Investing in A Home

Buying a home is usually the largest expenditure (or shall we call it an investment) any of us ever makes.  Spending that kind of money almost always comes with second thoughts, particularly if it’s your first home. And there are some hazards of home buying that are totally unavoidable. I always try to help buyers with their concerns. I would guess that the average agent holds the hand of a buyer maybe hundreds of times throughout their career.

You may have heard the term “Buyer’s Remorse”.  I like to tell both buyers and sellers that they may experience remorse once their “deal” is written and the offer is made and accepted.  And yes there is “Seller’s Remorse” too, but the truth is, both parties will probably spend that evening riddled with remorse: the buyers think the accepted offer means they could have gotten the place for less, and the sellers think it means they could have demanded more!

Even after showing the homes that I think will work best for my clients, they still sometimes are attracted by some glitter seen in a water front home or a golf course property, and later rue the day they closed on that particular home, maybe for years and years to come. I had a buyer once who saw a worn out waterfront home with a barn and paddock—after he saw it, he could not focus on anything else.  He had to have it, even though the home was not functional for his family. Apparently it represented all the things he had always wanted to show off. Unfortunately the purchase price plus the repairs caused him to over extend himself financially and he ended up in mortgage distress.

Clearly, the decision-as to what house makes the most sense for a family is the buyer’s.  But as an agent I can and do make suggestions—and sometimes even argue. Probably the most important suggestion I ever make is that the buyers hire a home inspector. House condition surprises are only avoidable if you have inspections. And while the inspector may find many things to report to the buyer, the idea is that sooner or later the homebuyer would find these things out for himself, so before he buys is a better time than after.

When I am trying to find the perfect home for a client, I have long used a visualization exercise. I like to ask them to close their eyes and tell me what the perfect house would be. And to tell me what their favorite rooms were in the homes or apartments they have lived in. Sometimes I try to get their minds’ eye on topics like how long will the family likely live in the new home.  Or what is important to them in terms of neighborhoods and schools? Do they want to walk to shopping. What sorts of things are appealing to the family, both inside and outside of the home, for work, school, play and their downtime. County water and sewer may or may not be available. How close are they to retirement? (These points seem personal, but so is a home, and more to the point, what home amenities they will need). Naturally I ask about the desired number of beds, baths, square feet desired in the next home. 

American clients don’t have a good feel for the size of a home expressed in square feet.  They are more from the school of, “I’ll know it when I see it.”  Whereas, Canadians and European buyers seem to know exactly how big a home they want and can quote you the exact number of square feet, “I want a home that is 1800 square feet,” they’ll say.

Some buyers fail or choose not to read disclosures, inspections, loan documents and such. These are the buyers who tend to end up really, really upset at a later stage of the deal. Some buyers are so unused to these sorts of transactions that the mere sight of all those papers and zeros makes their eyes glaze over. Other times, there are buyers who have done so many major transactions in their work or their lives that they’ve gotten casual, with the details.

I try to summarize the documents which I know are important and encourage them to ask questions. The prospect of trying to read and catch mistakes in a pile of docs at the closing table can be daunting.  When the closing is hanging in the balance and all the excitement and expectations of the family—and maybe the moving truck is parked just outside--is one of the most common reasons buyers cite for not reading and understanding their papers.

I’ve had buyers proudly arrive at the closing in a brand new car, and then be told (by phone) by their lender that since they bought a new car their credit no longer qualifies them for the mortgage. I always tell my buyers not to make any expenditures (no new furniture, no new cars or boats) until AFTER athe closing.

Some of my best buyers have early on disregarded my advice, only to lose a house to another buyer or a mortgage to a dumb financial move. But then, once they see that good advice and timing will help them, these are the folks who can turn out to be my best clients, especially when the market has proven me right!

Dane Hahn is a real estate professional serving Sarasota and Charlotte counties. You can reach him at 941-681-0312 or via email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com.

It's a Seller's Market!

