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Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | May 7th, 2014

With the U.S. employment picture gradually brightening, real estate specialists say more young families are now considering a move from their starter home to a larger property. Many such moves are spurred by a promotion or a salary increase.

"That means larger houses are selling well again," says Tom Early, a real estate broker and past president of the National Association of Exclusive Buyer Agents (www.naeba.org).

Of course, not all families crowded in a starter home can afford an upward trade. True, far fewer homeowners are now "underwater" on their mortgages than in the aftermath of the financial crisis. Even so, Early says that in many cases, equity is still in short supply.

But the outlook is better for those who didn't overpay for their first home and have gained appreciation in the last year or two.

"Many people who were conservative in their selection of a first home -- and who weathered the economic storm that hit in 2008 without falling behind on their payments -- are in a decent position to move now," Early says.

"For people who own stocks, there's also the 'wealth effect' from the stock market rebound, which has made (prospective buyers) more confident about their finances," says Eric Tyson, a personal finance expert and co-author of the "Home Buying Kit for Dummies."

In addition, homeowners are often prompted to move up if their family size is increasing.

"There's always the classic case of people starting a family and needing another room for the baby. That's one of the most common reasons people want bigger housing," Tyson says.

A growing family also means adults in the house may have had to surrender their use of a bedroom they used as a home office, to let the kids have their own rooms. But as Tyson notes, more people than ever want and need a dedicated home office space, especially if they telecommute at least some of the time.

What features do most young families seek in a trade-up property? Early says a large family room is typically near the top of the list.

"Anymore, most people don't demand a formal dining room or a formal living room. They're looking for space that's comfortable and large in useful ways. A family room is nothing if it's not big enough for that 65-inch TV," he says.

But Early, a veteran of the real estate business, says experience has taught him that it's critical for young families to approach a potential trade-up purchase cautiously. Here are a few suggestions:

-- Make sure you can truly afford a bigger home.

Tyson cautions buyers against committing to a much more expensive home without first considering the long-term spending requirements.

"It's not enough to know that a bank will let you borrow for a larger mortgage. You have to do some financial soul-searching of your own," Tyson says, noting the frequent disconnect between the maximum sum a bank will lend and the amount a family can truly afford.

He advises those considering a move-up purchase to attempt to project their future financial needs. To make basic calculations, he recommends the free online financial planning tools available through such mutual fund companies as T. Rowe Price (www.troweprice.com) and Vanguard (www.vanguard.com).

-- Factor in all related home expenses.

Some who covet a bigger house are willing to personally handle all the cleaning and maintenance tasks they face. But beyond upkeep expenses, there are other costs to factor into your calculations.

"Are property taxes rising in your area, and what's happening to your homeowners' insurance premiums? You can't overlook these indirect costs of ownership," Tyson says.

In addition, he says, it's necessary to take into account all the expenses involved with furnishing a larger property, as well as utility costs to heat and cool the place.

-- Do an assessment of real estate valuation trends in your area.

In recent years, home prices have recovered strongly in a number of popular neighborhoods, though in some cases price gains have recently slowed or stalled due in large part to ever-more-stringent mortgage lending standards.

Does that mean you can still find an affordable move-up property in a neighborhood that's likely to appreciate in value in coming years? Tyson says the answer to that question depends on the strength of the local labor market and economy.

"If the area you've targeted has unusually strong schools, that could help keep values high and rising. But if the area is already overbuilt with large houses, you'll likely have to wait longer for appreciation," Tyson says.

No matter the size of the home you buy, you should stay there for at least five years to make your investment worthwhile, according to Tyson. Many who've held real estate in strong neighborhoods for the long term have been richly rewarded.

-- Plan your move-up purchase with your major life goals in mind.

Early estimates that well over half his home-buying clients purchase as pricey a property as their mortgage lender will allow. But the rest undershoot their ceiling because they have other money goals as important as housing.

For example, he's worked with clients who place as high a priority on family travel or on private-school tuition as on luxury housing.

"There's nothing un-American about buying the fanciest house your pocketbook will allow. But before you do so, make sure you're not spending so much that you'll sacrifice other top objectives. No one wants to be so house-poor they can't live fully or meet the legitimate needs of loved ones," Early says.

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

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Turning 'Vacant' Into 'va-Can'

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | April 30th, 2014

A couple in their 50s ached to sell their four-bedroom family house in the suburbs in favor of a slower lifestyle in the country, where they could inhale fresh air and spend nights gazing at a star-studded sky. Soon after putting their property up for sale, they found and bought the perfect rural cottage.

