Sunday, June 28, 2020

Is Now a Good Time to Buy a House?

These are unusual times and many people are wondering if it is a good time to buy a house. Quite a few have dropped out of the market because of the economic uncertainty or the economic certainty of having their job or business shut down by government edict. Some are just too frightened to come out from under their covers. What I have to say here may be a little controversial, but realtors are a lot like economists in this sense: if you took all of them in the country and laid them end to end, they still would not reach a conclusion.

What's Happening to Sellers?

Many of the lookie-loos and mildly motivated have dropped out of the market, either for fear of the kung flu or, perhaps, better screening by real estate agents. People are not exactly breaking down the seller's doors for a chance to look at their properties even with, or perhaps because of, the increasing use of video tours. Sellers looking to cash out their homes are taking a more realistic look at the values after weeks of inactivity.

Here in Pinellas County FL when I get a notice of new listings, it comes along with a list of price reductions. These price cuts amount to about half of the new listings. This morning I received a message with 48 new listings and 27 price reductions. They aren't always big price cuts, but the action is designed to get the house more attention.

Many sellers are ready to bargain and hungry agents are ready to help them get the place sold,

Who Is Buying and What Are They Looking For?

According to a recent report about a quarter (27%) of homeowners would consider a move during the kung flu panic if their circumstances warranted it. While it may seem high, the changes brought about by being stuck at home have caused some to reconsider their ideal configuration.

Perhaps it is a sign that not all is gloom and doom on the economic front that searches for new home construction have increased by almost 75% over last year. Many are looking to move away from the open concept designs that have been popular in recent years. With more people working from home, a trend that doesn't look like it will go away after the panic, a little privacy seems more desirable. Having a way to remove yourself from the noise and commotion of family life is now looked on a good thing,

There are also the usual considerations like changes in family size and financial resources. Some have found the lockdown and increased spending in certain areas to be a windfall and, unfortunately, some have seen their income evaporate along with their freedom.

Cheaper Money

With efforts by the Federal Reserve to keep interest rates low and banksters eager to make loans – in spite of their underwriters - this may be a great time to look for financing before things open up very much and those with the resources come back to the market with a vengeance. We have to keep in mind the Fed's fetish for fighting inflation by raising interest rates when things get going well.

When you are buying a home to live in for an extended time period, usually payments are the primary consideration. To put this into perspective, if you buy a house now with an extremely low-interest rate, you may still be better off than if you can get it a little cheaper after a rate increase. This type of thing happens at times when payments are too high and sellers lower prices to accommodate increased borrowing costs. Or you could pay a higher price with a higher interest rate, The future's not ours to see,

What Will Happen to the Home Prices?

Here is where I polished my crystal ball to get a clearer picture – it still appears cloudy. We have to be careful of any prognosticator that may have an interest in a self-fulfilling prediction. Hence we can't really turn to the political class to tell us what to expect. Some want to see the economy booming with people having money in their pockets to live the American dream and other pols think they will benefit from a crashing economy causing people to turn to them for solutions.

It's hard to say what is going to happen, it may depend on which dog we feed the most. I tend to have confidence that we will see things straighten out, but I have no idea of the time table. There are some things to keep in mind -people will always need a place to live and dips in housing prices are usually temporary pauses in the general upward trend. If you are an investor, there is another trend to consider: if fewer people can qualify for a home loan, they become renters. During these periods rents generally rise because of the increased demand.

That said, there are the local conditions to take into account. If you are in an area with a net loss of population, it may be a little longer before prices stabilize. That is some of the northeast high cost of living and high tax states are seeing an outflow of people who realize that they can live better and cheaper in warmer climates. Then there are the areas where people come to. This will provide better support for housing prices.

So, What Do You Do?

A lot depends on your plans. If you are not looking to stay very long, you may want to make other arrangements, as short-term buying may not be a good decision. However, if your plans are to make the place your home for a longer time, temporary fluctuations shouldn't be too much of an issue.  Like I said, the general trend is upward.