As I write this, I am surrounded with this week’s newspaper real estate sections. The headlines call out the fact that home sales are up, home prices are up, and home inventories are down.  Why just this morning I showed a home to some buyers who early in the week had found 5 homes they wanted to see, but by this morning, two of the five were under agreement and so not able to be seen. Property is moving again!

Buyers are discovering, to their dismay that homes they wanted to see or possibly buy have already been snatched up before they even get a chance to see or make an offer on the property.  Our area’s unprecedented low inventory levels are slowly driving up home prices and making sellers reluctant to cede little if any concessions to buyers.

There’s no better gauge of the onset of a seller’s market than the demise of concessions that were once considered essential to attract buyer interest just a few months ago.  But with inventories down and prices up, sellers are ending the costly incentives they have been forced to offer buyers during the six-year long buyers’ market. The market has steadily moved towards a seller’s market with buyers more willing to bear closing costs, in some cases paying for half or more of the closing costs. Tight inventories of homes for sale are making markets increasingly competitive.

Last year sales were so slow that 60 percent of all sellers offered an incentive of some kind to attract buyers. The most popular was a free home warranty policy, which costs about $500, according to NAR this was offered by 22 percent of sellers, but 17 percent upped the ante by paying a portion of buyers’ closing costs and 7 percent contributed to remodeling or repairs.

Concessions linger where inventories are still adequate and sales slow, but in tight markets the times when buyers can expect concessions are already over.  And where the supply is dwindling and sales are moving to a more balanced market, buyers can expect sellers to offer even fewer concessions and sales prices will be close to list price.

Not only are most concessions a thing of the past, but also some desperate buyers are even resorting to writing “love letters” to win over sellers in competitive situations. When buyers know they are in a competitive market and there will likely be multiple offers, it makes sense to write a letter introducing themselves to the seller and explaining why they liked (and wanted to buy) the home so much.  The idea here is to get the seller to choose the letter-writer’s offer from the multiple offers they have to sort through.
New regulations enacted last year by the Federal Housing Administration to limit its exposure to risk forced many sellers to cut back on the amount of assistance on buyers’ closing costs. Sellers are now limited to no more than six percent of the loan amount at 90 percent loan-to-value or lower, and then usually 3 percent for 90 to 100 percent loan-to-value.

Some sellers bump up the home sales price to pay for concessions. But when this happens, and the buyer is getting a mortgage, then he will need to borrow the increased amount, (and he will need the property to appraise for the higher amount). So it will make sense to focus on concessions that will actually increase the value of the home, because the buyer will have to meet increased debt-to-income ratio in order to close his loan.

Making concessions or simply lowering the price are both powerful incentives to attract a buyer.  As the market ebbs and flows, sometimes it’s a buyers market and sometimes a sellers market, but the recent limiting of concessions will make buying and selling a little simpler and more rational for all parties. From my standpoint it will make writing a contract a little simpler. As one observed asked, “In this market, why would anyone selling a home pay the buyer to buy it?”

Dane Hahn is a real estate professional.  You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

Sellers, It's Your Front Door!

The real estate market is coming back—over the last week or so I have probably been in and out of 25 homes with several groups of buyers, and I must say, today’s sellers are neither very tidy nor all that conscious of the “first impression” that we all talk about. 

You don’t get a second chance to make a “first impression”. Some homes make a very poor first impression. These are homes with a very uninviting front door, or homes where you had to skirt the gas meter or sidle around garbage cans to get into the home. In one case a house where there was such a bewildering array of doors, you weren't sure which one to knock at.

Picture yourself as my customer, at the front door, while I am getting the door unlocked. My clients are noticing the door paint is peeling or the lockset hardware is rusty, or worse, it’s loose. The front entrance is seldom high on a seller's remodeling priority, yet, just like that old saw about first impressions, it's the home's entrance that people notice first. It's practically impossible to rectify a bad impression made at the front door.

Customers actually say, “I hope it’s nicer inside than this.”  Or, “looks like they didn’t take care of this one.”

