Wealthy decide to rent, not own

An interesting article on CNBC today.  I had written several weeks back about how people completely capable of affording their mortgages were choosing to walk away from their homes with no intent on paying.  They could afford it but saw no point to do it when they couldn’t make the money back that they invested when they purchased it.

This article is similar.  It talks about how wealthy Americans are choosing to rent homes instead of buying them because of the state of the housing market.  While many wealthy Americans could flat out buy a home in cash without ever having a mortgage, some are worried that a need to move will have them losing money.

And it’s not just a fear of selling down the road.  One of the pitfalls of home ownership can be routine maintenance and the need to fix items or replace those beyond repair.  It’s also keeping up with the exterior maintenance, etc.  With renting, they can avoid all this.

According to the article: “More affluent Americans are opting to rent as oppose to buy,” says Jack McCabe, an independent real estate analyst and CEO of McCabe Research and Consulting in Deerfield Beach, Fla. “Within the last year, so many people have seen their family and friends get burned in real estate. They don’t see it as being a risk free investment as they used to.”

But what about the flip side of the coin?  Isn’t that throwing money down the drain by paying a landlord each month instead of investing?  And isn’t this turn in the housing market great to get a house for a lot less than what it used to be worth?  Maybe that works if you’re planning to stay in your house for a long period of time, at least 5 years.  But for those looking to feel out a new neighborhood or relocating for a short time, renting could be a better option.  A lot of these renters also believe that it’s not the same investment as it once was.

One reader left a comment about the mortgage crisis contributing to this problem.  He suggests that if you want to buy a home you need to take out a personal loan that will automatically be deducted from your paycheck each month so that you can’t default.   If you’re not working or retired, he suggests cash only, or you can’t get a loan.  I think that really takes away from the American dream of home ownership.  While it’s a tough market right now, it can only get better.  And for goodness sake – if you don’t need to sell your home, don’t move!

I’m curious to hear what you think of this reader’s comment and if you think it would work.  And I’m also happy to help you look for a home to buy or to rent.  Please visit me online.

Remodeling not worth as much as it used to be

In a not-surprising news story in the Chicago Tribune, it turns out that those homeowners who choose to do some remodeling in their homes will not make as much money in resale value as they would have in previous years.  Most people are under the impression that if you do an upgrade or remodel to certain aspects of your home, you’ll get most or all of that money back when you sell.  Well, not so much in this market.  Unfortunately, more money is going in the contractor’s pocket than will go back in yours at the closing table.  

Remodeling Magazine has just put out their annual cost vs. value report for 2010-2011.  While you’re able to look at statistics and numbers for all areas of the country, I want to focus in on Chicago.  Let’s use a midrange major kitchen remodel for this year.  With the average job cost of $58,367, the homeowner would have a resale value of $40,126.  The percent of it being recouped is 68.7%, one of the highest values of all the remodeling projects.  However, last year that percentage was 72.1%.  So not a significant decrease, but still noticeable.

What’s interesting is that every single category the magazine studied, the percentage in recouped value was a decrease from last year.  Some examples of those categories include a basement remodel, bathroom addition, bathroom remodel, master suite addition, deck addition, siding replacement, window replacement, and others.  They also break it down into midrange projects and upscale ones.

Kermit Baker, director of the Remodeling Futures program at Harvard University‘s Joint Center for Housing Studies said, “A lot of what drove the (remodeling) market in 2003, 2006, 2007 was the notion that you were playing with house money.  You could get 90, 95 percent of your investment back. It was really a no-risk proposition. The mentality has clearly shifted to, ‘What kinds of features do I want in my home?’ given how long you live there and your lifestyle.”

So what does this mean for sellers in today’s market?  Just be smart about what projects you take on.  You might not have to spend the money on a complete kitchen remodel.  Sometimes just painting the cabinets and changing the hardware can make a world of difference.  You might not need to replace them all.   And if you have linoleum, it’s worth the upgrade to ceramic tile or hardwood.  Not every home needs granite countertops, especially those with small kitchens already.  It’s not worth the extra expense.  But do know that kitchens are the best room in the home to remodel.  While you might think you need to spend the money to finish your basement, that’s not necessarily true.  A young couple could come in and have a completely different idea of what they want it to look like.  See what the feedback is from the potential buyers coming through your home before you make any drastic improvements.  Talk to your Realtor about what he recommends before spending all that money.

For more information or to have me give you a market analysis on your home, please visit me online.

How to read an MLS sheet

For those of you who are looking to buy a home, it’s most likely that your Realtor is providing you listings to view, either online or on paper, with information from the Multiple Listing Service (MLS).  On those listings, you’re able to see photos, address, bed and bath count, and numerous other information about the home.  But for those who haven’t done it before, it’s very common for Realtors to use abbreviations as well as the MLS is known to shorten information.  I thought this might be a good lesson in some of the more common uses on an MLS sheet.  I am going to use the information from the Multiple Listing Service of Northern Illinois, now known as MRED (Midwest Real Estate Data).  This is the MLS for the region where I work.

The first thing most buyers will look at is the bedroom and bathroom count, also abbreviated as BR and BA.  Here’s the trick.  Let’s say you see a home that lists its bathrooms as 2.1.  You wonder why there’s two bathrooms and a tenth of another one.  How it works is that the number before the decimal point is the amount of full baths.  The number after the decimal is the amount of half baths (those without a shower or bath and just a toilet and sink).  So that home would really have 2 1/2 baths.  If you do see a listing as 2.5, it means there’s 2 full baths and 5 half baths, or someone made a mistake entering it.