The thing one has to keep in mind, if you believe we will come back, you may well be in better shape buying now. The lower price and lower interest could well leave you in a comfortable position, even if the prices drop a little more. If you wait until the economy rebounds and the Fed decides to put the brakes on by raising interest, the place could end up costing a good bit more,

Sealing the Deal

If you are looking to buy now, you can go with the low down payment FHA loan with about 3%. If you've saved up some more and are looking for a conventional loan, you can get away with 10%. But, for this privilege, the bank will insist on Private Mortgage Insurance (PMI). This extra fee will continue until you pay the note down to the point where you have 20% equity.

Something I did a while back and some lenders will do today is set up a thirty-year note for 80% of the price and a shorter-term second mortgage for 10%. What this gave me was a monthly payment similar to the 90% loan with PMI. The difference is that the extra payment actually reduces your amount owed and eventually goes away rather than paying for the insurance that keeps the banksters happy,

So there is not an easy, one size fits all answer to this question. I hope I've given you a few more things to chew on than you get from the talking heads on TV.

Sunday, June 21, 2020

Does a Bad Inspection Report Kill a Deal?

This is a question that concerns both home buyers and sellers. There is no firm answer, other than that it may require some creativity and flexibility from both parties. The severity of the problem, at times, is a matter of perception and the degree of desire to complete the sale.

What's the Problem?

Each buyer brings with him or her there own experiences and background. So what is a deal killer for one may not even raise an eyebrow for another. For instance, I recently sold an older home where the inspector, without comment, noted that there were galvanized pipes running out to the street. The buyer had just spent several thousand dollars replacing the galvanized pipes in the home they had just sold. For them, this was too much for them to handle so they backed out of the deal.

I got some estimates for the replacement, however, I did not intend to do the job unless it became necessary to complete the sale. However, the numbers would have been useful if it came down to a negotiating point. Even this proved to be unnecessary as just a few days later we found a buyer that didn't care one way or another and was content with the pipes as they were.

Nitpicky Details

Often times inspectors will come up will all sorts of minor points that don't make a whole lot of difference one way or another. That is what they are trained to do. Although, it seems that some take kind of perverse delight in finding the “how did you ever see that” type of detail. 

I was buying a house a few years back and the report came back with about 12 to 14 items that needed attention. Among them were cracked outlet covers and a loose fence post. I already was aware of most of the things and it was a little annoying, but the guy was just doing a thorough job. The one thing I asked the seller to fix was a mis-sized circuit breaker. I hadn't noticed that and it was fixed without me having to do it.

Often the inspector will have a list of things you can ask the seller to take care of. If they are not major, they usually agree to most of them and it saves you a little work.

What if it Isn't Little Stuff?

Sometimes the inspection will turn up issues that many home buyers will not pick up on. This is why you hire these guys. Sometimes they can keep you out of a money pit. Suppose he finds that the HVAC is held together with chewing gum and baling wire, or the roof isn't as good as it looks and will need replacing in a year or two? Are these deal killers?

It all depends on how badly you want to buy the house, how badly the seller wants to sell the house, and how good a negotiator you or your agent is. Let's say the major repair costs around $15,000 and you really don't have the extra money to handle it. There are various options – assuming the seller is flexible and willing to talk about a solution. If he is not, it's often best to walk away and keep looking.

You could ask them to drop the price by that amount or at least a portion of it. That sounds good but probably won't help as it won't lower your down payment that much and you still won't have the money. If it is a cash deal, that can be a workable alternative, You could ask the seller to replace the roof before the sale is complete. This takes the problem out of your hands – sort of. This way you have no control over the process and you may get a good job or you may get a cheap job. You could offer to pay the full price that you agreed to with the amount for the repair held in escrow to pay for the job, That is the title company or the attorney that handles the closing will keep the money in their account until the buyer is satisfied the job is complete – then pay the bill.

These are three ways of working and there can be combinations depending on what works for each of the parties. The point is that a big bill does not necessarily kill the the deal, but it probably does require some sort of give and take to make the deal work... if you still want to,

If it is a Deal Killer

What do you do if the problem is more than you want to deal with? Any reputable agent will include an inspection contingency clause in your agreement. In my part of Florida it is usually ten days from the time the seller accepts the contract, but even that is negotiable. This gives you that much time to have the inspector evaluate the property and it is usually a no questions asked satisfaction contingency. This should be scheduled as soon as possible to give you the maximum amount of time to make your decision.