Newer homes built by tract homebuilders usually have more money and energy spent on the front door than elsewhere in the home. Because builders who know their buyers care about first impression--even in the cheapest house--they rarely cut corners on the front door. They know that a strong impression of quality here subtly colors a visitor's perception of the whole house.

For hundreds of years colonists, architects and builders have spent time on their front entrances, which are a focal point of a home's design. In colonial New England, for example, the front door was often flanked by sidelights and topped by a pediment, setting it apart from an otherwise austere facade.

Certain design elements are hard to adjust, for example, a narrow lot does not lend itself to a garage opening to the side, so the “snorkel-house” (the one with the garage sticking out toward the street) has become popular in Florida, but really, the entrance should also be clearly apparent from the street. That doesn't mean it has to be glaringly exposed to view just that an unfamiliar passerby should easily deduce its location. Architects call this principle "demarcation."

There are lots of subtle ways to demarcate a front entrance. The most common is to surround the door with an architectural form such as a pediment or other type of trim. Another traditional strategy places the door in a recess, on a projection, or under a roofed porch. You can find a well-known example of the latter on the back of a $20 bill.

If you’re selling, here are some thoughts for your own grand entrance:

• Stand on you own entry porch area and look around with special emphasis on the door.  A quart or two of paint can correct a world of hurt from the front door. Don't be afraid to invest in a new door lockset hardware, there’s a lot to say about new shiny doorknob and key locks.

• Trim back any natural vegetation that might be overgrowing the entry. And if you must bring the path to the front door past utilities such as gas or electric meters, or past unsightly storage areas for trash or the like, consider a couple of sheets of plastic fence or lattice installed to hide the utilities. Keep these kinds of features out of the buyer's line of sight.

• If you have a covered entrance porch, be sure it’s clean and free of mud wasps, spider webs and any general mess.  A pressure wash will correct most of this, but even a garden hose and a broom will do the job.

• Lastly, if your house has several doors facing the street, make sure your front approach directs your visitors toward the main entrance. Do this with welcoming geranium flowerpots—or similar--or even a small welcome flag. Your front door may seem obvious to you, but, hey, you live there.

Dane Hahn is a real estate professional serving Charlotte and Sarasota Counties in Florida, he can be reached at dane.hahn@gmail.com or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Buyers Determine The Selling Price

Sellers often start a conversation with the statement, “I have to get a certain amount”. Of course they then tell you what their carved-in-stone minimum price is—and sometimes they tell you why it's that (high) amount. Sometimes their imaginary “have to get” price is what they paid for the place some years back, possibly with every upgrade added in. Sometimes it's the price a neighbor sold for, and they have to “match” the windfall. Sometimes it's totally irrational, and may be a number that they made up over cocktails with the neighbors, or on the phone with the kids, and are now certain they can achieve.

House prices really are like the prices in the stock market, you pay the going rate when you buy in and sell at the going rate when you leave. But with real estate home prices, sellers always think they control the selling price, but it's the buyers who have the cash and they call the price.

The bad news for the stubborn seller is that buyers don't care about their personal “have to get” number. Buyers usually see a bunch of homes that are available within an acceptable area, and after their home search, they are pretty knowledgeable as to what is priced right and what's not. In fact I like to tell buyers that I will make them experts on homes in their price range, and they can make up their own mind as to what is priced properly, and what is not. After a couple of days out looking at homes, they rarely disappoint.

But how do we tell a stubborn seller that his “have to get” price is too high? I suppose gently is the best way, but the signs will be obvious. First of all, the price may be too high if there are only a few lookers

You get the most interest in your home right after you put it on the market because buyers want to catch a great new home before anybody else takes it. If there have been fewer buyers calling about and asking to tour your home than there have been for other homes in your area, (ask your agent) that may be a sign buyers think it’s overpriced and are waiting for the price to fall before viewing it.