Eager to move, they took all their furnishings to the new home, leaving their former house vacant. That made it much tougher to market the property, says Kurt Albers, the real estate broker who handled the listing. As he notes, when a house becomes empty, all its flaws become obvious to buyers. For example, they focus on marks on the carpet where furniture stood and on the walls where pictures once hung.

Visual eyesores aren't the only problem.

"Vacant houses often have a stale smell because the windows and doors are rarely open. And odors can be a huge barrier to getting a house sold," says Albers, who's been in the real estate business since 1994.

To make the house more presentable and get it sold promptly, Albers' clients followed his recommendations. They hired a professional cleaning crew to redo their carpets and painters to freshen the entire interior. They also ensured that all needed minor repairs, such as a shaky stair railing, were fixed. In addition, they brought back a select few items of furniture and hired a home stager to arrange them artfully.

"It's much better to market a house in move-in condition. That way, you sell faster and for more money than if the property is sold in 'as is' condition," says Albers, who's affiliated with the Council of Residential Specialists (www.crs.com).

He says a vacant house that lingers unsold raises buyers' suspicions and can encourage below-market offers from those who believe the sellers are under pressure to move.

Why is it usually harder to sell a vacant house than one that's attractively, if only minimally, furnished? Jane Fairweather, a veteran broker who heads a real estate team with multiple agents, says the problem is that most buyers lack visual imagination.

In fact, as she points out, in a market with ample inventory, a property that's vacant may not even make it onto a buyer's "short list" because it will not show well in online pictures.

"More than 90 percent of buyers meet houses for the first time on the Internet. Online, houses that are vacant look flat and lack perspective," Fairweather says.

-- Begin your listing at a realistic price point.

Sid Davis, a real estate broker and author of "A Survival Guide to Selling a Home," advises sellers to check out their competition and adjust their pricing accordingly before putting any property up for sale.

If nearby homes are selling at a rapid clip in your area, meaning you live in a so-called "high velocity" neighborhood, Davis says you can be more aggressive in your pricing. But if the local economy and unemployment rate show signs of weakness, you should enter the market at a price point that's very conservative. This is the best way to avoid the stigma of a slow-to-sell property.

-- Fix any cosmetic flaws in your vacant home.

Davis stresses that the sellers of vacant property can't afford to present their place in anything but pristine condition.

To maximize a sale, Davis contends it's essential that vacant homes be freshly painted on the interior, in a light, neutral tone.

He also urges the owners of vacant homes to replace worn carpet and refinish (or replace) hardwood floors that need work. In addition, they should fix any unsightly areas that visitors might encounter, such as scratch marks in a cast-iron kitchen sink.

"If you don't address the minor stuff, buyers won't be able to grasp the overall beauty of the house," he says.

-- Consider hiring a professional stager.

Eric Tyson, co-author of "House Selling for Dummies," says a vacant property needs a few well-chosen items of furniture so that would-be buyers can see the scale of its rooms.

Of course, you can always rent or buy furniture to outfit a vacant home. But Tyson says a better solution is to hire a professional home stager to lend you the "props" you need to present your place thoughtfully.

Your listing agent may be trained to provide staging services. Or you can turn to professional stagers' organizations to find leads in your area. One such group is the Real Estate Staging Association (www.realestatestagingassociation.com).

-- Maintain your vacant home in show-worthy condition.

As agents know, one plus of marketing a home that's vacant is that it's so convenient to show, without the need for complex arrangements with the family living there.

A vacant house doesn't suffer the problem of dirty dishes in the sink or kids' toys spread across the family room floor. But other things can go wrong. For instance, newspapers and litter can pile up on the front lawn. Light bulbs can burn out. A leak might develop in a bathroom faucet. That doesn't count the dust and cobwebs, which are a given.

You can always hire a neighborhood teenager to pick up newspapers and do routine yardwork. But Davis says it's also important to ensure that your listing agent keep a close eye on the property, stopping by at least twice each week.

"Looking after your vacant home is part of your agent's professional responsibility, and it's not that much of a burden," he says.

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

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How to Buy a Luxurious House Without Breaking the Bank

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | April 23rd, 2014

As statistics make obvious, the rich are getting richer. So, too, are the homes of the well-paid getting richer with amenities. That's according to the National Association of Home Builders (www.nahb.org).

