Your Home: Is it still a good time to consider refinancing in NEJC?

Question: Should I refinance my home? How much could I save?

When interest rates dropped so low, and the housing market was declining, refinances were the hot topic. Now that the market is in a state of recovery, it seems that “refis” have lost their spot in the limelight.

But now is still a great time to refi — for most homeowners. I say most because there are a few general rules to follow if you are considering a refi.

Most lenders would tell you that you need to plan to stay in your home for at least two more years if you are considering a refi. There are closing costs that a homeowner must pay when refinancing, so it is important to make sure that you will recapture the cost and then see some savings before making the investment.

Also, if you purchased in 2005 or 2006 before the market declined, there is a chance that the market value for your home today is not as much as you paid for it back then. That could stand in your way when it comes to refinancing. Just like when you purchase a home, the lending institution will perform an appraisal on your home to insure that it is worth the refinanced amount. If you did purchase around that time, you should probably first contact a Realtor to perform a preliminary market analysis for your home. He or she should be able to give you an idea as to whether a refi might be an option or not.

Now, the up side. A lower interest rate can make a huge impact in your payment and overall equity position. For example, let’s say that you have a mortgage on your home of $240,000 and your current interest rate is 5.25 percent. If you were to refinance today into a 30 year conventional loan, you would save approximately $25,000 in the first eight years between interest savings and equity improvement. Yes – I said $25,000! That is not to mention what would happen to that $25,000 it it were then invested elsewhere: a 529 plan for your kids college education, down payment for an investment property, etc…

If you are considering a refinance, I would like to make an endorsement. Jim Yarrington with Peoples Bank has been a long time partner of ours. He handled our refinance on our first home, and the home purchase loan on our current home. Not to mention that our clients love him. If you would like to make an application for a refinance, just got to ApplywithJim.com. It is a very user-friendly site and I am confident that Jim can provide you with the best options for you and your family.

Your Home: Preventing the ‘usual suspects’ during a Home Inspection

Question: What “usual suspects” that come up during inspections can a seller possibly prevent?

An ounce of prevention is worth a pound of cure. That is certainly the case when it comes to home inspections.

As a seller, when you perform preventative or deferred maintenance on your home, you control the service provider and you decide when the repair is going to hit your pocketbook. If you wait until your home is under contract, then a buyer is involved. They may want to use their own trusted service providers. And that trusted service provider could be twice the cost of yours. Not to mention that during a real estate transaction, there is just a little bit of emotion involved. Can you sense the sarcasm?

So let’s talk about the usual suspects that a seller can prevent.

First let’s talk about grading. It seems like such a little thing, but BOY does it make a huge impact on a home. Grading is the slope of the soil away from the foundation of your home. Most drainage professionals recommend a one inch drop per foot for 6-10 feet away from your home. By maintaining a proper grade away from your home, a homeowner can prevent foundation cracks, water seepage and leaks, and the cost of foundation repairs. In our experience, approximately 75% of all water infiltration in a basement is caused by improper grading and gutter neglect.

Radon is also often a surprise for a seller. What is radon? The EPA explains that radon comes from the natural (radioactive) breakdown of uranium in soil, rock and water and gets into the air you breathe. It is also the second leading cause of lung cancer according to the EPA. There are radon hot spots all over the USA and we just so happen to live in one here in KC. Of the homes that we have sold, probably 40 percent of them have had elevated levels of radon. Visit the EPA’s radon website for more information. A radon mitigation system can cost anywhere from $750-$1,500 depending on the layout of the home.

Know this: 90 percent of the buyers out there will expect that a seller install a mitigation system if the radon level is elevated. Due to the long-term health risk, it is pretty much non-negotiable.

Now lets talk about chimneys. There are two types of chimneys. Those that have been lined with a stainless steel liner and those that need to be. That is if you are dealing with an older home. Whether you are burning wood or just gas logs, the clay tile chimney flues are not a good design and should be addressed for safety reasons. So if you are looking to market your home with a fireplace, make sure that you have had a level two inspection (video inspection from roof top to firebox) completed and have addressed all suggested repairs.

