Timing a purchase, sale in today’s market

Loan limits, investors may impact your decision

By Dian Hymer
Inman News™

The decision of whether to buy or sell a home is perplexing. A lot of buyers and sellers are still wondering if now is the right time to be in the market.

Ideally, buyers would like to know that the market has hit bottom and that the value of what they buy won’t decline. Sellers who will sell at a loss today wonder if they should get out now or wait for a better market to sell.

When will that better market appear? It’s impossible to time the market. We’ll know that we hit bottom after the market turns around — not before. Some economists think this will take another two years; others expect a turnaround in five to six years.

Many economists think we’re at or close to bottom. However, it’s expected that the market will be rocky for some time. The market will change seasonally. For example, it’s typical for home sales to decline during the winter months.

HOUSE HUNTING TIP: Good and bad news can affect whether buyers feel optimistic about homebuying. The fact that the conforming jumbo loan limit is likely to drop to $625,000 from $729,750 could spur home sales in higher-priced markets between now and September, when the higher loan limit expires.

Interest rates have been fluctuating but remain below 5 percent for conforming, fixed-rate mortgages. Interest rates and affordability in general have a great impact on the strength of the housing market.

The news about the real estate market was discouraging at the beginning of the year, as hopes of a solid recovery were dashed by declining home-sale volume and prices. Some economists even predicted that the housing market was headed for a double-dip recession, but this doesn’t look likely at this point.

March brought good news as home-sale volume nationally picked up 3.7 percent from February, according to the National Association of REALTORS®. However, the sales were primarily driven by investors buying cheap foreclosures.

Although investor purchases were up, the percentage of first-time-buyer purchases was down, possibly due to tough mortgage qualifying criteria, which are expected to become even more difficult going forward.

Leslie Appleton-Young, chief economist for the California Association of REALTORS® (CAR), points out that it’s difficult for buyers to trade up or down if they don’t have equity in their homes. According to CAR, approximately 25 percent of homeowners in the U.S. owe more than their home is worth. Appleton-Young believes the figure is closer to 31 percent in California.

As grim as the picture looks, it’s not the same everywhere. Residential real estate is a localized phenomenon. The San Francisco Bay Area is a good example. Although median prices are still lower than they were a year ago, the number of homes sold in the Bay Area in March was the best showing in four years. Sales volume was up 41.3 percent from February and up 0.2 percent from a year ago, according to MDA DataQuick.

However, within the Bay Area there was considerable diversity. Several higher-priced counties, which haven’t seen much activity until recently, saw gains. These included San Mateo County, where sales were up 8.6 percent, and Santa Clara County, up 3.9 percent. Both counties benefit from the Silicon Valley rebound. Jobs are necessary for a healthy housing market.

In Alameda County, home sales declined 7 percent in March. Even so, there are hot spots within the county. Select neighborhoods close to shops, transportation and good schools defied statistics with high buyer demand and over-asking-price sales.

THE CLOSING: Keep an eye on trends, but focus on your local neighborhood when making decisions about buying and selling.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

Open Houses: Saturday and Sunday, June 18-19, 2011

Happy Father’s Day! This Sunday is a little slow for open houses due to Father’s Day, but the following properties will be holding open houses in the Brandywine Hundred, North Wilmington, Newark, Hockessin, Pike Creek, Newark, and Middletown, Delaware areas on Saturday and Sunday, June 18-19, 2011:

Can’t make the open house? No problem!
Contact Brian Doreste today at 302-753-6398 to schedule your own private showing.

The most current open house list for New Castle County, Delaware can always be found at: http://deerhurst.net/category/upcoming-open-houses/, and is usually published every Thursday morning.

