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Fix Your House Without Breaking Your Sanity

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | November 28th, 2012

Are you planning to sell your home in the new year? If so, real estate specialists say it's crucial that you do all the repairs and improvements needed before your property hits the market. That means fixing every leaky faucet, gash in the walls and shaky stair railing.

"These days, buyers have less and less tolerance for houses with problems. They want instant gratification. They don't want to move in and have to wait weeks or months to get a house up to standard," says Sid Davis, a longtime real estate broker and author of "A Survival Guide to Selling a Home."

Davis says it's never too early for sellers to get serious about home repairs and cosmetic improvements. But as he notes, finding competent and reliable contractors can take time -- especially now that a housing recovery is underway.

Though spending on home improvement dipped steeply in the aftermath of the recession, the outlook for the remodeling industry is now more positive, according to Harvard University's Joint Center for Housing Studies. For the first half of 2013, it projects double-digit growth in home-improvement spending.

Davis recommends extreme caution when hiring contractors for pre-sale work. Here are a few pointers:

-- Request contractor referrals through your listing agent.

For their clients' use, many established agents maintain lengthy lists of contractors, ranging from carpet cleaners to air-conditioning repair services. Such a list can be a valuable starting point for home sellers, says Eric Tyson, a personal finance expert and co-author of "House Selling for Dummies."

"Agents have a lot of pull with contractors, because they can send them lots of work over time. So the contractors know they'd better not mess around or delay the jobs an agent sends them," Tyson says.

But he says you "shouldn't take as gospel" the positive experiences your agent has had with any given contractor.

"The contractor may have slipped in the quality of his work or gotten too busy. So you'll still need references for every contractor you hire for a major project and also get at least three bids," Tyson says.

-- Make sure all your questions are answered before hiring a contractor.

"To be sure a contractor is organized and on time, you've got to meet with him before hiring him. A face-to-face meeting helps rule out sloppy or disorganized people," Davis says.

To ensure you don't get squeezed out of a contractor's schedule by a larger job, he says you'll want to find out whether the company is overbooked. You also need to know who will perform the work.

-- Insist that the contractor's promises are put in writing.

Davis says that those who know a contractor well often make the mistake of counting on verbal guarantees. But he says there's no substitute for a written contract that provides details on all aspects of the job, including price, timing and scope.

"Without a written agreement, you'll never get anywhere in small-claims court if the contractor turns out to be a con man. So unless it's a very small job -- like a plumber replacing a faucet or an electrician fixing a light fixture -- you'll want to have everything in writing," Davis says.

Davis also recommends you include in your agreement language indicating that the firm carries all the proper insurance coverage on its employees and subcontractors.

"Suppose one of the workers falls off a ladder and gets badly hurt. Without insurance, you could be held to blame and face a major lawsuit. Remember that any good contractor will carry insurance and be happy to show you documents to prove it," Davis says.

-- Don't let your contractors cut corners on government requirements.

Not all home repairs or upgrades require government permits to ensure compliance with local codes. For instance, your electrician probably won't need government oversight to change a light fixture and your plumber likely won't require it to replace a broken water heater.

But in many areas, major projects may be held to a higher standard. Examples could include the installation of a new bathroom or deck.

Perhaps you think you'll get a better price from a contractor who asks to circumvent government requirements. But as Davis says, skirting the law can be risky, especially for homeowners with plans to sell.

"It can come back to bite you if your contractors fail to get the proper permits for big jobs. That's because your buyer's mortgage lender may demand to see those permits for any major work you've done," he says.

-- Refuse to pay for the entire project at the outset.

It can be perfectly legitimate for a contractor performing a major project to ask for a partial payment at the front end, particularly if substantial material costs are involved.

For example, you could be asked for a down payment on a roofing installation job to pay for the purchase of shingles. And a house painter might reasonably request that you pay for paint, rollers and brushes before the work begins.

But Davis warns against covering the full cost of any work -- including all labor costs -- before it's completed. Those who pay for the whole job at the outset lose all the leverage they'll need later if the contractor fails to complete the work as promised.

