What You Must Know About Home Appraisals
August 28, 2013 By Leave a Comment
Understanding how appraisals work will help you achieve a quick and profitable refinance or sale.
1. An appraisal isn’t an exact science
When appraisers evaluate a home’s value, they’re giving their best opinion based on how the home’s features stack up against those of similar homes recently sold nearby. One appraiser may factor in a recent sale, but another may consider that sale too long ago, or the home too different, or too far away to be a fair comparison. The result can be differences in the values two separate appraisers set for your home.
2. Appraisals have different purposes
An appraisal being used to figure out how much to insure your home for or to determine your property taxes may rely on other factors and arrive at different values. For example, though an appraisal for a home loan evaluates today’s market value, an appraisal for insurance purposes calculates what it would cost to rebuild your home at today’s building material and labor rates, which can result in two different numbers.
Appraisals are also different from CMAs, or competitive market analyses. In a CMA, a real estate agent relies on market expertise to estimate how much your home will sell for in a specific time period. The price your home will sell for in 30 days may be different than the price your home will sell for in 120 days. Because real estate agents don’t follow the rules appraisers do, there can be variations between CMAs and appraisals on the same home.
3. An appraisal is a snapshot
Home prices shift, and appraised values will shift with those market changes. Your home may be appraised at $150,000 today, but in two months when you refinance or list it for sale, the appraised value could be lower or higher depending on how your market has performed.
4. Appraisals don’t factor in your personal issues
You may have a reason you must sell immediately, such as a job loss or transfer, which can affect the amount of money you’ll accept to complete the transaction in your time frame. An appraisal doesn’t consider those personal factors.
5. You can ask for a second opinion
If your home appraisal comes back at a value you believe is too low, you can request that a second appraisal be performed by a different appraiser. You, or potential buyers, if they’ve requested the appraisal, will have to pay for the second appraisal. But it may be worth it to keep the sale from collapsing from a faulty appraisal. On the other hand, the appraisal may be accurate, and it may be a sign that you need to adjust your pricing or the size of the loan you’re refinancing.
How to Use Comparable Sales to Price Your Home
August 25, 2013 By Leave a Comment
Before you put your home up for sale, understand how the right comparable sales help you and your agent find the perfect price.
Knowing how much homes similar to yours, called comparable sales (or in real estate lingo, comps), sold for gives you the best idea of the current estimated value of your home. The trick is finding sales that closely match yours.
What makes a good comparable sale?
Your best comparable sale is the same model as your house in the same subdivision—and it closed escrow last week. If you can’t find that, here are other factors that count:
Location: The closer to your house the better, but don’t just use any comparable sale within a mile radius. A good comparable sale is a house in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.
Home type: Try to find comparable sales that are like your home in style, construction material, square footage, number of bedrooms and baths, basement (having one and whether it’s finished), finishes, and yard size.
Amenities and upgrades: Is the kitchen new? Does the comparable sale house have full A/C? Is there crown molding, a deck, or a pool? Does your community have the same amenities (pool, workout room, walking trails, etc.) and homeowners association fees?
Date of sale: You may want to use a comparable sale from two years ago when the market was high, but that won’t fly. Most buyers use government-guaranteed mortgages, and those lending programs say comparable sales can be no older than 90 days.
Sales sweeteners: Did the comparable-sale sellers give the buyers downpayment assistance, closing costs, or a free television? You have to reduce the value of any comparable sale to account for any deal sweeteners.
Agents can help adjust price based on insider insights
Even if you live in a subdivision, your home will always be different from your neighbors’. Evaluating those differences—like the fact that your home has one more bedroom than the comparables or a basement office—is one of the ways real estate agents add value.
An active agent has been inside a lot of homes in your neighborhood and knows all sorts of details about comparable sales. She has read the comments the selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS®, lenders, closing agents, and appraisers said about the comparable sale.
More ways to pick a home listing price
If you’re still having trouble picking out a listing price for your home, look at the current competition. Ask your real estate agent to be honest about your home and the other homes on the market (and then listen to her without taking the criticism personally).
Next, put your comparable sales into two piles: more expensive and less expensive. What makes your home more valuable than the cheaper comparable sales and less valuable than the pricier comparable sales?
Are foreclosures and short sales comparables?
If one or more of your comparable sales was a foreclosed home or a short sale (a home that sold for less money than the owners owed on the mortgage), ask your real estate agent how to treat those comps.
A foreclosed home is usually in poor condition because owners who can’t pay their mortgage can’t afford to pay for upkeep. Your home is in great shape, so the foreclosure should be priced lower than your home.
Short sales are typically in good condition, although they are still distressed sales. The owners usually have to sell because they’re divorcing, or their employer is moving them to Kansas.
How much short sales are discounted from their market value varies among local markets. The average short-sale home in Omaha in recent years was discounted by 8.5%, according to a University of Nebraska at Omaha study. In suburban Washington, D.C., sellers typically discount short-sale homes by 3% to 5% to get them quickly sold, real estate agents report. In other markets, sellers price short sales the same as other homes in the neighborhood.
So you have to rely on your REALTOR’s® knowledge of the local market to use a short sale as a comparable sale.