Saturday, June 18, 2011

5879369 $139,900  505 Stonebridge Blvd, New Castle DE Stonebridge

Sunday, June 19, 2011

5694036 $110,000  2302 Riddle Ave B 201 Wilmington DE Rockford Park Condo
5708887 $285,000  27 Wheatfield Rd Wilmington DE Meriden
5790774 $189,900  814 S Cass St Middletown DE Sharondale
5806149 $375,000  18 Birch Knoll Rd Wilmington DE Northminster
5817670 $424,990  315 Friedman Dr BRANDY New Castle DE Northern View
5830881 $289,900  27 N Cliffe Dr Wilmington DE Wycliffe
5831070 $153,900  6105 Highland Ct Wilmington DE Paladin Club
5850821 $344,900  132 Kingston Dr Bear DE Kingston Acres
5864875 $165,000  206 Skelton Dr New Castle DE Jefferson Farms
5865643 $234,900  116 New Amstel Ave New Castle DE Van Dyke Vil
5872577 $299,000  2306 Baynard Blvd Wilmington DE Wilm #03
5876411 $229,500  14 Birchgrove Rd Newark DE Christina Hollow
5877484 $250,000  4237 Mill Creek Rd Hockessin DE None Available
5878313 $383,000  415 Draper Ln Middletown DE Fox Hunter Crossin
5880788 $250,000  110 W 6th St New Castle DE Old New Castle
5881010 $224,900  412 Cushman Rd Wilmington DE Middleboro Manor
5881097 $214,900  5417 Doral Dr Wilmington DE Fairway Falls
5882934 $274,900  3 N Thomas Ln Newark DE Linden Way
5885558 $235,000  25 W Kapok Dr Newark DE Raintree Village
5887695 $279,899  1019 Rockwell Rd Wilmington DE Longview Farms
5892741 $319,900  168 Oldbury Dr Wilmington DE Westgate Farms
5893036 $124,900  30 W 5th St New Castle DE Old New Castle
5894022 $379,789  98 Willow Grove Mill Dr Middletown DE Longmeadow
5894626 $249,500  169 N Hunter Forge Rd Newark DE Anvil Park
5896026 $185,000  309 Goldsmith Ln Newark DE Christiana Green
5897159 $299,900  418 S Barrington Ct Newark DE Barrington
5899371 $329,900  4 Capa Ct Wilmington DE Ridgewood
5901835 $283,500  1164 Elderon Dr Wilmington DE Arundel
5902481 $434,900  29 Hempstead Dr Newark DE Farmington
5902577 $199,900  221 E Seneca Dr Newark DE The Woods
5903025 $340,000  2611 Pennington Dr Wilmington DE Brandywood
5903436 $129,000  43 Chelwynne Rd New Castle DE Castle Hills

Come out and see these houses this weekend!

Real estate pricing tips for sellers

Good news and bad news about common strategy

By David Fletcher
Inman News™

This column is addressed to every home seller in America. Your obvious goal is to get the highest possible price for your home.

I’d like to share a little-known process about how you can get more showings per day than all the competition on your side of town. Also, I’m offering some tips on how to get more qualified prospects per day — and there is a difference.

It has to do with your pricing strategy.

One strategy is to price it right and sell it.

Another is to price a little higher than market price and expect offers.

Another is to price it over the moon and hope someone comes along who just fell off the turnip truck.

The latter is the most common strategy among sellers, and this is the one I’d like to focus on.

Let’s say homes like similar homes in the neighborhood are selling for $200,000, and the seller has spent $5,000 upgrading it for sale. So, the seller insists that the price has got to be at least $205,000.

The seller doesn’t have any equity in the home, and needs at least $10,000 to purchase a new home, so the seller adds that amount to the price, making it $215,000. The seller demands to get at least $215,000, and won’t sell otherwise, and an additional $10,000 is added to account for the real estate commissions, making the price $225,000.

But wait. We know that resale buyers are counseled by their agents to “make an offer,” that in many markets these days will be below asking price, so you need to add another $10,000 or so (the seller is advised to try to keep it within 5 percent of what the seller will accept, if possible).

So — there it is — mathematically we have arrived at a listing price of $235,000. There is nothing emotional about this. It is all about the numbers. This is a really easy and fast way to determine a listing price.

There is some good news and unfortunately some bad news with this “strategy.”

The good news: The seller’s home will be shown by the smartest REALTORS® in the area, and will get a lot of showings.

The bad news: They will be showing it as what is called “sell against” — to help build a value story for the homes down the street, which their prospects will actually purchase for around $200,000.

The good news: If the home does sell for $235,000, the seller will cover all expenses and have money left for a down payment on another home.