Another measure of over pricing is there are lots of lookers, but no offers. If you’ve had many sets of potential buyers come through your home and not a single one has made an offer, something is off. What kind of feed-back are you getting? If the other agents who are bringing in the buyers are not encouraging them to make an offer, there are only a couple of things that could be the cause, condition and price. An overly high price may be discouraging buyers from making an offer.

If the home’s been on the market longer than similar homes, check with your real estate agent about the average number of days it takes to sell a home in your market. We call that DOM (days on market) If your home has been on the market for longer than the usual market period, your price may be affecting buyer interest. When a home sits on the market for too long, buyers begin to wonder if there’s something wrong with it, which can delay a sale even further. It's probably time to consider lowering your asking price.

To increase buyer interest and “get 'er sold” you may resort to a price cut. If you have to sell soon because of a job transfer or you’ve already purchased another home, it may be smart to abandon the “have to get” price and generate buyer interest by dropping your price so your home is a little lower priced than comparable homes in your area. Remember: It’s not how much money you need that determines the sale price of your home, it’s how much money a buyer is willing to spend.

If you want to hold that magic asking price number, and can afford to sweeten the home a bit, consider adding new carpets or stainless kitchen appliances. If you can afford to, then address the questions that buyers have asked—for example if there is a lack of privacy, perhaps adding a hedge or planting bushes will make that complaint go away. Adding a home warranty to give buyers peace of mind can solve their concern about condition. But if you're plum out of cash and don’t have the funds to even put fresh paint on the walls, clean the carpets, and add curb appeal, then a price decrease will cure these issues.

If your home has been on the market longer than comparable homes in better condition, it’s time to accept that buyers expect to pay less for a home that doesn’t show as well as others.

If weeks go by with no offers, continue to check out the competition. What have comparable homes sold for and what's still on the market? What new listings have been added since you listed your home for sale? When comparable home sales or new listings show your price is too steep, the only way to a sale will be a price reduction.

Dane Hahn is a real estate professional practicing in Sarasota and Charlotte counties. You can reach him at 941-681-0312 begin_of_the_skype_highlighting            941-681-0312      end_of_the_skype_highlighting or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com.

Foreign Buyers are Here

One of the first axioms we teach in real estate is that all business is local. Meaning that watching national trends and basing future decisions on national headlines—when our business is local—is like comparing apples with oranges. This week brought lots of minor national reports but nothing to change the outlook. In general, nationally things are better, but not booming. And yet, here on the Suncoast, business is booming. The 12 percent spike in December housing starts (again, nationally) got more attention than it deserved -- a dead-of-winter month is not a good indicator – but it manages to push interest rates up a hair. Locally, it feels like 12 per cent is a low number.

For now inflation in the real estate markets seems under control, up only 1.7 percent in the whole of 2012. But again, spending income (free cash) has taken a hit with the new withholding taxes. So will that influence the willingness of Mr and Mrs Jones from Anytown, USA to move here—or at least to prepurchase a retirement home for use in the near future? Time will tell. The core hazard facing us all: how to get right the timing and magnitude of fiscal austerity before the Fed has to stop buying our debt. When that happens, the musical chairs game ends and we all know, if you don't have a chair, you're out. We may be making more accidental, near-term progress than we know, time will tell.

Having said all that, I have more business today than I have had in a couple of years. Clients are a mix of American, Canadian and Russian. Honestly, I have never marketed myself to Europeans, I'm not fluent in any language but English, I have a little high school Spanish that has served me well on vacation trips, but I could never say with a straight face that “Yo hablo Espanol”. So what's up with all these buyers being (as we say in New England) “from away”?

Well for one thing, fear. Either the economy of the world sucks more than ours does, and so their investment money is finding us a safe haven and their money is better invested here, or our economy sucks more than theirs and so the values are greater here. Either way, people are knocking at my listing's doors with cash. And they are anxious.