"In most cases I recommend that people pay no more than 10 percent of the labor costs at the beginning. Good contractors have credit lines. They don't need your advances to get a job rolling," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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It Is the Time of the Season for Selling

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | November 21st, 2012

Are you a wannabe home seller who planned to get your place on the market during the spring-summer selling season but are only now ready to sell? If so, don't despair. It's still very possible to strike a good deal this winter.

Real estate specialists say that although housing cycles are always in flux, there's no one "right" season to sell.

"General economic factors -- like the health of the job market and consumer confidence -- are much more important than seasonal variations in determining how much a home is worth," says Fred Meyer, a veteran real estate broker and appraiser.

While buyers are typically more numerous in the warmer months, sellers are as well -- and that means stiffer competition for your property.

"After nearly 50 years in the real estate field, I'm amazed at how it all seems to even out from one season to the next," says Meyer, who sells property around Harvard University.

Winter home-seekers often tend to be more earnest, according to Eric Tyson, a personal finance expert and co-author of "Home Buying for Dummies."

"On-the-fence buyers disappear in the winter. Most people making winter moves are doing so for work -- either a job change or transfer. These are very serious, highly motivated buyers," Tyson says.

Here are a few tips for wintertime sellers:

-- Realize that your home's value doesn't depend on the season.

Mary Biathrow, a longtime real estate broker, says the factors that most influence price are independent of time frame. How much you get for your home depends more on the desirability of your neighborhood, the quality of your local schools and the condition of your home.

No matter when they sell, she urges owners to avoid the most common of home-selling pitfalls: pricing on the basis of wishful thinking.

"Too many sellers are in denial about the value of their property. If their house is worth less than before the recession, they don't want to face that fact. Also, many people are in denial about all the repairs their home needs to be ready for sale," says Biathrow, who's affiliated with the Council of Residential Specialists (www.crs.com).

"Nowadays, buyers are educated on price. They spend a lot of time previewing homes online before they even call an agent and to start looking around," Biathrow says.

She says younger buyers are especially tech-savvy and can tell right away if a house is overpriced.

-- Don't worry about moving your kids during the school year.

A common fear of winter movers is that their kids have to make a change during the school year. They fret that their offspring will have a tough time adjusting both in the classroom and on the playground.

But William L. Bainbridge, president of the SchoolMatch Institute, which provides comparative information on public and private schools (www.schoolmatch.com), says children who make a mid-school-year change usually fare better than those who move in the summer.

One reason is that mid-year switchers are often showered with attention from teachers and classmates alike. In contrast, those who start a new school in the fall usually receive less academic and social support, says Bainbridge, a professor of education.

"Changing during the school year is a highly exaggerated problem. Kids are very adaptable. Most do just fine in their new schools," he says.

So long as you've picked strong and appropriate schools for your children, he says you needn't worry about a winter transition. The only major exception involves students in high school who are taking challenging pre-college classes, including Advanced Placement (AP) courses. He recommends they wait until the end of a school semester or term to transfer.

-- Remember that the math could work in your favor when trading up.

As the economic recovery continues, home values have already begun rising in many neighborhoods. But if you're living in an area where a housing recovery has yet to take hold, you might be tempted to wait until next spring or beyond, hoping your place might regain the value it lost.

However, Biathrow says this strategy may not be the best approach for sellers who now find themselves in the financial position to move up to a larger or fancier home in the same general area.

The reason has to do with simple math. Assume, for example, that in your neighborhood both starter homes and upper-end properties have lost the same percentage of their value since the recession hit. In that case, the discount you obtain on your trade-up purchase will more than outstrip the cut you take on the home you've sold.

"In a weak market, buyers moving up can do better than sellers moving down," Biathrow says.

-- Go light on the decor if you're selling during the holidays.

Have you decided to take the plunge and sell around the winter holidays? If so, Biathrow recommends you keep your decorations simple.

