Thursday, February 5, 2015

The Difference Between a Home's Cost vs. Price

As either a first time or repeat buyer, buyers must not be concerned only about price but also about the ‘long term cost’ of the home. I know I have discussed this before; let me explain:
There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.
nationwide panel of over one hundred economists, real estate experts and investment & market strategists project that home values will appreciate by almost 4% by the end of 2015. Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.5% by the end of 2015.

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

Please e-mail me, if you would like to know more about this, just use the Contact button in the upper right corner.

Monday, January 19, 2015

What Is a Property Appraiser?

As previously Published by Alison Shuman  On September 08, 2014 
Property appraisers are generally referred to as Real Estate Appraisers. This is a category of real estate professional that determines the value of real estate. This is a heavily-regulated industry, with oversight at both the state and federal level.
Different Types of Property Appraisers
Three types of appraisers are recognized:
·                 General
·                 Certified Residential
·                 Licensed

General appraisers can appraise any and all types of property, and are most likely to work on commercial valuations. Licensed appraisers have the lowest-level licensing status and have less formal training than either General or Certified Residential appraisers. Licensed appraisers have more restrictions on the types of property they can value, and fewer and fewer lenders will engage appraisers at this licensing level for service.
The typical appraiser engaged by a lender to value property for a real estate transaction is Certified Residential.

Appraiser Licensing
Real Estate Appraisers are licensed by individual states, with federal oversight by the Appraisal Subcommittee (ASC). Eligible appraisers are listed on the National Registry which is a database maintained by the Appraiser Qualifications Board (AQB) containing the names and licensing status of State Licensed, State Certified Residential and State Certified General Appraisers who are eligible to perform appraisals in connection with federally-related transactions.
In order to become a licensed property appraiser, individuals must meet a strict set of criteria which includes classroom education and on-the-job training as a trainee.
Appraiser Training
Before a trainee can be sponsored by a more experienced appraiser, he or she needs to first complete classroom-based training (or online training) that covers:
·                 Basic Appraisal Principles (30 hours)
·                 Basic Appraisal Procedures (30 hours)
·                 15-Hour national USPAP or Equivalent (15 hours)
In addition to classroom-based training, new appraisers are trained in the field by more experienced appraisers that hold a licensing level of Certified Residential or General.
In-the-field training of 2000 hours over 12 or more months is required before being licensed. In-the-field training of 2500 hours over 24 or more months is required before becoming a Certified Residential Appraiser.
Once the training has been completed, the applicant must sit for a long and comprehensive exam as well as undergo an oral exam. Each state maintains a website with information about licensing requirements, training requirements and exam information.

In-the-field Training
Appraiser trainees go out in the field with their sponsors. This means they visit property to be valued and perform certain tasks, including:
·                 Measuring the dwelling and any outbuildings
·                 Making a diagram of the measurements of the building(s)
·                 Taking photographs inside and out
·                 Evaluating the condition and the quality of the improvements
·                 Evaluating any external influences that may affect value (train tracks, power lines, commercial property, busy roads)
·                 Evaluating the neighborhood

In-the-office Training
In addition to going out to visit individual properties, appraiser trainees perform additional tasks to assist their sponsor (supervising appraiser) with valuing property:
·                 Pulling aerial maps
·                 Reading flood maps
·                 Looking up zoning information
·                 Looking up ownership information
·                 Researching transaction histories
·                 Determining market characteristics (increasing, decreasing)
·                 Entering data into the report
·                 All of these tasks are part of learning to become a licensed property appraiser.
Why So Much Work?

Property appraisers go through a lot of training to make sure that when they become licensed, they have the knowledge and skills to properly evaluate the value of real estate.

Friday, November 21, 2014

Why Sell Now Instead of Waiting Until Spring?

Based on prices, mortgage rates and soaring rents, there may have never been a better time in
real estate history to sell a home than right now. Here are five reasons homeowners should consider selling before the Spring market arrives:

1. Supply Is Shrinking

 With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first.  Don’t miss the opportunity to get your home on the market to provide that ‘once-in-a-lifetime’ buy.

2. Price Increases Are on the Horizon

Prices are projected to appreciate by over 25% from now to 2018.  First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if it is a move-up buyer, it will wind-up costing them more in net dollars as the home they will buy will appreciate at approximately the same rate as the house they are in now.

