Thinking about Home Remodel?

It's time for the annual results of Remodeling Magazine's 2007 look at the return on home remodel projects. Basically, the return on projects trended down from 2006, a not-too-surprising result nationally due to rising costs and slowing home appreciation. The Pacific West was an exception, though. In July and August of 207, REALTORS® in 65 markets were asked to speculate on the return of project costs, and the Pacific region agents estimated 100 percent return or more for six projects: a wood deck addition, a minor kitchen remodel, fiber-cement siding replacement, wood window replacement, and an upscale wood and vinyl window replacement. Note these are all exterior projects except for the kitchen.

Home office remodels nationally bring the lowest return on remodels. The projects that bring the highest return seem to be based on the buyer's needs, i.e., a minor kitchen remodel which brings one of the highest returns. Careful thought should be given on types of room conversions--reducing the total number of bedrooms to enlarge or create the master suite may be a negative reduction for buyers. When a buyer's space needs match those of the seller's, there is likely to be a high return on a project, so knowing the local demand is important. So if you're a seller thinking about what to re-do, even if you're not going to sell for some time into the future, consider "universal" projects which could be identified with by a prospective buyer.

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Do Abandoned Oil Wells Impact Your Neighborhood

In early Southern California real estate, homeowners were enticed into additional income by having an oil well, literally in the back yard behind a little bungalow house. On a larger scale, oil was drilled for in certain areas which coincide with earthquake fault lines. Many were capped and ultimately receded into dim memory. But no longer. The presence of these wells could have an impact on a seller's use of their property.

While this map gives only the overview, you get the idea of how many active (green) and abandoned (red) oil wells there are in the Long Beach area alone.

The City of Huntington Beach considers this such a vital issue that a report is required by law to be made by a seller as to the whether or not any such wells were ever present on a property.

According to the company which maps these wells, there are 4,000 abandoned wells in Long Beach, 1600 in Signal Hill, and 3600 stretching from Seal Beach to Newport Beach. For a larger version of this map, just e-mail me.

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Do Foreclosure Properties Always Sell Under Market?

"Foreclosed properties sell way below their market value," per Foreclosure Times.com. This is the kind of myth that spreads quickly, and often to the detriment of the investor or buyer.

A lender may buy or take a property back below market, but will price the property as near as possible to local market values in order to recoup their loss. Why would it do otherwise? An example: A Long Beach property where the total loans taken out were approximately $580,000. The property in my CMA analysis had a market value of $645,000-$650,000 in early 2007 if certain improvements were made before going on the market. Eventually, the property was on the market for 6 months, did not sell, even at $599,000, and went into foreclosure. The tax records show the lender took it back for $400,000 (the seller originally bought it for $475,000 about one year prior.) Two months later in October 2007, according to the tax records, it sold for $650,000 to a new owner. That was not an undermarket price.

Another example is an upgraded single family home in Palmdale which was first listed for $399,000 and eventually dropped to $279,000 and still did not sell. After going into foreclosure, the asset management company recently listed it for $329,000.

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Property Tax Reduction

Don't pay more property taxes than what your current market valuation indicates. If you bought property 2 years ago, or less, then you probably want to keep close track of your local selling prices for properties similar to yours. For information on how to apply for property tax reduction, go to the Los Angeles County Tax Assessor's site located at the right column and download the form. You will need to provide certain information about sales within a certain time period for this year, plus get the form submitted by the date stated. For sales information to help you in this process, contact me, I will be happy to help you in your market sales information.

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The Things That Help a Listing Sell

In a market where the inventory is over 6 months in many areas, buyers have a lot more homes to view before deciding to make an offer to the seller. Sellers have much more competition. Buyers have more time to compare. In any market, however, it's always wiser for sellers to prepare their home for sale, and here are some photos of a refurbished house waiting for a buyer.

Not everyone can or will pay a professional stager to set up their home, however, just getting the basics will take a seller a long way:

An uncluttered home that is clean, enough furniture to create the scale of the room or rooms, and the right size furniture so the room does not feel crowded; enough personal possessions so the buyer can identify with the space, yet not too many personal items such as a large number of family photographs that will snag or distract the buyer's attention away from the focus of viewing the house as their potential home; soft or neutral colors that create a background for the buyer to imagine himself living there with his furniture; shiny hardwood floors or a cleaned carpet; clean bathrooms and kitchens with shining counters; a coat of paint and well done repairs. Outdoors, fresh flowers and a raked and watered lawn or other landscaping creates "curb appeal" when the buyer arrives for the showing.

The home in this example is a 2 bedroom, 2 bath single family house listed for $869,000 and has been completely refurbished by the owners/listing brokers Laura and Richard Martin of Laurich Realty.

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10 Biggest Buyer Mistakes

If thoughts about buying are holding you back, take a look at my presentation by clicking on the title (you can even leave your comments there if you want), then ask yourself what would it take for you to take that step. Would saving money do the trick? Most people are saying, "Yes, but the asking prices are still too high, and I'm waiting for them to come down."