"Unless your rooms are large, this year you won't want a huge Christmas tree and a lot of bows and boughs everywhere in the house. Too much decor makes a home look overfilled. And no one wants to buy a place that seems crowded," she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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Overpaying: Don't Start, Bid Smart

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | November 14th, 2012

Few would have believed it just a few short years ago, but the housing recovery has come far enough that in an increasing number of popular neighborhoods, buyers must now compete with rival bidders.

Are you a buyer seeking a home in a high-demand market? If so, real estate specialists say that you could be at risk of overpaying.

"Overpaying can be a real danger -- especially if you're one of these idiots who gets revved up when facing competition and wants to win no matter what," says Sid Davis, a real estate broker and author of "A Survival Guide for Buying a Home."

Of course, the risk of overpaying is that you won't recoup your investment when you move. That's especially likely if you have a career that requires you to move often.

"I'm not so concerned about people overpaying if they really expect to stay in the house for 10 or 15 years. But if you're not sure how long you'll stay, you've got to be cautious," says Leo Berard, charter president of the National Association of Exclusive Buyer Agents (www.naeba.org).

Do you plan to bid on a particular property that's for sale in a highly desirable neighborhood? Yet do you fear overpaying? If so, then even some basic research on local property values could help put your mind at ease.

Berard says astute buyers narrow their search for information to the exact area where they intend to buy. Data gathered on state or national real estate trends will have little relevance for you as you seek to learn more about values in your target area.

In fact, homes could be worth more in one section of a neighborhood than another, due simply to differences in housing styles.

A strong knowledge of local property values helps you craft an offer at the right price point, thereby reducing your chances of overpaying.

Here are a few tips for buyers intent on getting a fair deal:

-- Seek Internet information as a starting point.

Many websites now offer fast and free estimates on property values and can prove a valuable resource, Berard says. One example he cites is Zillow.com, which lets you search data at either the property or neighborhood level.

"To get started with your research on home values, these sites are a good starting point," he says.

However, statistics from websites are no substitute for guidance from a capable real estate agent with extensive knowledge of the area where you're looking. The right agent may even be able to recite recent sales figures from memory. But Internet information can be a good complement.

"Spend an hour or two one morning on the right websites and you can move up the learning curve while still in your pajamas," Berard says.

-- Ask your real estate agent for help evaluating any home you're considering.

The classic technique used by real estate professionals to estimate a home's value is called a "Comparative Market Analysis." This method is grounded in data on recent sales of similar homes to the one being judged.

"If you're looking in a community with lots of houses that have uniform floor plans, the process is pretty straightforward. But that's not the case where lots of houses are custom-built," Berard says.

In any case, your agent should find at least three completed sales that are roughly comparable. Then she or he should add and subtract value based on differences between the home you like and the others.

Real estate agents are the first to admit that their judgments on property values are based on more than data.

"Unfortunately, coming up with an opinion of value is never totally scientific. Your agent also has to draw on experience," Berard says.

-- Take neighborhood economic trends into account.

During a period when real estate markets are relatively volatile, as they are now, Berard says you need to look beyond closed deals to see where values are heading.

"Housing prices don't rise or fall as quickly as stocks on Wall Street. But over time, economic factors can have a big impact," he says.

In a suburb that's heavily reliant on one employer, such as a defense contractor, a wave of layoffs by the company could reduce property values nearby. On the other hand, values could rise in a community that's benefited from a school boundary change.

-- Request seller "concessions" rather than a lower price.

As a real estate broker, Davis recently helped a middle-aged woman buy a place for her elderly mother. It was an accessible, ranch-style home in a popular neighborhood where a number of properties were on the market at the time.

The statistics gathered by Davis for his client indicated that the two-bedroom condo was fairly priced. They also showed a high level of inventory in the area, which strengthened the purchaser's bargaining power.

Even so, Davis advised the buyer to offer full price for the place, while at the same time seeking a sizeable amount of seller assistance with her closing costs. The sellers readily accepted the deal and the elderly woman was soon able to move in.

Often sellers are much more willing to yield on closing costs than on the price, Davis says. This helps protect their pride.

"It's a cliche in real estate that people like to crow about how much they 'got' for their house. But when they boast, they never mention how many concessions they made," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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