A victory for value
For today, we’re going to turn a blind eye to the notion of “Location, location, location” and focus our attentions on pricing. I received a call from an old friend last week and our conversation turned to my living situation. He did all the wiring in the house I built and was basically calling to just catch up. It should be noted that he currently has a house listed for sale in the same town where I live. As it came to light that I had sold my Jackson NH real estate in just two weeks, he (jokingly) called me a few nasty names and then asked how on earth that happened. The discussion turned, shortly after telling him what a great agent I had, to pricing.
Our two houses certainly have their differences. He has more land, I had a better view. He’s on a private road (Yes, it’s THAT house!), I was on a main road. His house was built in the 70′s, mine was built in 2010. His is a one story ranch with a full basement, mine was a 2 story cape with a drive-out basement. At the end of the day, you could argue that we are going to be attracting two very different buyers. But they also have their similarities. They are both houses, not condos. They both have small manageable lots and convenient garages. Their sizes were close enough to attract the same size buying family. So how do you compare them with their speed of going under contract? How did one sell in just two weeks while the other sits vacant and on the market for nearly a year? One of the answers to that question is price.
For argument’s sake, let’s assume that my house sold for $200,000 and his is listed at $150,000. We could argue that there are differences in the buyers in both of those ranges, but overall we can agree that there are buyers out there for both. Homes sell because of real or perceived value. Of course there is an emotional element in any purchase we make, but value, which comes down to condition and price, is a critical component with such a large and significant purchase like real estate.
I can’t over-emphasize the role of objectivity throughout this entire process. Of course my house was the nicest house in the whole world, but for everyone else, relying on the advice and opinion of real estate professionals is likely a good idea. Talk to builders, appraisers and even go see the other homes in your market that are in your price range. This will give you the confidence to price your house “right” and get it sold.
One way to approach the pricing of a home is through the rate of absorption (i.e. how much inventory is there and how fast it is moving). For example, if there are 100 homes on the market and only 10 are selling every month, for a seller to position their home to sell in the next 30 days, they need to be in the top 10 percent in terms of value. Is their home in the best condition for the best price? If not, it will fall into the 90 percent that will remain listed for sale until the listing expires or until the seller moves their price enough to motivate a buyer to bite.
Another effective way to price a home is by using price-per-square-foot data. Basically a home will fall into three categories which are, not surprisingly, based on condition and location. The top category is newly (or recently) built homes in desirable locations. The bottom category is homes that are in rough condition or in need of repairs and are in challenging or less desirable locations. The homes in the middle are the “C” students of the real estate market. They have the same amenities, condition and location as many of the other homes in the area. They are not asking for extra credit or headed to Harvard, but they are also not skipping school or dropping out.
As you can imagine, going back to that “objectivity” topic again, getting a seller to admit that their home is “average” can be challenging. One effective way is to go out and look at the competition. If you don’t feel comfortable doing that, just a review of plenty of interior photos of recently sold homes will be just as effective. You can review the images and start to choose the ones that most resemble your own house. The agent is then able to gather that data and generate an accurate listing price. The advantage here is you are now focused on SOLD prices instead of LIST prices.
The final method, for today, is to use the three different tiers of price-per-square-foot data and simply “choose your own adventure”. Gather the listings that have sold, those that are currently on the market and those that did not sell and group them respectively together. This paints a very clear picture of what range has sold, what the current competition is, as well as how much higher priced those that did not sell were listed. You are then able to see, and choose, where to price your home.
There are always exceptions to the rule. Was price the only reason my house sold in two weeks? No. There is always someone out there looking for what you are selling. This week, Edvard Munch’s “The Scream” painting sold for $120 million, setting a record for the most expensive artwork ever sold at auction. Clearly the perceived value was great enough to generate that type of bidding action. You certainly need to do some comparisons with regard to value, but in the end – the higher the value, the faster the sale.
Smarty Pants 2.0
We got some great feedback from our story last week so we decided to share a few clarifications and thrown another log on the fire. Financing is currently a steaming hot topic and I’m guessing, will be for some time. Today we’re going to go further down the path of financing on a private road. Our friends at Northway Bank sent over a few clarifications that should prove helpful for anyone thinking of buying or selling Jackson NH real estate situated on a road that is not maintained by the state or local municipality.
One of the biggest factors in nearly all of these conditions for financing is “who” is providing the financing. As most of you are aware, a very small percentage of loans actually stay with the bank they were initiated through. They are more commonly bundled together and sold into the secondary mortgage market. Because these larger corporations and investors are typically more gun-shy than your local bank would be, they tend to require a more stable situation with the property being sold. Because your local bank is more likely to consider all of the factors that you, as a person, bring to the table, your chances at getting a more creative solution to your financing are much greater.
The first place this comes to light brings us back to the issue of the road maintenance agreement. A local bank is more likely to not require a formal or recorded road maintenance agreement for what they call “portfolio lending”. These are mortgages that will remain with that particular bank for the life of the loan. Of course there are always exceptions. One example was with a property on a class IV town road where the “road” was literally a goat path and the homeowner could not get fire coverage because emergency vehicles could not pass to get to the house. Without insurance coverage (or more literally protection for their investment), the bank could not do the mortgage.