When working with investors, usually on fixer-uppers, some will want to have larger deposits and no contingencies. I understand they don't want to tie up the property and have someone back out, but personally, I tend not to deal with them.

I had one deal where we gave the place a once over and made an offer. After it was accepted but before the inspection appointment, I was giving it a much closer look since actual money was involved. The house was a brick bi-level on a lot that sloped to the back. As I was examining it closely I found a crack in the foundation at one of the back corners. As I followed it up, it ran halfway up the house – through the bricks, not just the joints. It could have been fixed, but I really didn't want to deal with it.

I talked to the agent and canceled the contract as that is the purpose of the inspection contingency – no matter who finds the problem.

Seller Surprise Protection

While it is not usually done, I have come to be of the opinion that the seller could benefit from an inspection when putting it on the market. This way you have a pretty good idea what the buyer will find, It is possible then, to fix many of the smaller issues and be prepared for the major ones if any. If it is a good report, you can show it to potential buyers. If it is not good, you can mitigate the problems so as not to scare your buyers away.

Saturday, June 13, 2020

Shrubs. Bushs and Trees – The Finishing Touch

When I finish remodeling a house, one of the last things I do before showing it for sale or rent is make a run to the garden center and pick up some finishing touches for the outside of the property. I don't go into anything elaborate as I am not trying to personalize the place to my tastes. However, a few plants judiciously place add tremendous value to the curb appeal of the house. They make it look finished – that the building was not just dropped onto the lot.

Is home landscaping different than other landscaping?

You see some of the high-end office buildings with elaborate landscaping – and you are impressed. That is what they are trying to do. This is really more than most people want to do with their home – even if it is a McMansion.

Home landscaping is no different than any other kind of landscaping. It is just a matter of degree. Where the office park may have dozens of trees and shrubs around their buildings, you may need only a dozen or so. It is natural for people to want their home to look as good as possible. Who doesn't want the kind of yard that the whole neighborhood is envious of? The beauty of home landscaping is that it does not have to be hard and much of it you can do yourself.

All it takes is a bit of elbow grease and some time to design your own home landscaping. Yes, I said design. To get the best out of your investment, put some thought into the project. You will be much happier than if you just grab a little of this and a little of that at the garden center.

Getting Ideas

There are many products on the market that will help you to find the best home landscaping idea out there. You can choose to use home landscaping software for one. These programs can be a great help as you are trying to decide what will best suit your home and yard. With these programs, you get to see some different layouts and options that may work for you. This is always good when you are trying to narrow down your choices.

If home landscaping software is not for you, you can try doing a search online for some creative home landscaping ideas. The internet is full of interesting sites that you can use to help get everything done the right way. It is important to do plenty of research before you start your own home landscaping so that you keep the number of mistakes made down to a minimum. If you do make a error, don’t worry about it, pretty much anything can be fixed.

Before You Grab a Shovel

Before you start your home landscaping adventure you will need to look into any gas and electrical lines that may be running through your yard. If you have a Miss Utility phone number in your area, she can get these things marked for you. If not, check with your local utility companies.

This is very important if you are planning to be doing a lot of digging. You cannot afford to hit any of these things, not only can it cost you a bundle to fix, it can also be kind of dangerous. Hitting an electrical line with a metal shovel could be a shocking experience. If you survive you will have to deal with grumpy utility workers, or ones laughing at the silly homeowner who didn't check things out first.

Checking with Big Brother

You will also need to find out about zoning restrictions and HOA regulations that could affect your home landscaping. In some places, you cannot have trees too high and even some fences are not allowed. Find out these kinds of things before you start your home landscaping work and you could save a lot of time, money and fighting a battle you probably can't win.

Working with the Pros

After you go through the planning stage and come up with the winning combination, you may find that you have a Cadillac plan and Volkswagon budget or ambition. You can either scale back your plans or hire a professional landscaper for all or part of the project. They can help with design ideas as well as advising on what vegetation works best in your climate and soil. You are paying for their experience as well as labor.

Whatever you do, keep in mind that these plants will need to be maintained to keep them looking good. Be sure you are familiar with their care and feeding. You want to get the most for the time and money you invest in beautifying your home, so a little education goes a long way to keeping things beautiful. Good luck and happy pruning.