3. Owning a Home Helps Create Family Wealth

Whether renting or owning the home they are living in, they are paying a mortgage. Either they are paying their mortgage or the landlord’s. The Fed, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter. With interest rates low and home prices rising wealth accumulation is most likely when home prices are still low.

4. Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the this time next year. That is an increase of almost one full point over current rates. Higher rates tend to mean less available buyers.

5. Buy Low, Sell High

We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. However, experts predict that home prices will not rise this year and much as they did last year. It’s time to sell.

Thursday, May 22, 2014

Even the "For Sale By Owner" Industry Uses Realtors

 In a recent Herald Tribune article, that when it came to selling his Florida mansion, Al Bennati, the longtime chief executive of, has chosen to list his home with a local real estate agent. is one of many websites out there now that encourage home owners that they do not need to enlist the help of a professional agent to be able to sell their home. They go as far as to tell homeowners:
" allows you to reach the most potential buyers in the shortest amount of time, in the most effective (the Internet) and most cost effective manner (no commission!) possible."
Let’s break down that statement:
Myth #1 – The internet is the most effective way to sell your home
Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. When the time came to list his own home, Bennati went against his own advice saying:
"To sell a home of this magnitude, it needs to be done by a person and a company that reaches buyers of this caliber."
Myth #2 – FSBO’ing is the most cost effective solution
Without proper exposure to the “right kind of buyers” your home will not sell. Many real estate professionals have elaborate strategies to get your listing in front of exactly who needs to see it.
The most recent Home Sellers’ and Buyers’ Profile Report from the National Association of Realtors revealed that, though 92% of buyers search for a home on the internet, 90% still use a real estate professional.
This isn’t the first time that a CEO of a major FSBO website has enlisted the help of an agent when the time came to sell their own home. In August of 2011 Colby Sambrotto of who, after failing to sell his home using FSBO websites, needed an agent to sell his NYC apartment.
And, he got more money!!!!
Bottom Line
Two separate people made fortunes convincing others to sell their home through their FSBO sites. Yet, when it came to selling their own home, they recognized the value of using a real estate professional.
There is a reason the real estate industry has been around for centuries: you perform a valuable service.
Provided by Franklin American Mortgage Company.

Monday, April 28, 2014

How to Enhance Your Home’s Appraisal Value

Straighten Up
Appraisers look at the home and the permanent fixtures of a home, not a clutter that can be picked up, however, a clean home will leave a better impression on an appraiser trying to assess the condition of the home. Remember, spending hours cleaning your home for an appraisal may be a bit of overkill. A modest clean up involving removing clutter, sweeping or vacuuming, making beds and providing access to places in the home an appraiser may need to see, i.e. attic, external basement opening, and electrical boxes should be adequate.
Enhance Curb Appeal
Curb appeal is always critical when assessing a home. Again, this does not have to be an extensive task. A new coat of paint, a new roof and landscaping the whole yard will definitely improve the curb appeal but isn't always necessary. Simply mowing the lawn, removing weeds and cutting back overgrown plants or shrubs can go a long away. It is also a good idea to remove clutter and wash large stains on the home or driveway with a power washer.  If your capabilities are limited, concentrate on the front yard instead of the backyard.  The front yard gives the first and most crucial impression.