There are always exceptions to the rules. There are many different lending institutions and many varieties of those that play in the secondary mortgage market. Freddie Mac, Fannie Mae, VA, FHA and the list goes on. One of those exceptions is that Freddie Mac is one of the only of those larger institutions that will accept or buy mortgages that do not have a formal road maintenance agreement. Mostly all of the others still do.
How about if we move a bit closer to the actual structure on the lot? The question came up about the presence of a shared septic between multiple lots without any formal agreement. This issue can muddy the waters a bit. (Sorry, I couldn’t resist!) Because septic systems are governed by the Environmental Protection Agency, most local banks will not have a problem with financing either home. At the end of the day their position tends to be – if the state has approved the septic for use by both properties, who is the bank to come along and say it is unfit?
Once we step out to the larger investors, the rules change a bit. In general terms, the investors in the secondary mortgage market want to be sure that the specific property they are taking as collateral has all of the components to function independent of any other lot. In the case or the shared septic, it almost always comes down to which of the lots the actual septic system is located. We ran into a similar issue with my friends and their struggle last year. The septic is municipal but the houses up the road, including the one they wanted to buy, all have their sewer pipes running under the homeowner’s property at the beginning of the road. Since the “system” was essentially out of the control of the “upstream” properties, and there was no formal agreement in place, the investors were leery of getting involved.
It is safe to say that anytime a property cannot stand on its own with regard to services that make the property livable, the secondary market is going to shy away. I think you’ll have some flexibility with phone lines and likely cable television. But, when you start talking about shared water, septic, power and even driveways, you’re going to have better luck staying with a local bank that lends the money directly.
It is important, as buyers and sellers, to put ourselves in the shoes of an investor. If the entity you are investing in has the potential to be rendered “useless” or unlivable, you are more likely to move on to the next opportunity. When you are going to sell a home or looking to buy a home, take the time to assess the viability of your investment. If you find yourself explaining lots of little “hiccups”, it is likely time to take a step back and get those items cleared up. You will increase the salability of you home for all involved.
Smarty Pants
We are dealing with a far more educated consumer in today’s North Conway NH real estate marketplace. There are studies that tell us 60% of the sales cycle is already complete by the time the customer makes that first phone call. This is both encouraging and horrifying as a business owner, and that includes our buyers and sellers.
I am a research and data fiend. I’ve been told I tend to over-analyze things, but in the end I’m glad to have gathered as much information as possible and, hopefully, made an informed decision. This is how our society works now. We have seen it in the real estate world for a few years and it has made its way into nearly every level of commerce. I buy almost everything I own through an online shopping site (named after a river in South America). The main reason is they provide user reviews and recommendations. There is nothing like the collective knowledge of 500 people that have already purchased and utilized the product you in which you are interested.
As real estate professionals, we try to make the transaction as smooth and painless as possible. We end up educating our clients on a myriad of topics since no two deals are ever the same. I’d like to explore a couple of the more popular questions we run into and see if I can offer some insights. Since the banks have snugged up their lending standards to more logical levels, we have seen an increase in questions related to the location of a property on a private road. If you were reading along this past fall and winter, you know my friends lost out on a house solely because of this hiccup.
The main point of contention is the actual maintenance of the road. Because we live in a state where snow is most always a factor (no comments on this year, please) the lending company wants to be sure the owners will have year-round access to the property. This assumes, of course, it will be a permanent “owner-occupied” property. If the buyers are not dealing with financing or it is simply a summer cottage or vacation home, the rules significantly change. If there is nothing in writing that states how the road will be maintained, the banks will likely be unable to approve the loan. They want to ensure the new owners will have ongoing access to their property.
This can easily be rectified with a very simple document. When I sold my home I met with my neighbor who shares the driveway or “road” with me and we crafted a “road maintenance agreement”. Because he does not have a house on his land yet, we agreed to place the burden of maintenance on my side of the road. It also explained that once a home is built on his lot, the maintenance would be shared equally between the two parties. We took the extra step of recording this with the county. Should the new owners decide to sell the home or once my neighbor sells his lot, this document will already be in place and this hurdle will not cause any further hiccups for future transactions.
There is still a pile of concerns surrounding this issue. What if someone on the road refuses to sign the agreement? What if a tree falls on the road and the properties farther down the road cannot access their homes? Who pays to have the tree removed? Are there liability issues if there is a car accident on the road? If the tree falls in the road, did anybody hear it? I’m sure this list could continue forever. I had a nice conversation with a real estate attorney friend of mine and he offered up his favorite answer to all of these questions: “It depends”. There are so many variables to take into account for each of these that a single answer or article is not nearly inclusive enough. Attorneys will call on both statute and case law that provide a base from which to work. Then all the factors for your specific scenario come into play.
One of the other popular questions we get that also utilizes that nebulous “it depends” answer has to do with heat and other utilities. Providing a buyer with the previous owner’s (or tenant’s) utility usage values is really a subjective exercise. It is important to ask the buyers how they will be using the property (full time / vacation) and have a good understanding of the seller’s current usage. Since I started working out of my home office, my gas and electric usage jumped way above the levels they were when I was out of the house all day. Lights, electronics, heat and even air conditioning play a significant role in my utility bills and would vary greatly from someone using the home for weekends only or even someone who works outside of the home.