Over the last 25 years or so I have never felt good about writing a contract on a property which the prospective buyer has only seen once and not “slept on”. It's been my history that buyers who fall in love with a property after one viewing, fall out of love just as fast after the home inspection. Once the stars in their eyes clear, and they find reality rearing it's ugly face, they can't wait to cancel a contract. Not so today's European buyers. The decision to get a piece of Florida real estate is so strong that they will ALMOST buy from a photo. If the property they saw in the Multiple Listing is as nice as it's photos, just walking into the property one time is all it takes to confirm their decision. This would make for a really dull HGTV show. The people buy the first house. No drama and no worries. You could fit the whole show into 5 minutes. Too bad they're not all like that.

Dane Hahn is a real estate professional practicing in Charlotte and Sarasota Counties. You can reach him at dane.hahn@gmail.com or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Maybe It's Time To Sell Your House!

Homes are starting to sell again, and the asking prices are inching up. So for the folks who meant to sell last year, but couldn’t get their price—meaning they couldn’t afford to sell—or for those of you who want to move up into a larger manse, now may be the first time in the last 5 years when listing your house makes good sense. But don’t think that slapping a “For Sale By Owner” sign up on the nearest palm tree will get you the money or deal you are hoping for. There’s a good deal of marketing and preparation that needs to go into a home to get the best price in the least amount of time.

If you want to start the home-selling process, ask yourself, "What would happen if my home doesn't sell?" I’m here to say the home selling process is not easy, but before you panic, recognize that there are many things that you can do so you don't wind up in that position.

First of all, understanding the real estate market and the value of your home will help you avoid this dilemma. The first key point is to get educated about the market. Read your newspapers, check online real estate sites, look at your tax assessment and consult with the best experts in real estate for your area before you determine the sales price.  Don’t take any web site's dollar figure as gospel, but look for ranges within which homes in your neighborhood have been selling.

While all that may seem basic, you'd be surprised how many sellers rely on emotion to dream up a selling price for their home. I once had a house listed for what I considered was about 25% more than it’s value.  The price had been set by the seller’s mother—a price which “came to her in a dream”. It must have been a bad dream. When I finally lowered the price to where it needed to be, the place sold quickly.

Some sellers have done little research on their own neighborhood. Instead, their strong ties to their homes cause them to imagine that their home should sell for the price they want. Or they base the selling price on how much they owe which is, of course, of no significance to buyers. Sometimes the neighborhood busy-body will suggest prices base on what they thought a house sold for. Discount real estate data learned at a cocktail party.

Visualize a shelf at a shoe store filled with shoes. You’re going to pick the nicest ones that fit right?  Most buyers don't want to purchase a house with a long list of things they need to fix before they can live in the home. Yet, some sellers think that it's a waste to spend money on a home that they're moving out of soon. That's quite a predicament. Both sides have valid points.  BUT the buyers are in a stronger position because they have the money. The seller is in charge of the condition of the house, so if the home is a mess, many buyers will simply move on to the next best house.

Sometimes, if a buyer wants a particular home or neighborhood badly enough, he/she might agree to purchase a home that needs work, but it's almost sure that the buyer will want to discount the price for the problems that need fixing. In the end, you might have to fix the issues before the closing anyway. So, offering a house that is in relatively good order is the best way to begin.

I have sold homes on Christmas Eve and Thanksgiving Day. Buyers who need to buy a home will keep hunting through all the seasons. There may be some slow times but when people need a house, they'll keep looking even in the unlikely times. Think about companies that are on a calendar budget, they are ready to hire (and transfer people) in January, so holiday shopping can include homes.

Also you can offer incentives. You can make your home more appealing by offering a home warranty or some other incentive. The law allows the seller to offer bonuses to the buyers, but it's best to speak with your real estate agent about which incentives are best for you to offer. I am presently offering a cruise (value up to $2,000) to whoever buys a home I own in Maryland. Consider practical incentives to get buyers into your home to view it. For example, if your house is “way out of town”, consider offering a $25 gasoline certificate for each family that shows up at your open house. These incentives can help encourage the buyer to move forward, especially if other challenges arise.