Listing Updates
Keep an itemized list of all the structural updates. This can help an appraiser keep track of any improvements made to the home. Make sure the updates are significant and permanent. Small improvements like replacing a door knob will likely not improve the value of the home so there is no need to list it.  Changing all the door knobs or doors may or may not be important so be judicious in the renovations.  Finding out what adds value can be daunting and what ultimately impacts the value will be decided by the market comparables.  Make sure the improvement is to the structure of the home. While a new area rug or sofa may change the appearance of the home it is not a permanent fixture and doesn't add value to the home.  Finally, document any additions or conversions to non-living space, such as the garage.  Addition of a garage space can add significant value to your home.  The appraiser may be getting the size of the home from city hall records or previous listings for sale.  They may not be aware that additions or conversions have been made and may be conducting the evaluation assuming an incorrect size to your home.  Good appraisers will generally measure the size of the home, but not always.
Locate Comparable Homes
Most residential appraisals are done with the direct comparison approach.  That means that your home is compared with other homes (called comparables) that usually have sold recently in your area (normally within the last six months).  Your appraiser should check thoroughly through your neighborhood to find the most relevant comparables – ideally between three and five homes.  But it does not hurt if you make the appraiser aware of homes that have recently sold in your neighborhood. The same size home that is the same age on the same size lot in the same condition and next door to yours would be the ideal comparable.  Unfortunately that home usually doesn't exist and even if it did, it would be unlikely that it has recently been listed or sold.  Usually comparables are sought and some adjustments are made to account for the difference. The appraiser will determine which comparables are most relevant and how much to adjust the variations between homes.  If you do find a comparable make sure you understand the difference between a list price and sale price. Appraisers usually only use comparables that have sold and they will always put more value to the selling price than the listing price. A person can list their home for whatever price they want, it does not mean that somebody will buy it for that price. That's why the price that a property sells for is more relevant.  A professional real estate agent can assist you in obtaining comparable homes for a comparison.
Make Improvements Cautiously
If you're planning on making any improvements or planning to do any renovations, do so cautiously.  Improvements don't always add value and if they do they don't increase value over the amount invested.  Investing $60,000 does not always increase the value beyond the amount spent.  In fact, it rarely increases over the amount invested.  Usually you only recover a percentage of the money you have invested.  The best improvements are generally painting, flooring, replacing lighting fixtures and plumbing fixtures. The rooms that add most value are considered to be kitchens and baths.
Don't Rely on Gov’t Agency Valuation
Assessments done by government agencies are usually used to assess your property taxes. These assessments can give you a general idea of what your home is worth or they can be completely off. Assessments, in most jurisdictions, are done through a computer model.  The accuracy of the assessment usually depends on the data that the computer model uses.  The age old adage of garbage in, garbage out applies.  If the model has relevant and accurate data it can provide an accurate assessment. It should be noted that a computer model does not view the inside of your home, therefore, it is hard for it to distinguish or compare it to the most relevant comparables.  Another factor that can affect accuracy is when the assessment is done.  A lot of jurisdictions will use data from the summer where there is generally an upswing in value and volume.  This provides the assessment entity with more data but the assessment can be higher or lower depending on how the market has changed.

Finally let the appraiser do their job.  Give them space to do their inspection.  This is, generally, not their first appraisal and they know what they are looking for when inspecting the home.  You don't want to annoy them by pointing out details they may not find relevant.  There can be a fine line between being informed and being a know it all, you don't want to cross the line.

How Do You Determine The Value of Your Home?

Have you ever wondered how realtors come up with a number to suggest to you the sale price of your home?  Well, it’s not as complicated as you may think.  They prepare what is known as a Competitive Market Analysis (CMA).  Although, a CMA is not an appraisal, it does contain some of the same types of information that you'll find in an appraisal.  Generally, features that are of interest to buyers are considered in the calculation of a CMA.  Such things as granite countertops, wood floors, number of bedrooms and bathrooms, square footage of the home, pool in the backyard and even things such as a circular driveway are used to determine the home’s value.

The objective of pricing a home for sale is to create a baseline price to use as a reference in determining a fair market price for your home in the marketplace.  That is done by taking the price of homes that have been sold recently, and compare them to your home.  Comparable homes means, homes that have similar features to yours.  Once items considered of interest to buyers in the marketplace are determined, a value for each feature is created. This tends to be more art than science by trying to assess what the current value of a feature is worth in order to build or replace – which sometimes is difficult to do.

Once that is determined you now search for comparable homes, usually three to five similar ones, to use in the analysis. What do you do if each home doesn’t have exactly the same features as your home? You make adjustments to the property you are comparing to your home. So, if the comparable has a pool and yours does not, you deduct the value of the pool from the comparable home (never from your home). If you have a pool and the comparable does not, you add the value of a pool to the comparable home thus making the comparable home similar to yours.

Once you have added or subtracted all the features’ values from comparables you then take the resultant prices and average them out to come up with a possible selling price.  The process is not terribly complicated, but sometimes the value you assign to each feature can skew the pricing model a great deal.  Understanding the marketplace in a particular community can help in establishing an accurate value for each feature and in turn your home.

