key players at every step, and will be able to get the facts and inside scoop to help you sound out the right decisions. Often you’ll be presented with multiple options for each resource so you’ll be sure you have a vetted group of experts to choose from.

What am I Looking For?

The right Realtor will interview you to pin down as closely as possible which of your goals are must-haves…and which want-to-haves. Before long, your Realtor will understand instinctively what matters to you, how that translates to the current listings; and even how it matches inventory that’s waiting in the wings. If you’re a first-time homebuyer, you’re likely to find that the right Realtor will answer some of your questions even before you know what to ask! 

How Can I Reach You?

If you’ve ever had trouble—real trouble—reaching an agent, you’ll appreciate that a great Realtor has not only excellent communication skills, but back-up systems in place to be quickly available for questions, showings and negotiations. So make sure you ask all Realtor candidates how she or he plans to field last-minute or urgent requests.

The right Realtor will always demonstrate having your best interests at heart—from the first home viewing to the day you close. If you’re interviewing Realtors in the Portland Metro area to help with either Buying or Selling a home, I’d love to show you what my team and I can accomplish for you!

Selling a Home Means Recruiting a Skilled Team

by Marc Fox

Selling your home can be a bit complicated. Although you can make a case for the feasibility of doing the whole thing yourself, there are enough areas of knowledge where experience, expertise, and even licensure are recommended that few would ever try it.

At the end of the day, Selling a home is a true team undertaking. And you’re the one selling a home, so you’re Captain. In addition to interviewing and selecting the real estate agent you will be working with, there are other professionals you should plan to engage as well. Here’s who and why:

The Inspector

It’s quite a good idea to have a professional inspection performed at your property before Selling a home. In addition to any major issues that could affect your smartest listing price, you want to be made aware of any minor issues before buyers come across them. Sometimes small details that are easy to fix can upset timing and even derail a deal entirely.

The Appraiser

As a seller, you shouldn’t try to value your property blindly. To do so runs the risk of over- or undervaluing it—and a smart listing price is a key element in the successful Selling of a home. Your agent will give you key guidance on pricing. However, having a professional appraisal performed in advance can help support your price to potential buyers (especially if you are asking a high number that could be difficult to otherwise support). While the buyer’s bank will require their own appraisal, the money spent here in advance can help speed up the offer and/or negotiations.

Financial Advisor

The most difficult part of Selling a home is finding and attracting a serious buyer. Fortunately, this is a burden your real estate agent will shoulder for you. But before everyone has signed on the dotted line, it’s important to understand what the financial and tax implications will be once you’ve sold. If you have gains, you want to know how much—if any—tax burden it will trigger. If there is a loss, you’ll want to know how to turn that to your advantage. Either way, knowing the tax implications before you list may well affect the price you list at or will accept.

Thinking of Buying or Selling a home in soon? Why not come by or give me a call? I’ll be here at the office, working hard for my clients all summer.

Good News for Some FHA Applicants with Foreclosures

by Marc Fox

There is encouraging news for some prospective homeowners with a foreclosure in their recent past: more common sense seems to have entered the picture.

The financial crisis that began in 2007 caused global disarray: across the U.S. (and the Portland Metro area was no exception), large numbers of responsible homeowners were clobbered by the fallout, often finding their incomes suddenly reduced or even obliterated as business cutbacks and closings reverberated through the economy.

The Portland foreclosure rate jumped as a direct result—and it’s taken quite a while for the effects of that to work through the system. But even after the economy has resumed something like normal activity, more than a few local residents have found themselves having to deal with how a foreclosure on their record dims their home ownership prospects.

Even if the reason for the foreclosure was due to circumstances beyond their control—and even if they had recovered enough to now be able to service a home loan—many found that qualifying for a mortgage with reasonable terms was difficult to impossible. That was bad for everyone, and the effect on the market was such that the Federal Housing Administration decided to address the problem in specific situations. For those who qualify, it can make the availability of a normal home loan newly possible.

 The idea was to enable FHA backing for borrowers who could show that their foreclosure or bankruptcy was caused by external economic factors. With few exceptions, borrowers had not previously been eligible for an FHA loan until two or three years after a foreclosure. Exceptions to that rule were granted only if the death of a spouse or medical emergency had caused the forfeiture: now “loss of income” was added as an extenuating circumstance.

 It means a much swifter rehabilitation. For those who can demonstrate that a job loss, pay cut, or decline in business income caused their foreclosure, the previous years-long waiting period may be waived. There are other details that can affect any individual applicant’s eligibility. The guideline change is temporary, but overall the recognition that the Great Recession was the true cause of many foreclosures does seem to be a fair accommodation.

In the wake of a foreclosure, you’d expect it to take more work to arrange a new home loan, and that’s the case. But the good news is that for those who qualify under the widened eligibility guidelines, they are increasingly likely to be able to obtain a new home loan—even following a recent foreclosure. Whether or not that is your situation, if you’re looking to buy a home this summer, step one is to get pre-qualified. 

Last year comprised a decision point for many a local investor who had been holding back from the real estate market. There’d been a number of good reasons for them to hesitate.

First, there were memories of the pervasive price drops that followed the global financial meltdown. Not exactly what a prudent investor was looking for—even given the real estate’s traditionally invincible long-term record. Then there were fears that the economy’s slow reverse out of the Great Recession (a term that was in itself enough to freeze many a checkbook!) would hamper apartment and single family unit rental increases. A landlord could get squeezed by inflation…if there were any inflation…who could know for sure?

But as 2013 began, some positives that were at last beginning to provide a degree of optimism. Last year’s real estate investment decision was looking a little less risky when the historically low mortgage loan rates were taken into account. They penciled out to what looked like a potentially rosy cash flow outlook. And even the more hesitant investors had been noticing for a while how institutions had been pouring their own cash into residential real estate—you had to wonder why so many of the larger investment concerns suddenly seemed to want to become local landlords…

Now we can look back at 2013 and realize what a fantastic year it was for a real estate investment. First, there was the rise in real estate prices, which was nationwide. According to the S&P Case-Shiller Index, U.S. real estate prices increased 11.3%—the highest rate of increase in many years. By the end of the year, website Zillow was predicting that the rise would continue through 2014 at a steady (and less superheated) rate. That tempering was attributed to the gradual rise in still-low mortgage interest rates—and to the inevitable fact that the most extreme bargain properties had been snapped up.

 The latest news on multi-family dwellings shows that fears of inflation outpacing landlords’ ability to increase rents were exaggerated (to say the least). National research firm Reis has just reported that for the 12-month period ending in June, rents rose 3.4%—the 18th consecutive quarter of rent increases! “You have definitely seen the recovery now spread to all of the major markets around the country,” according to Reis economist Ryan Severino. Single-family home rentals are on the rise also. According to Zillow’s latest Year-over-Year Rent Index, “increase renter demand is driving rental appreciation” even though rent affordability continues to be low in terms of percentage of incomes.

What does this mean for today’s investor deciding whether to enter the real estate market? That’s always a choice individuals make for themselves—although, as a not-entirely neutral observer I tend to side with landlords throughout the ages whose reliable backstop has always been the real estate “they aren’t making any more of.” One thing is for certain: checking out the values to be found in this summer’s real estate offerings is the only sure way to gauge the opportunities that are out there. 

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The Marc Fox Group
Keller Williams Realty
17700 SW Upper Boones Ferry Rd Suite 100
Portland OR 97224
Office: (503) 336-7072
Fax: (503) 336-7170