Your home: Can I get by with limited curb appeal?

Landscaping

If the inside of my home is a show-stopper, can I get by with mediocre curb appeal?
I recently received an email from Thomas O’Brien asking about the value of landscaping and how it impacts the value of a home. Because I have never written specifically about curb appeal, I thought it was time to do so. Thank you for the question Thomas.

There is a reason that 70 percent of the home projects that yield the highest return on investment (ROI) are exterior projects. The reason is that curb appeal matters. And it matters a lot. Just think, which picture is usually the first image that you see of a home on line? The answer: a shot of the front of the home. Therefore, the curb appeal of a property represents the first impression that it will make on the open market.

Let’s pretend that you are new to the dating scene and you hit the local club on a Friday night. Let’s also say that you have a heart of gold, a great job, and the best of intentions for all you come into contact with. But walking in the club you realize that you are wearing your acid washed jeans from the late 80′s (tight-rolled at the bottom, nonetheless), a Panama Jack shirt, and your fluorescent Converse high tops folded over with iridescent yellow laces. Odds are that you will leave the club alone. Not because you are a bad person, but because you did not take the time to present yourself properly to the “open market.” I have often said that this market is a “price war” and a “beauty contest.” If you want to be the winner of the beauty contest and snag a buyer today, you have to have strong curb appeal.

So what is strong curb appeal? Here are just a few examples.

  • Well maintained driveway and walkways
  • Healthy lawn and landscaping
  • Exterior paint/siding in good condition
  • Seasonal color- mums for example right now are really beautiful
  • Properly trimmed trees
  • Update light fixtures, mail box, and address numbers
  • Easy to operate front door and lock (this one is easily over looked)

When it comes to landscaping, I would suggest that if you are considering a move at some point in the future, don’t make the design too personal. By personal, I mean appealing mainly to you and not the general public. Also, keep it low maintenance. A green thumb is a great talent that is not possessed by every buyer out there. Most buyers appreciate a landscape design that shows forethought and intention coupled with lesser maintenance. If you do have an intricate design of plantings, a sprinkler system would be a brilliant idea. Just as you may hate to walk around your yard with a watering can or hose, so thinks your buyer perhaps.

Remember, 70 percent of the highest yielding home projects are exterior projects. Subsequently, they can be some of the lesser expensive projects when compared to a kitchen remodel or a master bathroom remodel. Therefore, focus some of your budget outside first then work your way inside.
When in doubt, it is always a good idea to consult your local real estate expert. I consult with clients about home improvement projects all of the time and am happy to do so.

Photo credit to: one2c900d on Flickr

Your home: Changes coming to local housing market

Is the local housing market about to come to a screeching halt?

No, of course not. But it is changing. We have already had a taste of the cooler weather and fall is nipping at our heels.

So how is the market changing? Well let’s look at the city at large. At the end of July, our MLS had 4.4 months of inventory (14,483 homes for sale). As I have shared before, anything less than six months is heading towards a seller’s market. The 4.4 months is calculated by dividing the total number of homes that are selling each month into the total number of homes actively for sale. Therefore, you know how long it would take for all of the current inventory to sell if nothing else came on to the market.

At the end of August, our MLS had 4.6 months of inventory (14,475 homes for sale). The number of homes for sale is almost exactly the same, however, the number of homes selling per month is dropping. In July, 3,298 homes closed compared to 3,149 in August.

Is this a huge drop in sales? No. That said, 149 homeowners did not sell in August who potentially would have sold in July due to the higher absorption rate (the number of homes selling per month). This is a classic example of both seasonality and supply and demand. Although I am not predicting a major stall in our market as we have seen in some years past, seasonality is inevitable. Essentially we have six to seven weeks of strong market left (barring any major weather conditions) before the shift will happen and the market will become more balanced.

On top of that, comparing July to August, homes are selling for 1 percent less of their original list price. Again, this is where the effects of supply and demand are the ugliest. I see this number as 1 percent off of my clients net results from selling their home. That is a big impact for most home sellers.

Finally, homes are selling for two dollars less a square foot (on average) when you compare the last two months. One might think that does not sound like a big number, but if you live in a two thousand square foot home, that is $4,000 less when it comes to the sales price. Again, we are not talking about dramatic changes in the market. But changes, nonetheless.

I know that the sellers out there have enjoyed the strong seller’s market that we have been experiencing this year. But those days could be limited.

Now to the buyers out there. Don’t get too cocky. Although the market is getting to be more balanced and not so heavily weighted towards the seller, certain price ranges are like their own little “micro-market” and will continue to sell immediately.

Your home: Should I rent or buy?

You would think as a Realtor my answer would always be to buy is best. However, that has not necessarily been the case over the last few years. As a matter of fact, I have coached several clients to rent their home as opposed to selling during the down market because the market could not support their desired price. Additionally, I have supported the notion that one might consider renting while home values where unstable.

We are now in a much healthier market, yet my team still gets asked this question today. Our answer today is that it is better to buy.

Here are some reasons why.

I am going to just briefly mention the obvious reasons like historically low interest rates and home values still more than 20 percent below their peak in 2006. You may not know that rental rates are up more than 5 percent nationally and are continuing to rise.