Finally, let’s talk about sewer line repairs. As the homes in our area continue to age, sewer line/waste line repairs are becoming more prevalent. Most of the older homes were built with a clay pipe sewer line. These clay pipe lines are subject to tree root intrusion, shifting and developing low spots, and breaking. A sewer line replacement can cost upwards of $7,000. And that is if you don’t have to repair the street or your driveway if yours happens to run underneath either one (or both). We highly encourage our buyer clients to have a sewer scan A contractor will run a special camera down the waste line all the way out to the main line. Our preferred sewer scan specialist, John Richmond with Hydro Physics, who even provides a DVD of the scan for posterity.

Most plumbers recommend that you have your sewer line cleaned every other year. If you have a ton of mature trees in your yard, you may consider doing it more frequently.

Your Home: How Do You Choose the Right Realtor?

Question: How do you choose a Realtor? Aren’t they all pretty much the same?

page0090

As our business has grown through the years and I have gotten better at asking good questions, I have been shocked by some of the horror stories I hear from clients concerning past real estate transactions. I’m talking stories that keep me up at night. It is important to me to find out what our clients have experienced in the past, and what they would like to experience with our team. It is from this “needs analysis” process that we define what our team wants to be, and what it does not want to be.

I am very proud of my vocation — and very critical of it at the same time. Please hear me out. I love the Realtor organization. I love what they stand for. The challenge lies with the licensing process. It is quite easy to get your real estate license. Therefore, it is quite easy for anyone who has the desire to be a Realtor, to be one. That said, it is one thing to be a Realtor. It is another thing to be a competent and successful Realtor. Understand, you don’t have to sell 50 million dollars in real estate a year to be successful. My definition of successful is that you are full-time and you are good at your craft.

So how do you know if someone is good or not? A “good” Realtor is in the market every day, previewing active listings, negotiating contracts, showing properties to clients and studying the trends in MLS. Again, doing all of these things on a daily basis. In addition, they should stay very current with their education. I am not just talking about their continuing education for their license. I am talking about education on topics like negotiations, coaching and consulting (to communicate effectively with their clients and other agents), scripts and dialogues, to name a few. At the end of the day, it is all about being better at what you do, and never accepting where you are in your business. There is a reason that leaders in any industry are always looking to improve themselves as professionals.

I do take a little heat sometimes from part-time Realtors. And I tell them all the same thing. I was part-time when I got started. My goal was always to transition to full-time at my first opportunity, which I did after six months. It is very hard to stay current in real estate when you work more than one job. It is very hard to serve two masters. Again, history leaves clues. Generally, people who are masters of one particular skill are only masters of that one skill. For example, when Steve Jobs returned to Apple in 1997 he took them from 350 products to 10. I would say Apple has done a great job of serving only one master.

Our team is designed to allow us to focus on our strengths. I have mentioned before that my wife, Leah, is our Lead Buyer’s Specialist. Her primary focus is our active buying client list and their individual housing needs. I am the Lead Listing Specialist, therefore I focus specifically on getting our current listings sold and conditioning our upcoming listings to get them market ready. And because Leah and I need some glue to hold this all together, we have Rebecca Holcombe (our Director of Operations) to take care of all the details in between.

Finally, let’s talk about deliverables. What can a Realtor truly deliver to his or her clients? Here are a few of our deliverables: a great client experience, an intimate knowledge of the market (locally and city-wide), a philosophy that no deal is worth our reputation and, most importantly, a passion for our business and our clients. As the listing specialist, I am proud of the fact that our clients are achieving 97.4 percent of their original list price in an average of 27 days. For me, the proof is in the pudding. And that is some sweet pudding!

Photo credit to: Keller Williams International

You Home: Media Coverage About the Seller’s Market

Question: Have you seen the media coverage about the seller’s market?

If I had a dollar for every time I have been asked this question in the last week and a half, I would at least have 30 bucks! Hey, that’s enough for a great lunch.

The article that ran last Saturday in the Star really has people talking.

page0005

For those of you who visit our column weekly, this article was nothing new for you. =If you are new to our column here on the PV Post… stay tuned in every Friday. A goal of our team is to provide relevant and rich real estate information in this column, and in real time. So here we go.

