Your home: Get off the fence and get into the market!

I wrote last week about the overall health of our real estate market. However, there is an epidemic that is running rampant in our market — even right now as you read this column.

This epidemic can have many long-term effects, yet is easily curable. All you need is a shot of “reality.” This epidemic that I am referring to is trying to “time the market.” We also call this being “on the fence.” Well, it is time to get off of it! Besides, isn’t that uncomfortable?

In the beginning of my career, I was taught that you cannot time the market. As a potential home buyer, you will not know that you have waited too long to take advantage of the historically low interest rates until rates increase high enough to begin to impact your buying power.

Most buyers will search for a home in a certain price range. That range is usually established by two factors — a pre-approval amount from their chosen lender and a mortgage payment range that they are comfortable with and that works with their monthly budget. As rates continue to climb, that mortgage amount will follow. So the same home one day may have a mortgage payment of $1200 per month, and then thirty days later have a mortgage payment of $1300 per month. We are still talking the same home, and possibly for the same sales price. The only difference is the interest rate. When it comes to getting a great value or “deal,” a low interest rate is the key.

Buyers are still very focused on a great value, and probably always will be. There is no better time to get a great value than today. Again, don’t wait. Time IS money in this case.

In January, with a 5 percent down payment a buyer could obtain a 30-year conventional loan at a 3.5 percent interest rate. Today, that same buyer with those same terms would be financed at a 4 percent interest rate. On a $250,000 purchase, the difference in the mortgage payment would be $68 a month, or $816 per year, or $24,480 over the term of the loan. Now for some, $68 a month may not seem like a lot, but the long term impact is huge. Additionally, it may not bother you to spend an additional $68 per month, but when the lender looks at your debt-to-income ratio (or DTI), every dollar counts. Even as little as $68 can keep a buyer from being able to purchase the home that they want or not.

Your home: Prairie Village housing update – Where are we headed for the rest of 2013?

Question: It is half way through the year, where is the market headed?

“Crystal ball” questions are a little tricky, but I felt it was time for a more specific market update.

Our MLS is divided up into several different zones. There is not a lot of rhyme or reason involved in the boundaries of these zones, but for the purposes of this column we will talk about zones 310 and 320. In Prairie Village, zone 310 includes all of PV north of 75th Street. Zone 320 includes all of PV south of 75th Street.

In zone 310 (north of 75th), we are down to 2.6 months of inventory. That is a 29.2 percent drop compared to this time last year, and is the lowest I have seen since before the peak of the market in 2006. The average days on market is 63 compared to 72 days this time last year. Finally, the median price for sold homes is up 9.1 percent. After seven long years, it is great to see values improving. As you can tell, all of these statistics are positive. Really positive actually.

The most popular price range (17 percent of the market) in zone 310 is $140,000- $160,000. That is not surprising to us due to the fact that we are working with a lot of first time home buyers this year. As rates continue to slowly increase, we are seeing more and more of them eager to purchase before their buying power is affected. In some cases, as rates go up it may make more sense for a buyer to purchase now rather than waiting to save up a more substantial down payment. Interest rates will have the largest impact on that buyer’s mortgage payment.

In zone 320 (south of 75th), the inventory is down to 2.4 months. That is a 12.5 percent drop from this time last year. The average days on market is 46 compared to 84 days this time last year (a 45.2 percent drop.) The median price for sold homes in this zone is up 2.3 percent. So homes are selling quickly and for improved sales prices. You gotta like that!

The most popular price range (17.96 percent of the market) in zone 320 is $200,000- $250,000. There are a lot of move-up buyers selling smaller homes north of 75th and moving to slightly larger homes south of 75th. Additionally, we are seeing a lot of established families moving into our area for the great local schools. Yeah SMSD!

I could talk about statistics all day long. Just ask our team. For those of you that would just like me to cut to the chase….here it is.

Although we should still see some normal seasonal trends in our market, the Prairie Village real estate market is very healthy right now and my prediction is that it will continue to stay that way as long as inventory stays at its current level. We could even see an increase in sales if interest rates continue to tick up causing some of the non-active buyers to get off of the fence and buy a home.

Your home: Can a multiple layer roof hurt my chances of selling my house?

Question: If I have more than one layer of roofing on my home, should I be concerned about resale?

The short answer is “yes.”

Now for the “why.”

Roof

If there is one thing that I love about my industry it is that things are constantly changing. And roofing guidelines are no exception to the rule. When I started my real estate career, I sold homes with three layers of roofing. Sometimes even with composition shingles (also known as asphalt shingles) over wood/shake shingles. It used to be common practice to install one layer of roofing over another.

Well those days are gone. As the years have passed, the insurance guidelines and the city guidelines have changed dramatically. Also, we have learned more about attic ventilation and how multiple layers of roofing actually compromise the life of the roof because of poor ventilation and the extreme temperature changes that we see from summer to winter.

So back to that short answer of “yes.” We are really talking about two different issues: multiple layers of composition roofing and composition over a wood shingle/shake roof.

When a buyer is purchasing a home, their homeowner’s insurance carrier will inquire about the age of the roof and the number of layers. If the roof has multiple layers, typically, the insurance company will only insure the top layer. So let’s say we have a hail storm and the roof takes a beating. If it needs to be replaced, the insurance policy will only cover the replacement of the top layer. The layers beneath the top layer and the decking (plywood) beneath will have to be paid for by the homeowner. Not very fun, huh?