Have you ever heard about staging your home? This is not the same thing as fixing up your home. Fixing up your home includes daily maintenance and repairs. Staging your home involves using a decorator or staging experts to make your home showroom-ready–like a model home. Even if you don’t want to live in a “model home” at least your agent can take photos of the home in all its staged glory, and use them in the advertising.  And speaking of photos, walk through your home before you list it for sale and take photos.  Then with a critical eye look at what your buyers will be seeing. I'll bet you will see dirty fingerprints and messy areas that are simply the result of living in a home, but you will be able to fix these things yourself--and that will help sell the house.

Take the time to research and understand today’s real estate market. See a Realtor. This will allow you to gain knowledge and information about your home and the market place. What you do with that is up to you, but it may just be the difference between a For Sale sign and a Sold sign hanging outside your home.

Dane Hahn is a real estate professional service Sarasota and Charlotte Counties. You can reach him at dane.hahn@gmail.com, or by phone at 941-681-0312.  See him on the web at www.danesellsflorida.com

We Made it Over the Physical CLiff

Dear Congress of the United States, all is forgiven.  My concern that the real estate market would be an orphan adrift on a raft of foreclosed homes has not come to pass. This week the House and Senate passed H.R. 8, legislation to avert the so-called “fiscal cliff.” A delightful term, which was widely misused as “the physical cliff” by Barbara Walters and others. Following are real estate-related provisions of the bill, which the President has ratified. So we’re good for another year.

The interest on your home mortgage remains deductible, so long as you itemize deductions on your tax return. Check with your CPA, but mortgage interest costs you money and is therefore income for your bank or mortgage lender and those guys will get to pay the taxes on that payment to them. There was some realistic concern that the interest deduction might not make the cut, but when push came to shove in Washington, this topic was apparently not even on the table.

The capital gains rate remains at 15 percent for individuals earning less than $400,000 per year and couples earning less than $450,000.  Any gains above these amounts will be taxed at 20 percent. The $250,000 individual/$500,000 married couple exclusion on the profits from the sale of a principle residence remains in place, but when one exceeds these parameters, one needs a CPA to sort out the Obama Care fees on that transaction.

Mortgage Forgiveness Debt Relief Act has been extended to January 1, 2014. In place since 2007, the act provided a tax break for homeowners who struggled through financial hardship such as a foreclosure, and were granted mortgage debt forgiveness. More than a quarter of all real estate transactions involve distressed properties.  In a letter to Congress, the NAR said. “Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received.” So the short sale continues to live among us, at least through next January.

Mortgage insurance (which is an insurance company’s guarantee that you will not welsh on your mortgage, and in turn for that guarantee a lender will give you a mortgage with less than 20% down) that mortgage insurance has been deductible for only the past few years. Congress has decided that this deduction (for filers making below $110,000) should be extended through 2013 and made retroactive to cover 2012.

Another topic Congress touched on is the 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties.  In their wisdom this is extended through 2013 and made retroactive to cover 2012.

I’m not exactly sure why the 10 percent tax credit (up to $500) for homeowners for energy efficiency improvements to existing homes was extended through 2013 and made retroactive to cover 2012. But I’m sure the guys who sell air conditioners had much to say through their lobbies on this topic.

“Pease limitations” that reduce the value of itemized deductions have been permanently repealed for most taxpayers (but will be reinstituted for high-income filers). “Pease” limitations will only apply to individuals earning more than $250,000 and joint filers earning more than $300,000. The thresholds are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction. Raise your hand if this applies to you or anyone you know.

First enacted in 1990 and named for Ohio Congressman Don Pease, who proposed the idea, the limitations continued throughout the Clinton years. The limitations were gradually phased out starting in 2003 and eliminated in 2010. Reinstitution of these limits has far less impact on the mortgage interest deduction than a hard dollar deduction cap, percentage deduction cap or reduction of the amount of mortgage interest deduction that can be claimed.

Dane Hahn is a real estate professional serving Charlotte and Sarasota Counties.  He can be reached at 941-681-0312 or at dane.hahn@gmail.com.  See him on the web at www.danesellsflorida.com.