But what if your monthly payment was lower? There is a way to negotiate pre-paid interest up front which can be paid by the buyer or the seller, that "buys down" the buyer's loan rate from the 30-year fixed rate and may save the buyer as much as $250 a month.

Don't wait for prices to come down if you can negotiate the same lower monthly payment now!



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What Repairs Is A Seller Supposed to Disclose?

The recent fires in Southern California unfortunately destroyed over 1600 homes, and while I don't know for a fact, some may have been in escrow. I know I saw "for sale" signs in front of some houses shown on TV coverage. First of all, the California Association of Realtors has established a Disaster Relief Fund for the fire victims, including fellow Realtors; the National Association of Realtors is contributing $500,000.

If you were lucky enough to escape major damage or total destruction, this information from CAR's legal advisors might help you now or in the future for selling your home (it applies to other situations as well) when you're wondering what the law says about potential disclosure issues:

"Q. Must a seller disclose the fact of a fire when there was major damage to the property but it has been repaired?
A. California law does not clearly answer whether a seller must disclose past property defects and repairs. At the present time, the law does not appear to require disclosure of past defects and repairs unless the problems may be persistent. In other words, a defect which has been fully repaired and no longer threatens the value or desirability of the property probably need not be disclosed. On the other hand, defects which are difficult to remedy and which may continue to plague the property may have to be disclosed. Given some uncertainty in this area of the law, many sellers may prefer to resolve doubts in favor of disclosure to minimize the risk of liability."

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You Can Lose Out by Waiting To Buy

I decided to make my post on another blog a subject for today. A reader comment at another blog prompted me to respond. The reader's reference was to Option ARM's and that they would wait to buy a home instead of getting this type of loan. which received so much bad press recently in the media. These are not the only available loans, although electronic media would have you believe that according to their massive single-topic coverage agenda. Good advice to prospective home buyers is the same now as 10 years ago--educate yourself as to your loan options, that may mean speaking to more than one broker, or asking a broker to draw up 2 or 3 scenarios for you based on different factors, such as interest rate, down payment, 15 or 30 or 40-year loan, interest-only, FHA or conventional, 1st-time homebuyer plans, down-payment assistance plans. If you first speak to your REALTOR, he/she could save you time and energy in your early loan-shopping stages by discussing some basic terms and strategies.

"Have you tried to find a loan that would work for you that’s NOT an option ARM? Option ARM’s by the way are very workable loans for the right buyer, but have you looked into a buydown loan, for instance. They were going back in the 90’s during the recession and have come back again. Essentially, part of your loan interest is pre-paid (a negotiable item with the seller if you ask) and you save money on your initial payments for the first 2-3 years before you come up to the regular 30-year fully indexed rate you agreed upon in your loan. The market is still good on numerous loan options, the key thing is having a good FICO score, but still, FHA loans (if you fit in its loan amount cap) are a good route to go if you have a score as low as 580, just know they look at you and all your risk factors and there are going to be letters of explanation for your situation. FHA loans have PMI, but that PMI is now tax deductible. Then there’s 80/10/10 conventional loans. And last, but not least, seller carrybacks are re-emerging, again a negotiated item but very successful with the right seller. So don’t close the door until you’ve looked into all the corners!"

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Long Beach's University By The Sea - October 28th

A great event this Saturday: film, classes, a tour into the old Jergins Tunnel which has been closed since 1967.

An unbeatable event! Click on the title to go to their web page for all the free events and indulge in some past history.

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Attractive Loan Options

A lot of people are taking a look at the Best Places to Live lately.

First time buyers should know that there are programs returning to the loan market that have not been very active for some time. California's Housing Finance Agency has an excellent program which offers several features depending the buyer(s). In the past, the income caps on such programs were often too low to assist many buyers, but on this one, Los Angeles County guidelines allow over $80,000 annual income for up to two buyers, with higher amounts for 3 or more buyers and more units. The interest rates are more competitive than regular conforming loans, and there are features allowing for assistance in closing costs payments and down payment coverage through this program. And, this loan is available for a FICO score as low as 620, pretty unusual in today's loan environment.

FHA loans are still bound by the same loan limits--there has been a push to increase the loan limit for California due to the higher market. They also have a variety of features for down payment assistance and closing costs, however, HUD, this month, just disallowed the seller from helping on the buyer's down payment as their tracking showed there was a much higher default on this type of loan (this kind of assistance has never been available on conventional loans). But all the other loan options remain the same, including government sponsored assistance, employer assistance, and down payment from a relative. FHA loans require PMI which previously was not tax-deductible, however that changed as of January 1, 2007, making FHA loans more "user-friendly". They already have the advantage of having extremely competitive rates with certain programs. FHA loans basically have more liberal lending guidelines, including not using FICO scores (but they do look at the overall buyer risk profile), because their sole purpose is to assist buyers in need.

This IS a good time to be a buyer; and, if you're waiting for the market to come down before you buy, keep in mind that most buyers and sellers are about 2 years behind the market, so by the time you think it's a good time to buy, the market could have changed already. And real estate prices are local, so for updated information on pricing for an area you're interested in buying or selling, feel free to contact me for a market analysis.

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