Last but not least, we are going to circle back around to our old friend financing. As we have mentioned, banks have now resorted to exorbitant requirements for home loans such as verifiable employment and a decent credit score. The nerve! One might argue that if a bank is not willing to lend someone money, nobody else should take that risk either. While this may be true, there are other reasons that owners might be interested in financing the deal themselves. When I bought the land I built my house on, the seller provided the financing. This not only limited the down payment I needed to come up with but also simplified the purchasing process overall. The seller had an attorney draw up the necessary mortgage papers and enjoyed the benefit of collecting the associated interest payments for the life of the loan. This worked well for them since they did not need the immediate influx of cash and were able to make a little extra money on the transaction.
The lesson here is not to be afraid to explore other options for home ownership. My friends that lost that opportunity last year are still pressing forward and looking for other creative ways to purchase a home. Being self-employed for less than two years will force me to seek alternative financing options this summer as I begin my property search. There are various options available to get you into that home you’ve been dreaming out. Rent-to-own, owner financing and even buying with another person or family are all viable solutions. The key is to ask the question and keep exploring the possibilities.
Imagination is more important than knowledge. For while knowledge defines all we currently know and understand, imagination points to all we might yet discover and create. – Albert Einstein.
Trust Your Gut
It’s like asking a painter if he thinks you should change the color of the interior walls of your Jackson nh real estate. Or, better yet, asking the unscrupulous car salesman if the vehicle you are test-driving would be a good purchase. I’m not saying you won’t get an honest answer, but in any situation you should use your own instincts and intuition and make the decision for yourself. Of course, another great idea is to solicit input from an impartial third party.
There are numerous times in life in which we’re provided information and are left to determine the value of the data on our own. Some of these decisions are life changing. The choice to sell or stay, the choice to buy or rent, even the choice to keep dating or pop “the question” are all game changers and should be made with thoughtful consideration and not necessarily outside influence. I find this to be true when it comes to the constant stream of data we receive from those involved in real estate.
Make no mistake about it, I understand that present company is included in this equation and people in glass houses shouldn’t throw stones. My encouragement to you is to simply take what you read with a grain of salt and take that extra step to filter the data stream through your own situation.
One of the more amusing things I find when reading industry blogs, articles and magazines is the incredible inconsistency of the message. If you have been reading along with me over the past few months you know that the pattern has not changed. I have lost count of the number of days we find articles in support of buying real estate and articles warning us of impending foreclosures and falling prices. There is truly no wonder people have a diminished sense of trust with real estate professionals. The real crime here is in throwing the baby out with the bathwater.
It is no secret that the lifeblood of the real estate industry is the sale of properties. If nobody buys real estate, nobody in real estate makes a living. This is not just limited to sales agents and brokers, but also directly impacts appraisers, inspectors, lending institutions, attorneys and more. But something I learned a long time ago is that integrity, customer service and a good reputation far outweigh the benefits of any sale.
While we laud the benefits of the current incredible interest rates, increased inventory and numerous aggressively priced homes, those need to be balanced with your own personal needs and current financial situation. Your own personal situation is the single most important factor in how you interpret the constant flow of data you are presented. There are broad, blanket statements made on a daily basis about the real estate market. And this is nothing new. For as long as there have been media outlets, there have been broad statements made about any number of financial, social, economic or even athletic topics.
I was taken aback, in reading the Boston Globe last week, that none of their staff writers picked the Red Sox to finish the season in better than 3rd place. While initially this was a little surprising, it occurred to me that they had all utilized their extensive experience combined with what they saw in Spring training, to establish an informed assessment of the team’s chances. While it may have looked a little “off” to have such a pessimistic view of the season, I quickly realized it was simply realistic. We need to take the same perspective when filtering the constant din of stories and articles about the real estate market.
One of the first things you learn, when you start dabbling in real estate, is it is an extremely local market. Almost nothing you read or hear on a national level will directly relate to your own neighborhood. My parents live in a town in Florida that is seeing sales of 250 homes a month. They live in a town that sees almost 400 homes built every month and enjoys a constant flow of people looking forward to starting their retirement in this small area of the state. This certainly puts the national news stories in perspective.
We enjoy the same sort of environment here in the Mount Washington Valley, though not nearly to that scale. We are fortunate to have a strong second-home market and a very desirable place to call home. And we’re not alone. Just this week, in a story from CNBC, we learned that homes in Midland, TX take an average of 71 days to sell and are only 1% discounted from the original list price (on average). That’s a healthy seller’s market to say the least. In fact, the gist of the whole story was highlighting towns across the country that are enjoying quick sales, minimum discounts and an overall healthy market.
I love that real estate is on everyone’s mind. We are fortunate that the industry we are in is a topic of conversation from the boardroom to the bar room. It is an easy topic to bring up in conversation and many of us in the industry can’t go buy a gallon of milk without a friendly face bringing it up. My caution and our recommendation for you is to simply filter what you hear and read with the lens of your specific town or area. There is a good chance the truth is in there somewhere; the onus is on you to find it!
Does their bum fit the seat?