HOA refers to the homeowners dues, where it will list an amount.  If an amount is filled in, you’ll find out there’s a frequency, usually seen as A, M, V, meaning annual, monthly, voluntary (it’s not required).  MAI stands for “Monthly assessment includes.”  Now, if the frequency is A, it means “Annual assessment includes.”  And what would be in this field are items like parking, water, etc.  Whatever is included in the dues you pay to the homeowners association.

A new required field for this MLS is the source of square footage.  You’ll most likely see a letter after the square footage is shown.  That shows what the source is for that number, whether it’s estimated, from a survey, or from an appraiser.  You can ask your Realtor what that specific letter refers to.

Now I’ll give you a few abbreviations the Realtors use when writing remarks.  They often have to shorten the description to fit everything in they want to say.

FP=fireplace
HW=hardwood
SS=stainless steel
MBR=master bedroom
SIP=screened-in porch
WIC=walk-in closet
WIP=walk-in pantry

When someone refers to a garage as 2.5 or 3.5, that does mean it fits 2 1/2 or 3 1/2 cars, or has the space for 2 cars plus room on both sides.

If you have more specific questions about how to read an MLS sheet or are ready to begin your home search, please visit me online.

Great new way to search for your dream home

We all know the Internet is becoming the most popular way to search for homes.  You’re able to virtually look inside a home to determine if you want to see it in person.  I’m about to share a whole new way of searching for homes, customized just for you.

Coldwell Banker just unveiled their brand new search tool: BlueScape.  Most people search for homes by how many bedrooms they want, bathrooms, school district, amenities, etc.  While those features are important, BlueScape allows a more customized search.  This is how it works:

You start out on the BlueScape search site. You’re asked to rate images with a thumbs up or a thumbs down, based on what you like.  You’ll want to rate at least five images, but the more you do, the better the results.  Once you’ve done that, you click on “Get results.”  You can narrow your search by town and price range.  Then you can narrow it down further by choosing certain keywords, such as “garage,” “lake,” etc.  The tool will find homes for you based on the images you liked before.

Taking their cue from popular online music sites like Pandora, Coldwell Banker figured this search was a way to explore more of people’s emotions when looking for a home.  Chief Marketing Officer Michael Fischer said this in a statement: “Home buying is often driven by a gut feeling. We’ve widened the definition of real estate search to give consumers the chance to explore those intangibles.”

Another added feature to the search tool is similar properties.  Based on what consumers choose as ones they most prefer, the Web site will provide a “You may also like” feature that shows you similar homes to what you’ve already said are ones you prefer.  This is important because if you’re looking in a certain price range, say $300,000 to $350,000 and there’s a house out there with all your preferred amenities listed for $298,000, you would have never found it otherwise.

I hope you’ll be able to check out this great new search tool, and the first of any real estate company.  As always, if you need more details on a home or need to get inside to see one, please call me at 800-858-7917 or visit me online.

Tips to make showings go smoother

The idea for this blog post came from a friend of mine who lives out of state.  He currently has his house listed for sale, and he had a showing over the weekend.  He was complaining because of the way the buyers left the home after a showing.  Not only did they leave all the lights on (not a huge deal) but they didn’t lock up behind themselves.  So when my friend returned home, the house was completely unlocked.  So here is some guidance for both buyers looking at a home and sellers on how to make showings smoother for everyone.

1. Leave the house the way you found it.  If the lights were on, leave them on.  If they were off, turn them off.  If you opened drawers and closets in the process of going through, just remember to close them.  Lock the doors behind you.  If you had to unlock it to open it, make sure to lock it when you’re done.  For sellers, make it easier on the buyers by leaving lights on for them.  It can be really hard to navigate a home you’ve never been to in the dark feeling along the walls and grasping for light switches, especially now that it’s getting darker early.  It’s only common courtesy.

2. Commit to a time.  One of the most frustrating things for sellers is when someone calls to make an appointment and is either an hour late or an hour early, or anything in between.  If you’re going to be late, make sure to call the office so they can let the client know.  If you decide you won’t make it at all, be sure to call.  I’ve known tons of people who decide they can’t show the home for whatever reason not let anyone know.  Just do the courteous thing and call.  And please don’t show up way early.  Some families have kids that they have to wake up and aren’t prepared.  Go stop and grab a cup of coffee if you have time or take a walk around the neighborhood.

3. Keep pets out of the way.  I’ve tried to show homes where a protective dog or cat won’t even let me in the front door.  Make sure to let your Realtor know ahead of time to let prospective buyers know there’s pets in the home.  But keep them locked up.  The friendliest dog can scare a child.  Just keep them in their kennel for the duration of the showing.

4. Make the home accessible.  With temperatures dropping in Chicago, snow should be arriving at any time.  Keep paths shoveled so people aren’t trekking through a foot of snow to get to your front door.  Leave the heat on.  If you’re out of town, make sure you have a neighbor or someone who can shovel and turn the heat on before  a showing.  Your buyers won’t want to stay for very long to see the potential in a home if they’re freezing.

What other recommendations do you have for buyers looking at homes?  Or as a buyer, what other suggestions can you make to sellers?  Please leave me a comment or visit me online.