The Star story provided several different perspectives and helps spread the good news. By good news, I mean the news that a home purchase is still a great investment. In our area of the country it always has been. Even after suffering the down market, real estate in our area is a wonderful investment. Real estate, unlike most investments, does not suffer the volatility that most investments are subject to. Sure there are cycles of value, both high and low. But if you look at a long term trend line of values (like the one below) you will see that nationally the volatility is not very high. At the end of 2012 is was predicted that prices were still undervalued by 23.8 percent. If most of us look at our investment portfolios from the last few years of the recession, a 23.8 percent loss of value over time is not much (comparatively speaking).

Remember, I said that prices were undervalued by 23.8 percent at the end of 2012. That is not the case today. Here we are in May of 2013 and values are jumping up for the first time in years. AND interest rates are still incredibly low. If you have ever considered investing in real estate, now is the time. Whether to invest in a personal residence for yourself, or to purchase rental income properties. Money is cheap and the rental market is hot. Most of my clients with rentals are seeing a zero vacancy rate. As soon as a home is advertised for rent, it is rented. And typically with multiple interested parties. Kinda sounds like both the re-sale real estate market and the rental market are experiencing the same effects of a housing recovery.

If you would like more information about real estate investment, please e-mail me and I will send you a copy of an incredible book call HOLD: How to find, buy, and rent houses for wealth. It was written by real estate agents who specialize in purchasing and renting investment properties. It is brilliant. I would love to send you a copy, free of charge.

For link to the above mentioned Kansas City Star article click here: http://www.kansascity.com/2013/04/26/4205061/as-housing-heats-up-sellers-suddenly.html

Your home: How is Market Value Established?

Question: What establishes market value?

I think the best place to start is with what does not affect market value.

Sellers often say things like, “I know that my neighbor’s house sold for….” or “We owe $175,000 and we have put $50,000 in to it, so we need to sell for $225,000″, or “Well, we paid $250,000 three years ago so I just can’t sell it for less than that.”

Unfortunately, it is irrelevant what your neighbor’s home sold for unless it is a very similar home, in very similar condition, and within the last six months. More often than not, a potential seller client is holding on to a sold comparable from two years ago. Well, that was a different market and will not be relevant to a buyer’s lender when it comes to the appraisal. What you owe on a home, or what you have put into a home does not translate directly into market value. If you bought in 2006 when the market was crazy hot and now you are selling in 2013 after seven years of depreciation, you may be facing that same sales price today. Or even less.

Also, home improvements will add, on average, about 55 percent of the total investment back into the market value. So on a 50,000 home improvement project, a seller will recapture $27,500 at the time of resale.

The last one is a tough one. It is very hard for a seller to face selling a home for less than what they bought if for. As a listing specialist, it breaks my heart every time I have to reveal a market value that is less than the original purchase price. This next point is very important to me, so please read it carefully. If you are a seller facing this situation, IT IS NOT YOUR FAULT.

Why is it that we can accept that a stock worth $50 dollars a share one day can be worth $5 a share the next, but we cannot accept that over a seven year period real estate values have suffered? I think it is because appreciation was just a given for the longest time. It was a constant. And now that the market has corrected itself, appreciation has returned.

Today, I often hear buyers say, ” I want to get a deal, maybe 10 to 15 percent below list price,” or ” What did the seller pay for the home?” or “The tax records have it valued at….”

“Deal” is a loaded word. What is a deal? Sometimes a deal is full list price. Sometimes the listing agent has underpriced the home due to lack of preparation on their part and full list price is a great deal. Or perhaps a buyer must accept that financing a home at less than a 4 percent interest rate over 30 years is their deal.

What a seller paid for a home is good information to have, though it bears very little when it comes to market value. When a stock sells, the prior purchase price is irrelevant, correct?

Finally, the county tax assessment is purely for gauging taxation. It’s intended use is not to establish market value.

Now, the answer to the original question. Market value is established by sold and pending comps (similar homes) from the last 6 to 9 months in the direct vicinity of a subject property. After that, a home is worth what a buyer is willing to pay for it and a seller is willing to sell it for.