How to Get Along With the Neighbors — and Live Happier at Home
August 21, 2013 By Leave a Comment
Seeing people bringing a tall ladder or power tool from a neighbor’s house to theirs is a common sight on my block. In the evenings many of us sit outside on the front porch relaxing, and catch up with others who walk by with their dogs or are just out for an evening stroll. When our chickens escaped into a neighbor’s yard, not only were they not angry, but they helped me round up the hens and toss them back over the fence.
Getting along (or not getting along) with neighbors can make a huge impact on our daily lives and how we feel about our home and neighborhood. Whether you live in the city, the country or somewhere in between, learning the art of being neighborly is something that can benefit us all. Here are eight ways to navigate the etiquette of being a good neighbor. When you’re done reading, go pour yourself something tasty to drink and sit on the porch for a spell.
Moving Checklist [inforgraphic]
August 13, 2013 By Leave a Comment
Few things in life seem to be able to cause more stress, chaos, and frustration (and did we mention stress?) in people than moving day. It seems like no matter how much prep and planning goes into making sure everything goes smoothly in moving to a new location, something always goes missing or is forgotten, or something goes wrong. Most of us have to move at one point or another in our lives, (some of us have to experience it several times) so what exactly is the best way to make sure everything goes according to plan?
Today’s infographic from Grace Removals Group gives us an extensive checklist of tips and advice to keep things running smoothly before, during, and after the big move day. Getting ready five to eight weeks in advance may seem like jumping the gun on moving prep, but in reality that’s the best time to do things like clean gutters, make an inventory of everything that’s going with you, and sell heavy appliances that are not coming along. This one may seem obvious, but on the actual day of the move, double-check everything to make sure nothing at all has been left behind.
For more tips on how to get ready for your move and more importantly reduce your stress, have a look at the graphic below. [Via]
Why people move to a new home
August 10, 2013 By Leave a Comment
Buying A Home, See What’s Right For You
August 5, 2013 By Leave a Comment
Pricing Your Home For Sale
July 19, 2013 By Leave a Comment
There is no doubt that the housing market is coming back nicely. What, if anything, could slow down the current momentum? We believe it may be sellers’ over exuberance when it comes to pricing. There is little doubt that house prices have appreciated over the last twelve months in most regions of the country. However, with both the inventory of homes for sale and interest rates increasing, we have to be careful to not over judge what the market can bare.
Trulia just reported that asking prices have jumped dramatically and the increase is accelerating:
- Year-Over-Year prices jumped 10.7%
- Quarter-Over-Quarter prices jumped 4.1% (16.4% annualized)
- Month-Over-Month prices jumped 1.5% (18% annualized)
No expert is expecting home prices to shoot up 18% in the next twelve months. If anything, price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and the first-time buyers expected to take their place will be working within a pre-set budget in many cases.
Buyers’ Purchasing Power
Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).
The Impact on Prices
This decrease in buyers’ purchasing power will have an impact on home values going forward. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.
If you are thinking about selling your home, don’t get carried away with current headlines about home price increases that have taken place over the last twelve months. Instead, call a local real estate professional. They will be best prepared to explain where prices are headed over the next six months.
Homeowners Association: What You Should Know
July 17, 2013 By Leave a Comment
With many neighborhoods associated with a homeowners association, chances are that you may live in one.
When you move into a neighborhood with an association, you are agreeing to abide by certain rules, and you acknowledge that rule breakers may face financial consequences. Understanding the association’s rules and your rights and responsibilities as a homeowner will facilitate harmonious living.
Whether you call it a homeowners association, a community association, or a common interest community, these names can confuse new homeowners, but the concept of all three entities is similar:
- The association is a legal entity registered with the state of Nevada and was created at the onset of your neighborhood’s construction.
- Its responsibility is to maintain your neighborhood’s common areas.
- It has the right to enforce deed restrictions on your home.
In Washington, associations have been established in newer neighborhoods and condominium and townhome developments. Your home may have more than one homeowners association if it’s located in a planned community.
Understand the Rule Book
Your association’s rules are found in the “Covenants, Conditions and Restrictions” (CC&Rs) and other governing documents. Per the law, the seller or builder provides you with these documents at the time of purchase, and they become part of your home’s title.
CC&Rs describe a variety of items, such as how residents are elected to your association board, meeting rules, dues, home maintenance requirements, pre-approvals for changes to your property, restrictions on your home’s use, and fines. They also describe the association’s responsibilities for the maintenance of common areas, like parks, pools, a gated entrance, or landscaping.
The rules can vary greatly by association. Some communities are age restricted and require residents to be of a minimum age. Others may designate a specific area for adults only, while others may provide a pre-approved desert paint palette that will prevent you from painting your craftsman-style home in neon polka dots. Some rules will prevent you from turning your home into a rental or will limit the number or size of pets. Fines of different amounts may be levied on those who do not follow the rules.
- Because the rules can vary, it is essential to read and understand all CC&Rs before you buy your home.
- If you do not agree with them, it is simple — do not buy in that neighborhood.
When Problems Arise
Problems can arise even when you understand the rules. Perhaps a neighbor files a complaint or you are notified of a possible violation. CC&Rs list the protocol for conflict resolution: who to contact and how to appeal a violation or fine.
Like policy-based governance, a homeowners association only has the rights that are set forth in its CC&Rs. They cannot make up new rules. If this kind of management concerns you, you may want to consider buying a single-family home where there are fewer, less stringent or no restrictions at all.