It has been interesting this year because as the housing market has improved almost simultaneously the rental market has been improving as well. By improving I mean that the vacancy rate has been dropping and rents have been increasing. This is great for the investor who owns the home, but not for the renter. This lack of supply in the rental market will continue to push rents higher and higher. Therefore, it really is a great time to shift from a renter to a homeowner.

Now lets speak to those who are new to our city. Perhaps here because of a relocation. During the downturn of the market, many companies tightened up their relocation package and have placed more of the financial risk on the employee. There was a time when many relocation companies would offer an absolute buyout to the employee taking away the risk of an employee getting stuck holding the bag if they were only in a city for a short period of time. In a buyout, the relocation company would purchase the home from the employee outright and assume all financial liability. Today, we really only see this style of relocation package for company executives.

For those who are concerned about the aforementioned risk, I have a positive message for you. Currently the break even point for owning a home in Kansas City is approximately 2.5 years compared to a rental scenario. This takes into account your down payment, closing costs, mortgage payments, and maintenance costs. 2.5 years is a short period of time for recoup compared to the recent past and hopefully allows our new residents to enter the housing market more comfortably.

As the housing market continues to improve, there will again come a time when interest rates increase to the point that for some residents it will be cheaper to rent than to buy. Please don’t wait until then. As advocates for home ownership, our team would love for everyone to experience the joy of owning a home. After all, it is a part of the American dream. We would love to help make your dream come true.

Your home: How has the mortgage industry changed? An interview with one of the area’s top loan officers

I have had so much fun with the buyer and seller interviews I recently shared with you that I decided to chat with one of our area’s top loan officers, Jim Yarrington with People’s Bank. He is a great partner of ours and I have total trust in him. I asked Jim to answer a few commonly asked questions we receive from our clients. He was happy to do so. My hope is that this will help any potential buyers out there to get a head start when it comes to your financing.

Chad: How would you describe the lending world today in ten words or less?

Jim: Flexible, but very detailed.

Chad: How so?

Jim: If I have someone with a couple years of work experience, a down payment, and relatively good credit, I should be able to get them a home loan. There are a variety of options these days. It is not as hard as the media makes it out to be. As a result of the loan fallouts from 2003 to 2007, however, the national investors (backing the home loans) are looking for extremely detailed information and insight into a buyer’s finances.

Chad: What has been the biggest change in the home loan process in the last couple of years?

Jim: The amount of detailed paperwork requested of the potential buyer by the investor backing the loan.

Chad: What is one of the biggest challenges for most potential home buyers these days?

Jim: For them, they need to understand the difference between being pre-qualified and pre-approved.

Chad: What is the difference between a pre-qualification and a pre-approval for a home loan?

Jim: Sadly, in my industry the terms are often used interchangeably. A pre-qualification is more of an opinion based on a short interview process. Whereas a pre-approval is a credit driven, fully documented review of the information that is on the loan application. To compete in today’s market as a buyer, certainly a pre-approval places you in a stronger position.

Chad: Can you give me three “best practices” or suggestions for someone who is preparing to enter the market?

Jim: Sure. First, make a budget. What is your mortgage payment comfort level now? In the next five years? Budget is a big one.

Two, consult with a referred (and experienced) mortgage loan officer early. Don’t assume that you can or cannot get pre-approved. Again, the market is flexible.

And three, get organized. Collect and organize pay stubs, tax returns, employment letters, bank statements, and any other documents that may fully explain your financial situation.

Chad: What is a common misconception when it comes to home loans? Better yet, what is the truth?

Jim: You do not have to put 20 percent down to purchase a home in today’s market. For example, for a home in the Prairie Village market, there are loans for as little as 0 percent down (VA loan or a gift down payment on a conventional loan). The most common down payments are 3.5 percent of the sales price on an FHA loan and 5 percent on a conventional loan.

Chad: How long does it take to get pre-approved? How long does it last?
Jim: If you apply online today and I supply you with a list of documents that I need in return, and you submit them tomorrow, I can have a pre-approval the following business day (barring any surprises). Most pre-approvals are good for 90-150 days.

Chad: What should we have discussed that we did not?

Jim: Bankruptcies, short sales and foreclosures. People often ask ho long you have to wait after a bankruptcy to purchase a home. The answer is two years after the date of discharge. Typically the waiting period after a foreclosure or short sale is three years. There are some exceptions, however. Again, you should talk to an experienced loan officer because each situation is different.

I want to thank Jim for his professional time and his insight. If you would like to share a question with Jim, his email is jyarrington@bankingunusual.com or you can call him directly at 913-239-2922.

I agree with Jim. The media has painted a negative picture of the lending environment today. Outside of the low interest rates, our media really doesn’t have a lot of nice things to say about the lending world. That is a shame.

I must say that the downturn of the market did an excellent job of “purifying” the lending system. As with most market shifts, those who are left (loan officers) and still thriving after a huge downturn are the ones who were probably doing it right all along. Lenders like Jim and many of his colleagues have always put their clients’ needs first. That is the kind of lender you need to find.