I write this today with a smidge of trepidation in my fingertips. One of the toughest phone calls to make, as a service providing professional, is the call to a client with news that the “service” is not complete. In Jackson NH real estate, especially in what we refer to as a “buyer’s market”, the justification conversation to an unhappy seller is not one of our favorites. So what are we to say?
One of the core concepts of the REALTOR organization is honesty. And just like Billy Joel says, it’s “…mostly what I need from you”. Here are a few ideas from our years of experience that might shed a little light on how to handle your home that is just not selling as quickly as you had hoped.
I would first contest that the old adage “Location, Location, Location” should be adjusted to “Price, Price, Price”. There are a hundred clichés that go along with this. My personal favorites are: “A product is worth exactly what someone is willing to pay you for it” and “There is a bum for every seat”. I restored a heavily damaged Corvette a few years back. As the second child in our family, I was essentially the reason my dad had to give up his own back in the 70s. (For some reason, Chevrolet didn’t include car seats with a 1969 t-top.) I’ve always felt a little guilty, so this was a great way to get him back behind the wheel of some muscle.
The “sweat equity” involved in this kind of project is such a subjective amount, assigning a value is nearly impossible. The true value of that project is either your own personal pride or the amount of cash in your pocket that someone was willing to give you in exchange for the product. In my case, it was the look on my dad’s face when I pulled into the driveway and tossed him the keys. This car is clearly worth more to the two of us than to anyone we would find in the newspaper. We often caution homeowners about doing remodeling projects prior to selling for this very same reason. There are projects that add immediate value to a home, but doing these projects with a more generic audience in mind will be more broadly valuable and impress a larger audience. While I don’t think anyone would turn away a free 1991 ‘Vette, the resale on a more modern and reliable car would be faster and attract far more buyers.
Keeping that “value” in mind, it is important to remember that buyers don’t really care how much money you “need” to get out of the sale. The amount you need to retire, move up, start a business, etc., should have no bearing on the price you set for your home. Setting your selling price based on what you think your house is worth compared to what your neighbor’s sold for is also dangerous. We all are convinced that our house is the best on the block. But, the only real opinion that matters is the buyer’s. An objective look at the house, neighborhood and overall market along with a detailed CMA should be your roadmap for pricing.
One of the most common hiccups we see sellers making is pricing their home based on greed instead of true market value. This is a tough pill to swallow, but it will have a significant impact on the speed of the sale and the interest in the home. Pricing your home 10 – 20 percent above the market value “just in case” you get a bite is a dangerous game to play. I will admit that it actually does sometimes work. Every once in a while, a vastly overpriced home sells because they found the right bum for that seat. But serious sellers trying to move their home should steer clear of this tactic. I know numerous brokers who will turn away a listing client for just this reason. If you want to “test the market” and sit on your home until that “one in a million” buyer comes along. I wish you all the best. When you are finally ready to get serious about selling, by all means give us a call.
When I listed my house, my broker suggested small items such as adding closet doors and a few small trim pieces to “finish” up the house. While these items would not have been “deal breakers”, they eliminated them from the discussion and made the showings more seamless. We always encourage our sellers to walk through their home with objective eyes and remove any of these small issues before listing the house. If the buyers feel they will need to paint, replace carpet, improve landscaping or some other perceived issue, the offer will be made with those costs in mind.
Aside from price, that first impression is critical to the sale of your home. We have talked about it before, but it bears repeating here and is always the number two item discussed with sellers. Your house needs to be pristine, neat and clean for every showing. This includes the basement, garage and the front lawn. If the buyers can’t “connect” with your home and imagine it as their own, they will likely keep looking.
Last, but not least is availability. Buyers can’t buy what they can’t see and making your home available and open 100% of the time is always the best option. I can tell you first hand, this is not the most convenient thing in the world, but the annoyance will pay dividends when your agent calls with that first offer.
I was fortunate to have my house go under contract just 2 weeks after it was listed. I paid attention to the CMA my broker provided and priced it accordingly, I scrubbed and cleaned the house for every showing, enough to make mom proud, and I accommodated every request for showing regardless of day or time. The buyers clearly agreed with the value we put on the home and apparently their bum fit the seat!
“Home” is where your stuff is
If you’ve been following along my journey these past few months, you know I have sold my Jackson NH real estate home and am currently waiting for my new apartment to be finished. Last word I received is that I’ll be moving in on Wednesday. All things considered, I could not be happier. I was fortunate enough to spend a couple lovely weeks in Florida as the 41 year-old living with his parents. I love my mom and dad and we are fortunate to enjoy each other’s company. While this was a welcome taste of home, it still did not satiate my need to feel “home”. But what exactly does that mean?
We have all heard or read the benefits of home ownership. We have explored both sides of the table in this column and there are countless articles written on the subject. There are financial, emotional, social and even physiological benefits to owning your own home. While these are all directly tied to the actual ownership of a structure you call home, there are benefits outside that entity that impact your life in a myriad of ways.
Simply having a place to lay your head is not enough. When I returned to New Hampshire I had the option of crashing on a number of couches with friends and family. This is certainly more cost-effective than a motel, but doesn’t really satisfy the need to feel grounded or home. I also tend to feel a bit obtrusive when I’m staying with friends and never really get the sense of being relaxed. My decision to rent a room for the week was based on just that. When I get home from a day out in the woods or in the office I can come back to a place I can call my own, if only for a few days.