The bad news: Many agents will not show the home to prospects who don’t want to look at homes priced over $200,000. This is really bad news if you actually need to sell the home.

The good news: The seller will not be disrupted by a move.

The bad news: The seller is not going anywhere soon — the longer the home is on the market in an overpriced condition, the harder it will be to sell.

I am on the seller’s side. We all know that the only reason a commissioned sales agent would suggest a salable listing price is that the agent would like to earn a commission by helping make the home salable — regardless of who sells it.

Here’s where this gets a little sticky when it comes to price: Usually, when the agent suggests a price the seller becomes flabbergasted and insulted, wondering how the agent could dare mention such a low price.

It is the same feeling the buyer gets when the agent mentions the asking price of the same home — except they feel insulted by the seller, not the agent.

Here’s where (speaking to the sellers out there) we need to meet in the middle with some quantified data (a fancy term for factual, relative information).

First of all, since the seller doesn’t trust the agent, why ask the agent what the agent thinks the asking price should be for the home?

The seller should insist on seeing a comparative market analysis report to view what similar homes are selling for, are now listed for, and did not sell.

Here is the real question the seller must answer as accurately as possible:

As the seller looks at the data — especially the “solds” from the last six months or so — the agent needs to ask this question: “What do you think a reasonable buyer will pay for your home?’

What better way to answer that question than for the seller to see what similar homes are actually selling for?

The seller probably won’t like the answer, but will likely thank the agent for sharing this information. Because it will prepare the seller to make the best decision. If the market prices are too low, and the seller chooses to wait and hope the market comes back in the next year or two — fine.

The seller could decide to list at any price the agent might suggest, but shouldn’t become upset with agents who are giving honest information and advice. Although the agents may be trying to help the seller, the truth can hurt.

A listing that goes to the “highest bidder” — the listing agent who gives a nod to the seller’s unreasonable price — doesn’t make sense to the seller or the agent, although new agents and those who “need a listing” might accept it.

The seller and the agent know it is only a matter of time before the price is lowered, whether that’s “if it doesn’t sell in two weeks,” or thereafter. This is an OK approach in a market that is moving up, but in today’s market … not so good.

Agents are likely to show their buyers the same CMA they show to sellers, as a way to prevent lowball, insulting prices.

A seller can have confidence in the CMA — and a lot more confidence in the probability of a faster sale at the highest possible price — if there are multiple showings to qualified buyers. And that is the numbers game that sellers should really want to play.

David Fletcher has been a Florida real estate condominium and new-home broker for more than 30 years. He has been the broker of record for 70 new-home and condominium communities. He offers podcast coaching services for general agents, broker-owners, homebuilders and developers through his website at www.newhomesniche.com. You may contact him at davidf@newhomesniche.com

Fix a sagging drywall ceiling

Remove and replace, or install new layer?

By Paul Bianchina
Inman News™

Q: We have a large living room that needs all the ceiling drywall replaced because it is sagging. We believe it is sagging because there was not an adequate number of drywall screws put in, plus there was insufficient insulation with no vapor barrier installed when the house was first built. About five years ago, additional insulation was put in correctly, with the Kraft paper touching the top of the drywall plus more insulation on top.

Our question is: When this new drywall is installed, what is the best way to remove the old drywall, without having all the insulation fall into our living space? –Chris A.

A: Since you have batt insulation between the joists with additional blown-in material on top, removing the old drywall without creating a horrendous mess is going to be pretty difficult. Once the supporting drywall is removed, the weight of the blown material is going to cause the batts to sag into the room. Even if it doesn’t come crashing down into the room, as you install the new drywall, you’ll have a very tough time pushing all that material back up into the attic. The result could sags and irregularities in the new drywall.

You have a couple of options. Working in small sections, you can rake the blown-in material out of the way, remove the batts in that section, remove and replace the drywall, then reinstall the batts, rake the blown-in material back into place, and proceed to the next section. This would obviously be a pretty tedious operation.

A better suggestion is to just leave the old drywall in place, and install a new layer over it. You can work your way around the room and re-screw the old drywall to stabilize it, then install new 5/8-inch material with longer screws that will penetrate through both layers.