Landscaping Ideas

Sunday, June 7, 2020

Working with Contractors

Unless you are one of these all knowing TV construction wizards, sooner or later you will need to hire someone to do some work on your home or investment property. For some of the smaller or less technical projects a local handyman can do nicely. However, as Clint Eastwood once told us, “a man's gotta know his limitations.” The same applies to the people you hire.

Licensed and Insured

When you need them, the place to start is licensed AND insured contractors. This should just be the minimum to get them in your door. Don't be afraid of offending them by asking to see their certificates – and check the dates to be sure the policies are still in force. Legitimate guys have these things handy and expect to produce them.

There are at least two types of insurance to look for. One is workers comp to be sure anyone injured on your property is covered and not your responsibility. The second is liability coverage in case the clumsy new guy falls off the roof onto your classic '58 Ford station wagon with simulated wood trim and chrome reversed rims. The repairs on both would be covered.

I am not a lawyer and I never played one on TV so I don't want any of the esquires reading this to think I'm giving legal advice. It's just some things I learned over the years and am passing them on for what it is worth. Generally it is not an issue, but let the contractor pick up the materials. Some property owners have supplied the materials on jobs that ended with tragic accidents and ended losing everything since in some states this alters the relationship between the owner and the worker This can also apply to your handyman changing your window screens.

Where to Find Them

Often the best contractors are found by word of mouth. If they treated someone else well, there is a good chance they will treat you well. It's not assured, but it's a good place to start. Investors that are part of a Real Estate Investors Association (REIA) often have an advantage here, as often there is a ready supply of recommendations available. Most have their favorite plumbers, electricians or general contractors, along with other tradesmen with unique skills. However, if a hurricane just blew through the area, you probably won't get a roofer recommendation from them – until their own work in finished.

If you're not part of an investor group, what then? Ask people you trust that in related trades. They tend to know who the good guys are and who the pretenders are... just like nurses know who the good doctors are in their hospital. Sometimes realtors can be helpful.

When all else fails, you can look at the ads. Check their length of time in business. This is not always a good indicator as I have had good results with a young electrician who had just gone out on his own. He was hungry and did an excellent job – at a reasonable price. However, he was recommended by someone I trusted who knew him.

With any contractor, don't forget to check with the Better Business Bureau to see if they have records of complaints. If there are any it's not necessarily a disqualification. Check out how they were resolved. As with other checks, the BBB is not fool proof and not everyone who gets a bad deal reports it.

One more thing, sometimes a guy will knock on your door telling you they are working in the neighborhood trimming trees, paving driveways, or something like that. They are not necessarily crooks – usually just guys trying to make a living, but it puts you in the position of not comparing prices to know if you are really getting a good deal and if they are on the up and up. Knowing what makes a good job and about what it should cost is essential to getting the best deal.

Inspecting the Work

On permitted work, the city or county will usually do a decent job of ensuring that the work is technically correct. That doesn't mean that you will be happy with the job. That means you need to keep an eye on the project. Just because the bureaucrat thinks the job is done well, doesn't mean you will.

However, don't be a jerk about it. Many years ago I was working with a large computer dealer with a repair department. They had a sign that said their rate was $25 an hour, $35 an hour if you watched, $45 an hour if you laughed and $55 an hour if you helped. Check out what they are doing, but let them do their job. An occasional question or two is not a problem but don't be a pest.

Paying the Bill

On big jobs you will be asked for a payment up front. A deposit is reasonable. A quarter or a little more may be right – sometimes up to half if they check out very well. An excessive deposit is often an indication they are on thin ice financially and don't have the cash or credit to get the materials. For example, on a $15,000 roofing job I recently gave a $3000 check the day before they started work, and the balance after the job was approved by the county inspector.

There is another tip, the job is not completed until the permit is closed out. You don't want open permits to explain and handle when you sell the property. The job is not done until the paperwork is done, in the construction business as with any other business.

A Good Contractor

A good contractor will get the job done right. They will get the job done on time. And they won't over charge you. Just be aware that sometimes when a job is opened up, unexpected problems do legitimately arise. That is why you need to deal with people you trust to give you the straight story.