All of my belongings are in a storage unit. When I first got home from Florida, I went to the unit and just spent some time sifting through a few boxes and reacquainting myself with my stuff. It was incredibly pacifying to be surrounded by my “home” after living out of a suitcase for the better part of a month. I’m confident the sense of familiarity we get when we walk into our front door lies right there in those boxes. The reason we tell sellers to remove pictures and personal items during showings, is the same reason these items are so important to our sense of home. Being surrounded by familiar faces, if only in picture form, provides a sense of warmth and belonging that only the individual can know and appreciate.
Outside of the material benefits of being home, there are physiological benefits as well. I have found, even with my kitchenette, that I tend to eat dinner out most every night. Breakfast and lunch are easily enough taken care of, but the thought of creating (and cleaning) a meal on a single burner stove and a microwave just doesn’t work for me. I enjoy cooking and appreciate the value of a good kitchen. Knowing where everything is and being able to pull together a healthy meal are two of the things I’m most looking forward to when I finally land in that apartment. The variety and quality of the meals I can create will surpass anything I’m getting eating. That’s not to take away from some of the yummy restaurants we enjoy around the valley, but I’m sure my health and diet will immediately benefit, as will my wallet.
I make an effort to reduce stress where possible and minimize the drama that surrounds me. That is one of the many reasons I don’t watch the news. The benefits of home ownership reach beyond the walls of your house and offer the comfort and security of a stable place to return. When I’m out hiking in The White Mountains or even traveling for business, the knowledge that I have a comfortable place to come home to, as well as the companionship of my cat, eases the stress of being away. I know when I return, all of my belongings and all those things that make this house my home will be right there waiting for me, even if that means the dirty dishes in the sink!
We have a large percentage of second homeowners here in the valley and all across the White Mountains. Every one of these homes and condos I have shown over the years has one thing in common. They all contain pieces of the owners’ life. There are family portraits, seasons passes and a myriad of other items that remind the owner of their friends and family as well as celebrate the fun they have while on vacation. There is no better way to make your vacation home feel like “home” than by duplicating those techniques that work at your primary house.
I feel incredibly fortunate to be able to have a “home”. I have an apartment waiting for me to make it my own and have had a nice time visiting with family and even living in the motel. It doesn’t matter if you rent or own, having a place to hang your hat and store your stuff has immeasurable value. The next time you walk through your front door, I encourage you to take a moment to look around and appreciate the comfort and stability your home provides.
It’s All Over But The Aloe
Today is my last day. Well, to be fair, it is my last “Friday” in Florida. I have been waiting for my new Jackson NH real estate to be remodeled and have spent the last couple weeks working on my tan (and working on a couple websites). As I prepare to load up the truck, with a newly repaired air conditioner, I am faced with the inevitable and daunting task of moving from a storage unit into my new home. Fortunately, when I was moving out of my old house, I did a little bit every weekend for about a month. This allowed me to take my time and use a little strategy so phase II would not be so miserable. Let’s look at a few suggestions that I picked up along the way that might help you make a move on your own.
I’ll admit I am fortunate to only be moving myself (and Remy). I have a good friend that offered to cat-sit for a couple weeks and eliminating him from the equation made things a bit simpler. If you can pawn your pets off on a good friend, I’d highly recommend it. It makes cleaning and leaving doors open much simpler and allows you one less thing to have to think about. That said, I do miss my little buddy and can’t wait to get home, get settled and get him back.
The other advantage I had was the ability to move myself over the course of a couple weeks. The closing or “move date” was set about a month out so I was able to plan accordingly. This gives the benefit of selectively packing up rooms and “stuff” at your own pace. I made six or seven trips to the liquor store for boxes and started picking and packing away. Spare bedrooms, seasonal clothing, rarely used kitchen items and most of the items in the basement or garage are perfect for this process. For people with children this offers a great opportunity for them to help out and start to pack up their own rooms. Stuffed animals, toys and other non-vital items are perfect for early packing and can simplify moving day significantly.
Labeling is critical to the success of the move and the minimization of stress during the unpacking process. Some experts recommend color-coding of boxes or some other fancy technique. I simply used a good quality (and thick) marker and some common sense. Because you will have started early, you can have multiple boxes filling up at the same time. The kitchen is filled with lots of items of widely varying size. I kept two or three boxes handy and would fill them based on the size and shape of the item. Since they were all already labeled with “Kitchen”, I will know where to find them when I get back to New Hampshire. I also kept this part very simple. I have about 10 boxes labeled “Office”. I don’t need to know their contents; I just need to know in what room of the house they need to end up.
When I mentioned the children’s toys earlier, I used the phrase “non-vital” with some hesitation. I can assure you, at 8 years old, my stuffed dog was extremely vital to my happiness. That said, a move is a fantastic time to do some hoeing out. I tend to lean towards the life of a minimalist these days, so every season I find myself donating clothing and other items to the local thrift store. If I have not used it or worn it in at least a year, it ends up on the chopping block. If you don’t work this way on a regular basis, a move is the perfect time to do some “filtering” and rid yourself of some unnecessary clutter.