If the ceiling is currently too uneven to get a smooth finish by installing directly over it, then you might want to install wood furring strips over the old drywall, then install the new drywall directly to the furring. Install the wood furring perpendicular to the way the joists run, and use shims as necessary to get the furring even.

With either method, since the old drywall is already taped to the walls in the corner, there would be no need to tape the new drywall to the walls. Instead, cover the wall/ceiling joint with crown molding, which will enhance the look of the room and save you the time and labor needed to tape the corner joints.

Q: Thanks for your informative article on attic ventilation. My question is: Do gable vents count as inflow (low) or outflow (high) in the NFA (net free area) calculation. I want to re-roof and replace my current box vents with ridge venting, but I also have gable vents. I think, but am not sure that my outflow NFA would be a combination of the ridge vent NFA plus the gable vent NFA. –Wayne D.

A: Gable-end vents would almost always be considered high vents, as they are typically located near the top of the gable-end wall, which would place them relatively close to the ridge. As a rough rule of thumb, if you visualize a line cutting your attic in half horizontally, anything above the line would be considered high vents, and anything below the line would be low vents. Of course the higher or lower the vents are, the more effective they’ll be.

In your case, assuming the gable-end vents are relatively high on the walls, you are correct in assuming that your high venting would be a combination of the ridge and gable vents.

Q: I just read an article about using pressure-treated wood for decks. I believe it is illegal — at least in Los Angeles; it should be everywhere. To be pressure-treated, the wood is injected with poison. This makes it dangerous to have exposed. We are allowed to use it internally only (i.e., for studs in enclosed walls). If I remember the newspaper article correctly, a number of years ago someone made a swing/play set for their kids and one of the children chewed on the wood … another possible Darwin Award. I have seen it used on trail fence rails in Laguna Hills, Calif. — hello, horses chew on wood!

Or is there some “new” kind of pressure-treated wood that doesn’t pose this issue? –Candice H.

A: Pressure-treated lumber used to be manufactured with chromated copper arsenate (CCA). The arsenate is a form of arsenic, which is probably the poison to which you’re referring. However, there were concerns about the arsenic in the wood leaching into the surrounding soil, so in 2004 the Environmental Protection Agency and the wood-preserving industry jointly agreed to change the chemicals being used in the process. Today, the pressure-treated lumber and plywood available in local lumber yards is typically made with copper azole (CA-B), or with alkaline copper quaternary (ACQ), neither of which contain arsenic.

While CCA-treated lumber is now used only for very specific and limited applications, I am not aware of any code-related restrictions on the use of the newer treated materials.

Remodeling and repair questions? Email Paul at paulbianchina@inman.com. All product reviews are based on the author’s actual testing of free review samples provided by the manufacturers.

Best windows: vinyl, aluminum or wood?

Choosing replacements

By Arrol Gellner
Inman News™

Editor’s note: This is the second of a two-part series.

Last time, we talked about choosing replacement windows that suit the style of your house — whether the type is casement, double-hung, slider or something more exotic. This time, we’ll look at the different window materials available, and which choice is best for your project.

First, however, comes the fundamental question about window replacement: Does it really make sense for you? The answer, in many cases, is no.

If you’re replacing your windows solely to lower your utility bills, for example, forget it. Energy loss through windows comprises only a small fraction of overall energy loss throughout the house, and you’ll be far better off investing your money in additional attic insulation or even, in many cases, a more efficient furnace.

Even if you think your current windows are in terrible shape, you may wish to get an estimate on repairing rather than replacing them. This is especially advisable if you’re lucky enough to have a prewar home with original wood windows — in this case, replacement windows will almost certainly detract from its market value. Bear in mind that window replacement is generally an iffy investment, since it has a very long payback period. It’s also one that can radically change your home’s appearance — often for the worse.

If you’ve determined that replacement is for you, however, here’s a rundown of the different window materials commonly available. Remember, we’re not talking about the window type — double-hung, slider and so forth — but actual material.