A survey by the builders' group shows that newly constructed homes are growing in both size and price. Most now have at least four bedrooms, a three-car garage, a front porch and a patio. They have gourmet kitchens with granite countertops, a double sink, a central island and a linen closet. What's more, their ceilings soar to nine feet or higher.

But these swanker homes also require a higher income than in the past. In the current era of stringent mortgage lending standards, the median income required to buy a new home in America has ascended from $91,768 in 2005 to $107,607 in 2011. That's notwithstanding the decline in overall housing prices that occurred during the worst years of the recession.

"The lion's share of income gains has gone to the top. At the same time, people in the middle are spending much more for housing," says Robert H. Frank, a Cornell University economics professor and co-author of "The Winner-Take-All Society."

Is your middle-income family willing to make economic sacrifices to obtain a brand-new property? Yet, do you want to stretch your dollars in such a way as to avoid the kind of financial pressure that faces an increasing number of middle-income earners striving for a high-quality home?

If so, James W. Hughes, a housing expert and dean at Rutgers University, urges you to look beyond your monthly mortgage payments when determining if you can afford a given property.

"With rising property taxes and costs for home improvement services, you have to be concerned about the operating costs for a large space,” Hughes says.

To get a spacious and well-appointed home, some home-buying families are still willing to move to an outer-tier suburb where prices are lower on a per-square-foot basis. Yet, at the same time, an increasing number of buyers now have a strong preference for a home located near their job or one located in a "walkable urban center," says Christopher B. Leinberger, chair of George Washington University's Center for Real Estate and Urban Analysis.

Leinberger talks about a long-term "structural transformation" in real estate values that he projects will favor housing units which are conveniently located, while weakening relative values in more remote communities.

Are you determined to avoid becoming "house poor" BUT would you like to buy as large a home as possible in a relatively close-in area? In facing these tough trade-offs, these pointers could prove useful:

-- Assess the indirect commuting costs of any home you'd like to buy.

Hughes say too few homebuyers take into account how much their commuting costs could increase in the future.

"Cars are becoming more energy-efficient, but an increasing number of jurisdictions are charging tolls for highway use. Also, fares for public transportation are steadily rising," Hughes says.

If possible, he encourages homebuyers from a dual-income household to look for a property from which at least one spouse could walk to work or commute by public transit. That way, the household could reduce to a single vehicle, thereby saving a substantial sum on gas, insurance and car-related fees.

-- Factor in utility costs for the home you'd like to buy.

Granted, America is moving toward energy self-sufficiency, and some analysts are projecting a decline in the utility costs that homeowners will face in the future. But many homeowners have yet to see any reduction in their bills, Hughes says.

To avoid any utility-cost shocks going forward, Hughes strongly recommends that those shopping for a property look for energy-saving features, including double- or triple- pane windows and extra insulation.

Hughes recommends that anyone buying a resale property ask the current owner for two to three years' worth of utility bills to track the trend on these costs.

-- Consider upkeep expenses.

Those who buy a brand-new house from a builder with high construction standards can typically expect relatively low repair and appliance-replacement costs for five to 10 years. But chances are, you'll be less fortunate if you choose an older home, which could be especially pricey to maintain if it's large.

"Suppose you need a new roof for that older house, or a brand-new cooling system. You have to be sure you'll have money for those costly expenditures," Hughes says.

He also advises you to think twice about the upkeep costs of owning a house with a lot of wood trim and siding, which will likely need extensive repainting every few years.

One way to gain help in approximating future upkeep costs is to be sure that your home inspection is done by a well-trained inspector. One source of referrals: the American Society of Home Inspectors (www.ashi.org).

Are you contemplating a property with a large yard and expecting to hire a landscaping service company to keep up the grounds? In that case, Hughes says you can assume the cost of yardwork will increase in coming years.

-- Examine the trend for homeowner association fees.

Whether you're planning to move to a gated community in the suburbs or a condominium building in a city setting, the odds are you'll be subject to a monthly fee to cover the costs of maintenance, security and other common expenses.

But before you commit to any property with a monthly management charge, Hughes says it's wise to obtain detailed information on the history of these fees going back several years. That will help you determine if inflation has been a factor pushing up these charges -- a trend that could well continue indefinitely.

"You can assume homeownership will be more expensive going forward. So be super-careful to calculate all your costs and make sure you are very conservative in your estimates," Hughes says.

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

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