While it is a little challenging to hold a yard sale in February in New Hampshire, the benefits of the Internet and your social network of friends and family can come in quite handy here. I unloaded a plow truck, a kayak, an air compressor and some hiking gear in a matter of weeks. Not only did I not have to move or pack them up I also made a little cash. If you have the time and are organized enough, this is a fantastic process to go through before your house is even listed. Your real estate agent will thank you for cleaning up the clutter and the potential buyer will appreciate the empty spaces in your home. I promise you the main concern we have with new listings is all the “stuff” people have throughout their homes. Get it cleaned up and cleaned out before that first showing and you’ll be pleasantly surprised at the results.
My appliances stayed with the house so a good thorough cleaning was all that was needed. The buyers moved right in on the day of closing so I never even unplugged the fridge. If you are taking yours with you, a little precaution can pay dividends down the road. Cleaning the fridge with some disinfectant or even a simple solution of vinegar and water can keep them fresh during the move and even storage if that is needed. If you can’t leave the door ajar, be sure to dry the inside out completely after washing it. This keeps mold and mildew at bay and will make for a more pleasant experience when you first open that door. While we’re on appliances I’ll offer this other little tidbit. Get help! After years of chiropractors and physical therapy (and many days spent in bed or on the couch in pain) I have finally learned to ask for assistance when moving large items. Not only is it simply safer for you and the item being moved, not to mention your sheetrock, but it makes the move more fun and far less stressful. If you have friends like mine, some pizza and cold beer is almost always payment enough.
Most of us are pretty good with fragile items. I learned the hard way that leaving breakables tucked inside a sweater drawer is not always the best option. Pack these things separately and well padded and labeled. It will remind you to leave them at the back of the truck or at the top of a pile where they won’t get crushed.
Because I started quite early, I kept a separate box and corner of my living room for the items I would need throughout the move. This included clothing, medicine, toiletries, a few office supplies, some client information and even all my tax stuff (it is that time of year). It was very convenient to have a single place to go for whatever I might need during the last month. This also keeps those items from being tucked away at the back of the storage unit and nearly impossible to find.
Most people dread moving (and rightfully so). It is one of the top 5 most stressful things we go through and tends to be a ton of work. Not only is your life turned upside down and dumped into boxes, but that sense of home and feeling grounded is nowhere to be found. Add the fact that you are dealing with one of the largest financial transactions in your life and you have a recipe for high blood pressure and short tempers. Moving into a new home should be an exciting new chapter in your life. If you can stretch this out over a few weeks, take the time to be organized and methodical, and you get some friends to help you out, my hope is that you’ll find it a more pleasant process. Now where did I put that sunscreen?
Perspective
As I write this today, there is warm sunshine on my face and a nice breeze in the air. The small taste of spring that New England is enjoying is a welcome respite from chilly, albeit very mild, winter. I suppose I should clarify that where I’m sitting, it is currently 81 degrees. Florida is a welcome break from a stressful but rewarding winter. The sale of my house went smoothly and the new owners are settling in. I am waiting for my rental house to be ready so I took this chance to visit some family down south. The influx of vitamin D is long overdue.
Selling Jackson NH real estate brings mixed feelings for most. In a relatively soft sellers market, a willing, ready and able buyer is a welcome entity and a bit of a relief. A strong initial offer and an amicable home inspection kept the process moving along and kept both parties happy. Of course, there was the inevitable trepidation on my part that something would cause a glitch. When you are sitting in the seller’s seat, your mind finds all sorts of ways to disrupt the deal and creatively slow or stop the process. In the end though, if both parties are motivated to keep moving forward, everything can be overcome and the deal will happen.
As I mentioned a few weeks back, the ability of an agent, or anyone involved in the deal, to empathize with the buyers and sellers is a skill that should not be overlooked. Experience certainly plays a role here since the more transactions an agent has worked through, the more hiccups and glitches they will have learned to overcome. The trick is to be able to put yourself in the shoes of the buyer or seller and see the deal from their side.
In this particular deal, the appraisal company won the award for complete negligence and apathy towards the whole process. I’m obviously not going to “name names”, but suffice it to say these folks are clearly sitting back on their laurels in the knowledge that they are guaranteed business with the way the “system” is currently set up. Since banks and real estate agents are no longer allowed to play a role in the selection of the appraisers, they are simply pulled from the proverbial hat and assigned to the deal.
I should be very clear in saying that I whole-heartedly agree with the intention behind this rule, however it certainly does not create an environment for good customer service. In general terms, when an appraisal is needed, the banks effectively put in a request and an appraiser is assigned to the deal. No consideration is made for location, market, skill level or quality of work. I believe the same method is used when a habitually horrible driver needs auto insurance. Some states require insurance, so the driver’s name is thrown into a hat and the “winning” insurance company has to take them on. In both instances, the business is by no means earned.
This was my third appraisal on this particular house. The initial appraisal came in incredibly low. The appraiser was from a town more than 2 hours away and had no concept of our resort communities or the inherent increased values of the properties in the area. The comps they used were from towns 20-40 minutes away and were in no way comparable to any of the properties in the area. Again, I blame this on the system and not the individual themselves. Don’t hate the player – hate the game.