A property does not sell based on the prices of sold homes alone — supply and demand is also a factor.  In a rising market the supply and demand factor will make listing prices more important.  In a steady market, it is the sold prices that will be given the most weight.  In a falling market, it may actually be the expired properties (those that could not be sold at the listed price) that show what the trends are and how much the subject property is actually worth.  The current environment in Trophy Club is what is known as a seller’s market. There are more buyers in need of homes than owners willing to sell their homes so the seller has an advantage when it comes to pricing.  This community is also a highly sought after city for a number of good reasons.  We have an excellent location in the Metroplex for commuting, lower taxes than surrounding counties and a highly desirable school system, to mention a few.  This factor along with the price of sold homes in Trophy Club combine to make up a CMA.

One disadvantage a CMA has for a homeowner is the fact that prices used in calculating a possible selling price is past history.  It doesn’t necessarily take into consideration the percentage increase in homes that is occurring as a result of demand.  Again that can be more art than science when trying to include potential price increase in a home value. However flawed the CMA method of market analysis may be, it is still the best approach currently available to realtors to evaluate a home’s sale price.

(As published in the monthly newspaper, Trophy Club Tribune, on 28 April, 2014.

Tuesday, March 11, 2014

Getting Your Home Ready to Sell

You’ve decided to put your house up for sale but you know that it is not in the best shape to get maximum value. Do you sell the house as is? Or should you make repairs first? Figuring this out will have a big effect on the price of your property.

Here are a few questions to ask yourself that can help you clarify this issue:

How extensive is the house’s damage?

There are two main categories of damage when selling your home. The first type of damage is cosmetic. Cosmetic issues are fixes that do not affect the structure or the overall livability of the property, but it does affect its appearance and is an annoyance to those living in the home. Such cosmetic damage includes leaking faucets, torn wallpaper, dirty areas such as the bathtub or sink, or dilapidated fencing or worn exterior paint. Even easily fixable small structural defects may fall into this category such as missing shingles or holes in the wall. The important thing to note is that they are relatively inexpensive to fix and if these are the only repair problems, a homeowner is better off fixing these issues instead of selling as is. Your objective, after all, is to maximize the value of your home.

The second, and more severe, type of damage is structural. This type of damage can sometimes be so severe that the house is unlivable. Things like broken pipes, electrical wiring issues, HVAC unusable, foundation problems and water issues will all fit into this category. Any one of these things can result in from hundreds, to many thousands, of dollars to fix and it will have a huge impact on the price of the house.

When should you do the property repair?

When a house is generally in good condition but requires cosmetic repairs to spruce it up, a homeowner will receive the greatest return by fixing those issues. If such issues such as a dirty bathtub or a broken fixture are left un-repaired, home buyers will assume that the homeowner has not cared for the property and there could be larger, hidden structural problems that are not necessarily within sight. During the negotiation process, the buyer will point to these blemishes in order to bring down the price, thinking about the cost of these repairs as well as the time and labor to do them. Thus, it is better if the homeowner does the repairs in order to show a pristine home that is move-in ready since it will command a greater price among buyers. Those repairs also include exterior landscaping. If your property is overgrown with shrubs that hide the elevation of your home, have them trimmed to open up the view.  A buyers first impression is very important in sales success.

In some cases it is still best to fix a structural problem before you list the house but that will depend on a few factors. The first one is who is your ideal buyer?  If you are going after buyers that will only have the money to make a down payment they are not going to be able to afford to fix up the house after they buy.  If they have to make repairs like these they are probably going to look elsewhere for another house that is move-in-ready.  These types of buyers will like having a move-in-ready house because they don't have to acquire additional funding to repair any defects with the house. Second, most buyers do not know the cost of repairs and will normally overestimate the cost of those repairs.  If the damage will cost you less to repair than what a buyer is willing to spend then go ahead and repair it.  For example, if you have a gas water heater problem you are probably going to overwhelm a buyer that is looking at your property and knows nothing about fixing a gas water heater system.

When should you sell it “as is”?

You either have so much damage that you cannot get a good return on your investment or you just need to sell your house quickly.  It is better to sell the house as is because repairing the house will take time that you don't have.  You should have a licensed home inspector analyze your home and look for defects so they give you the cost to repair the damage to the house. If you need to sell your home quickly the best thing to do is find one of the companies that buy houses or a real estate investor to see if you can make a deal with them.  If you are willing to take a lower price than what the market will bear, if you do the repairs, these investors may be the way to go or find a buyer who is OK with doing repairs after buying at a bargain price.

Whatever direction you choose to go with repairs, just remember that the most desirable homes are those that are updated and move in ready. Good luck selling your home.