  • Vinyl (polyvinyl chloride plastic, to be specific) is currently the ubiquitous material for replacement windows, but that alone doesn’t make it an obvious choice. The moderate price can be attractive, but the jury is still out on vinyl’s durability over the long haul. What’s more, the thick, doughy frames typical of these windows are inappropriate to many home styles, and the slim choice of colors makes them easy to spot as replacements.
  • Aluminum windows are still available, but no longer carry the bargain price you may remember from years past. There’s a good reason for this, however: They’re now better built and far more efficient than the cheapie units of the 1960s. If your house was originally built with aluminum windows — most postwar houses from the mid-1950s through the 1980s were — there’s no question that new-generation aluminum windows will be your best aesthetic choice for replacement.
  • Wood windows, whether standard or clad, remain the premium choice for replacement. Clad windows, which variously have an external shell of aluminum or fiber glass to protect the wood elements from weathering, are represented as doing away with maintenance headaches. However, unlike plain wood windows, they can’t be easily repaired or refinished if they’re damaged. You’re also permanently stuck with the color of cladding you choose. Hence, you should weigh the premium you’ll pay for clad windows against the occasional headache of repainting the standard wood version. Be prepared for sticker shock with either product, however — these windows are truly a lifetime investment.

As long as your budget allows it, the simplest rule of thumb for choosing window material is to replace like for like — aluminum with aluminum, wood with wood. In 10 years, after the latest window fad has come and gone, you’ll be glad you did.

Read Arrol Gellner’s blog at arrolgellner.blogspot.com, or follow him on Twitter: @ArrolGellner.

Home improvements that pay off

Today’s buyers are less willing to compromise

By Dian Hymer
Inman News™

The temptation is strong: Clean up the yard, declutter the house, and put it on the market without spending time and money sprucing the place up for sale. This is especially the case if you anticipate losing money on the sale.

Some real estate agents recommend you do little if anything to get your home ready for sale. This could work if you price the listing to look like a bargain. However, most buyers in today’s market are nervous and picky. They aren’t in a hurry and they want a house that’s move-in ready.

An agent who is looking for a fast sale might steer his or her clients away from doing any fix-up work. It takes a lot of time and coordination, not to mention money, to get a home properly prepared for sale in today’s market. Some agents don’t want to take on the effort, or haven’t the vision to see the home’s potential. This could cost you on the sale.

One agent told his clients that they needn’t do anything to get their house ready for sale. True, the house had inherent charm and good bones. But, the seller’s furniture was much too big to show the rooms off to advantage. The dogs had damaged the hardwood floor and the beautiful garden was overgrown.

The house didn’t sell until the sellers found another agent who recommended a laundry list of items to take care of before selling, including moving most of the seller’s furniture out and having the house staged.

Unfortunately, market values declined between the first and second times the home was listed. Even though the house sold quickly with multiple offers the second time it was listed, it sold for less than it would have if it had showed well the first time it hit the market.

HOUSE HUNTING TIP: Choose an agent to work with who has experience helping sellers prepare their homes for the market. Ask an agent you’re thinking about hiring for references. Call past sellers and ask them how effectively the agent helped them get their home sold and whether they made back the money they invested getting the home ready for sale.

A good agent should be able to supply you with a list of tradespeople who can help you paint, change outdated floor coverings and light fixtures, etc., at reasonable prices. And your agent ought to be able to provide access to the home for the people you select to help with the fix-up if you are out of town or at work.

Ideally, you should work with your agent who will help you prioritize the things that should be done to bring about a timely sale. For example, an outdated kitchen can usually be improved considerably by painting, changing light fixtures, refinishing or replacing a worn floor, and changing cabinet pulls.

It might make sense to change extremely old appliances and counters. However, it’s not a good idea to gut the kitchen and completely remodel it for sale. You won’t get that money back when you sell. The aim is to make cost-effective improvements that make your home appealing to the broadest number of buyers possible.

Painting is the least expensive improvement you can make that is likely to return more than you invest, provided you select the right colors. One seller repainted the exterior of his home before he selected a real estate agent. He painted it the same dowdy colors that adorned the house for decades. The first thing the buyers wanted to change was the exterior paint color.

THE CLOSING: For the best result, talk to a color consultant before you paint.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”