In an effort to be a good seller and at the request of my broker, I was not present for the appraisal. This offers a less biased valuation and keeps me from following the person around like a puppy dog lauding all the great features of the house. There are countless cartoons and jokes about the vastly different values a home gets depending on whom you ask. The town wants a nice high assessment so their tax dollars are maximized, the bank wants a more conservative appraisal since it minimizes their risk and the home owner, present company included, thinks their home is the most valuable structure in all the land!
The main complaint I had about this appraisal company is their inability to have any semblance of concern for the parties involved with the process. As this was my primary residence, at the time of closing my entire life, including everything I own, was being uprooted. Aside from finding a new place to live and making the effort to migrate all of my belongings to that space, it is an emotional and stressful time. In this particular case, the house I’m moving into is not quite ready so I was moving all my “stuff” into a storage unit. As you now know, I was also planning a trip to Florida so coordinating the flights and trying to finalize those plans required some sort of confidence that the closing was going to happen. That confidence was never delivered.
Because of what I can only imagine was pure laziness, a complete lack of communication on the part of the appraiser kept everyone involved in the dark until the day before closing. My flight quadrupled (literally) in price and I ended up spending the day before closing constructing railings for the front steps and the day of closing moving the rest of my belongings into storage. This is something that could have been avoided with a simple phone call and a touch of empathy. Thankfully my good friend and amazing carpenter had a day off and offered to help out.
I don’t write this today to whine about a lousy appraiser. I should offer up that the agents involved, the buyer, and most of all the buyer’s bank all worked very hard to get this deal done. The buyers are thrilled with the house and I’m a very happy seller diligently working on my tan. This process has taught me, or re-taught me, the importance of perspective. The ability to walk a mile in another man’s shoes and see the world through his eyes is becoming a lost art. This skill is critical to providing quality customer service. I truly don’t believe you need to have bought or sold a home to empathize with both parties involved in a transaction. You simply need to adjust your perspective and put the needs of your fellow man first.
Worm in the Apple
What’s worse than biting into an apple and finding a worm? Finding HALF of a worm! The lesson here is not biting off more than you can chew. We’ve been talking a bit about renting versus buying when it comes to North Conway real estate. There are strong cases for both depending on your current situation. For those thinking long-term, buying can be a better option and can help you develop strong community ties and an appreciating investment. But how much can you chew?
In the spirit of disclosure, I write this today in anticipation of my closing this afternoon. I’m actually writing this from a motel room since I moved my bed and, more importantly, my TV out of the house yesterday. It is a bitter sweet day as I’m excited to have sold my home and excited to see what my next real estate adventure will bring. It is a little bitter because I love the house I built and have enjoyed calling it “home” for the past two years. Selling at this point was always the plan so I knew this day would come. That said it is still the first home I have built and called my own.
One of the reasons for selling this home is the fact that I simply could not afford to keep living there. The mortgage is not a problem, but the additional bills that pile up became a little too much. A decent real estate agent will talk with you about the price of the home and might even discuss the actual monthly costs. A really good agent will talk to you about the “real” price of the home and educate you on the potential unforeseen expenses that often take new homeowners by surprise. In my particular case, I knew the majority of the costs associated, but a few still snuck up on me.
If you are building a new home, the bank is going to do a pretty good job of ensuring that you have the funds available to complete the project. It is clearly in their best interest to have the money they are investing on your behalf produce a “sellable” home in the end. I don’t think it is uncommon to use personal monies to complete construction projects, but using additional credit lines outside of the mortgage would not be a good recommendation. (Ask me how I know.) Once the home is built and you are settling in, those additional credit bills start to roll in and they are no less important than your mortgage. It is here where you can start to feel overwhelmed if you had not appropriately planned.
The other expenses such as taxes and insurance are sometimes included in the mortgage payment amount. Banks will often add money to your monthly payments and add those funds to a special account for the insurance and taxes. This is a great way to manage your costs and is highly recommended. Unless you are very good with your money and budgeting, the tax bill and insurance bill will inevitably surprise you. Often these bills arrive at the most inopportune times. If you are also trying to manage additional credit line payments, these extra expenses can become a little too much.
Education and planning are the keys to a successful journey into home ownership. With a good understanding of your monthly expenses, buying a home can be a smooth transition from the world of rentals and open up whole new experiences for you as a homeowner. You will not be surprised by the monthly expenses and will have reserves in place for those unexpected costs. I never was annoyed when the oil truck drove down my driveway as I had been putting money aside for heating. The electric bill never really strayed too far from what it was when I was renting and other tertiary bills like cable and phone have no real bearing on where you are living. A successful transition from renting to owning is within your reach if you plan ahead.
There is no shortage of articles about short sales and foreclosures in today’s media. We were certainly more fortunate than many parts of the country in that we saw very few of these by comparison. I think the main reason for a majority of these is simply lack of planning. Of course there were a few unscrupulous lenders that pushed buyers into more home than they could truly afford, but for the most part the buyer has to shoulder a good percentage of that responsibility.