In the case of composition over shake shingle, it is virtually impossible to obtain insurance for a home purchase these days. There are only two companies that know of that will offer coverage. And as mentioned earlier, they will only cover the top layer. And in some cases, the buyer will have to pay a higher premium.

If you currently have a comp over shake roof be aware that at some point you may no longer have full coverage with your current carrier. I am not trying to scare you. I just don’t like surprises for my clients, or anyone for that matter.

Now that roofs are in the spotlight, more and more buyer’s representatives are asking for a full roof replacement up front in a contract written on a home with multiple layers of roofing. As a listing specialist, I am encouraging a roof replacement on our listings that have multiple layers. As with any repair, it is much smarter to do the work up front which allows you to choose the service provider and thus control the cost of the repair. If you wait until after you go under contract to negotiate a roof replacement, a seller is more at risk of losing a buyer due to buyer’s remorse or over-paying for a new roof.

Additionally, when time is on your side, you have time to obtain multiple bids and call on references for any service provider who is bidding for a particular job.

Photo by: John-Morgan on Flickr

Your Home: House Foundations 101

Question: What are the pros and cons of each type of foundation — and how can I keep my basement dry?

Poured Concrete Foundation

In light of the five-plus inches of rain we recently received, I felt it necessary to address a few questions about foundations and how to properly maintain them. As we have been showing homes over the last week, our team has seen its share of wet basements. That said, we have seen all types of wet basements — stone, concrete block, and poured concrete. All of which could have been prevented.

I will start with stone. Sometimes stone foundations get a bad rap. Honestly, a properly built stone foundation can be one of the most structurally sound foundations out there. Now because of the porous nature of the mortar and the stone, stone foundations tend to “weep” when the water table is higher. Due to this weeping, it is necessary to monitor the mortar joints and repair any voids or cracks that may appear. This is called tuck pointing. If nothing else, an annual visual inspection of the mortar joints should be a part of your home maintenance plan.

Now to concrete block. Poor concrete block! This foundation seems to see the most abuse. Like stone, a concrete block foundation can be a great product. However, they are the most susceptible to cracks and movement (also known as deflection) during extreme weather (i.e. droughts or heavy rain). This is due to the expansive soil in our region. Expansive soil will expand when it is wet, and contract when it is dry. You have probably seen examples of this around your own foundation. Last year, many of you probably saw a gap around your foundation. That is because the soil was dry and contracted. Then we receive some well-needed rain (like this last week), and you get water in your basement. Mainly because the gap is acting like a big funnel and is allowing the water to find any void in your foundation that it can get through.

These cracks and movement can be remedied by installing vertical wall restraints, piers, or several other types of foundation repair. All of which, of course, cost money. Anywhere from $250 per restraint to several thousand dollars if piering is required. The good news is that almost all foundations can have their structural integrity restored by one of the aforementioned methods.

I saved probably the most coveted foundation type for last: poured concrete. The phrase “poured concrete foundation” brings a special glimmer to the eye of most potential buyers. And for good reason. A well-poured and well-maintained concrete foundation can be an awesome thing. You don’t have the weeping that you do with stone. And they tend to stand up to extreme weather better than concrete block. But they still require monitoring, proper grading, and proper guttering. You will see that when neglected, a poured concrete foundation wall will still crack and deflect.

I am sure that you can see the common theme: drainage. I mentioned a few weeks ago that 75 percent of all water infiltration is caused by improper drainage. Recently I read on a reputable foundation company’s website that they attribute poor drainage for 90 percent of all water infiltration.

Photo by: ArmchairBuilder.com on Flickr

Your Home: Is this seller’s market, will I be able to find a new home after I sell?

Question: We are ready to sell our home, but with inventory so low, what if we cannot find a new one?

The thought of “temporary housing” or “staying with the parents for a while” will usually cause a cold chill to shoot up and down the spine of a potential home seller. And for good reason. Who wants to move more than once? Every seller would like to move from the home that they have sold right into their new home. And 99 percent of the time, that is exactly what happens. That 1 percent is typically the choice of the seller. We have had some clients that prefer to obtain temporary housing. They like to close the chapter completely on selling before focusing on their purchase. Each to his/her own, I say.

I just ran stats for our area and we are down to less than three months of inventory. That puts us into a strong seller’s market, officially. So asking if it is hard to find a new home is a relevant question. In our experience, due to our activity level in our market, we have always been able to find a great home for our clients (even in a seller’s market). Sometimes it happens the first day a home goes into MLS. Other times we find out about a great property through our networking with other great agents. Leah and I found our own home in Indian Fields that way. Or it could be a FSBO, or just from simple door-knocking in a neighborhood and looking for potential sellers.

Probably the biggest adjustment a buyer faces going from a buyer’s market to a seller’s market is in their list of criteria. Last year, we would coach our buyer clients to identify what their dream home looks like first, and then if we couldn’t find it we would slowly peel away the negotiable characteristics until we found their home. This year, a buyer should really focus on their non-negotiable items first — you know, your “must haves.” An example might be the elementary school, or the number of bedrooms and baths, or a full basement for storage.

When your options are few, it is extremely important to focus on your non-negotiables. This does not mean that you have to “settle.” It just means that you have to accept the market as it is. If you fight the market, you will lose every time.

Again, I would like to reassure those of you who are considering listing your home and are concerned about finding your next home. We have yet to leave anyone homeless. I am not saying that we haven’t gone down to the wire. But at the end of the day, it always works out. Everything does happen for a reason. It is amazing how one day your new home just shows up. Keep the faith!