Variable rate, interest only and balloon payment mortgages each serve a valid purpose in the world of real estate, but they are not for everyone and every situation. I purchased the land on which I built my home using a variable rate mortgage with a balloon payment due in three years. This would have been crazy to purchase my house with, but knowing the land would be subdivided and I would be building a home on one piece of it made it a very attractive option. A good friend of mine just bought a condo with a variable rate mortgage. This works well for her since the rates are so amazingly low right now and she plans to sell the condo in 5 or 6 years. The worst that could happen is her rate will jump 2 points in that timeframe. Still a very attractive rate and that is still only a possibility, not a confirmed rate hike. Again, for the specific situation, it makes the most sense.
I’m a believer in home ownership. The feeling of pride and the comfort of coming home to a place I built and customized is second to none. I was fortunate to find a buyer that loves the mountains as much as I do and they will make this house their home now. Because this is such a great time to buy, I am already on the lookout for a new home and will be sure to plan and budget a little more conservatively this time around. Perhaps this time I will avoid the worm.
Double Down!
On the heels of our discussion last week about the age-old rent vs. buy conundrum, I’d like to throw another option (wrench) in the decision making process of our North Conway real estate buyers. When looking at the financial investment involved with buying a home it often makes sense to stretch a smidge and grab a multi-family unit. Right now in the Mount Washington valley, there are over 30 of these properties for sale with list prices ranging from 65 to 600 thousand dollars. When I purchased my first home it was a 2 unit building in Somersworth, NH and I paid a mere $112,000. The truth is if you do a little homework and think it through, a multi-family might just be the path towards home ownership and the many benefits of an appreciating asset.
Sharon Dworkin Bell, senior vice president for multifamily and 50-plus housing for The National Association of Home Builders reports that the forecast of 208,000 multifamily residences in 2012 is well below the 350,000 units needed to maintain a balance in the market. This makes it clear that duplexes and other multi-family dwellings are going to remain in high demand. As our economy gains strength and more young adults are entering the job market, the demand will continue to strengthen. This clearly bodes well for those who already own these units, but it is also a good indicator that you will have no shortage of tenants from which to choose or buyers should you decide to unload it.
When you start down the road to home ownership, one of the first obstacles is the almighty dollar. How is your credit? Do you have enough of a down payment? Will you be able to pay your mortgage if you lose your job? And although banks are slowly loosening the purse strings with more logical lending standards, the reality is you still need to be a good risk. One of the nicest benefits to owning a multi-unit property is you have someone else contributing to your monthly bills. This benefits you in two ways. You have the post-purchase advantage of the rental payments coming in every month to help pay for the mortgage. The other advantage to this is the banks will actually give you credit for this income prior to the sale. When you are being qualified for the loan, a percentage of the anticipated income from rental payments is factored in to your monthly income. This always increases your buying power and directly impacts the total amount you will qualify for.
The income generated from rental payments is a nice bonus, but should be carefully added to your budget. Banks will typically use an occupancy rate of 75% when adding that income to your borrowed amount. That means if you are expecting rental payments of $1,000/month for the other side of your unit, you should only budget $750/month. This will help plan for transitional months between tenants and the occasional empty unit when you simply can’t find a quality tenant. All of that said, it is also exciting to note that because the rental industry is so strong right now, vacancy rates and rental rates are both holding at great levels. According to Rental Beast, a rental agency, the Boston-area vacancy rate for rentals is 3.7 % and rental rates have seen a 7% uptick over last year.
If the battle cry for real estate is “Location, location, location”, the cry for multi-family properties is “Tenants, tenants, tenants”. The quality of the location of someone’s real estate and its impact on the value of that home has a direct correlation with the quality of the tenants you have renting from you and the peace of mind you will enjoy as a landlord. The importance of references, both personal and professional, cannot be underestimated here. I have had potential tenants provide their parents as their former landlords, I’ve had a women provide her “john” as a reference and I’ve even had someone give me a reference to a previous landlord that they skipped out on and to whom they still owed money!! Clearly these folks were not putting their best foot forward but they made my decision process very easy.
I would strongly encourage you to be diligent in your research. You’ll be able to rest easier at night knowing that you did all you could do to ensure the quality of the person who will potentially be your neighbor and a vital source of income for you and your family. I think it is important to note that the “quality” of a tenant goes beyond their ability to pay on time. A tenant that I enjoyed as a neighbor for over a year was late with his rent nearly every single month. On the surface this would garner him not only a bad reference, but also an eviction notice. Looking beyond the rent payment, I saw a hard worker, a single father and a good person. He was also a skilled carpenter who helped out around the property, always called or emailed to warn me of the late payment, and he always paid within a week or so. I would take a tenant like that every time over someone who did not respect my property, was loud or rude, yet paid their rent on time. The lesson here is to look at the whole picture when evaluating your new neighbor.
Buying a multi-family property is a bigger risk than just a single family home. You are not only taking on a larger debt load, but you are also partially relying on tenants to uphold their part of the deal and contribute to the overall expenses of the property, albeit indirectly. If you can focus on the long-term and not worry about any month-to-month bumps along the way, your journey will be a more pleasant one. Keep in the back of your mind that there is someone else helping you pay your mortgage and asking for nothing in return other than a roof over their head. You should stand tall in the knowledge that because you were willing to take the risk, you are now living in an investment that will continue to pay dividends throughout your ownership.
