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Homebound Owners: Preparing for a Delayed Sale

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | March 25th, 2020

There’s no sugarcoating the reality: Real estate specialists acknowledge that due to the coronavirus outbreak, the usually robust springtime home-selling market has slowed to a near standstill in many areas, with both buyers and sellers backing off.

“No one knows for sure but it’s likely many sales that would have occurred this spring will have to wait until the summer, fall or maybe even longer,” says Stacy Berman, a veteran real estate agent who specializes in the luxury segment of the market.

National Association of Realtors chief economist Lawrence Yun says a new survey of real estate pros reveals that nearly half report a decline in buyer interest due to the outbreak. Numerous sellers are also retreating from the market, canceling open houses and other showings.

“The decline in confidence related to the direction of the economy, coupled with the unprecedented measures taken to combat the spread of COVID-19, ... are naturally bringing an abundance of caution among buyers and sellers,” Yun says.

But economists emphasize that the current downturn is fundamentally different than the housing crisis of 2008, which led to a serious, albeit temporary, decline in property values. One major factor that’s different this year is that property in popular neighborhoods remains in short supply.

“With fewer listings in what’s already a housing shortage environment, home prices are likely to hold steady,” Yun says.

What’s more, demographic trends should continue to support a strong housing market after the outbreak ebbs. That’s because numerous older homeowners need to eventually liquidate large family properties to support themselves in retirement. Meanwhile, many young adults are anxious to move forward with a first or second-time purchase.

Berman urges potential home sellers to roll up their sleeves and take full advantage of their homebound days to prepare in advance for a successful sale when ultimately that occurs.

“I suggest you seek guidance from your listing agent about do-it-yourself projects that could make a big difference later when your property goes on the market,” she says.

Here are a few pointers for homeowners planning a future sale:

-- Muscle through clutter accumulations during your homebound hours.

Vicki Norris, a professional organizing guru, says one of the most crucial steps in preparing a property for sale -- ridding it of excess furniture and accumulations -- is also one of the least expensive and accessible to those now homebound.

“Chaos and other people’s stuff are instant turn-offs to buyers. So your collection of memorabilia can cost you the eventual sale of your home,” says Norris, author of “Restoring Order to Your Home.”

Given that many potential sellers have time on their hands now, they can focus on decluttering projects that wouldn’t have fit into tighter schedules in the past. However, to execute an effective decluttering plan, one that will make your place look clean and clear, many owners do well with a team effort to keep them on track.

School closures due to COVID-19 have many students home for extended periods. If that’s the case with your family, and you need reinforcements to assist with cleaning and culling in advance of your home sale, Berman suggests you consider hiring your offspring to help.

-- Tackle simple kitchen renovations if you’re handy.

Sid Davis, an independent real estate broker and author, says your kitchen should be the focal point of your pre-sale home improvement program, but that upgrades in this part of your property needn’t be as elaborate as many imagine.

“Some of the most important projects cost around $1,000 to $2,000 each,” says Davis, author of “Home Makeovers That Sell.”

Davis doesn’t recommend that homeowners embark on do-it-yourself projects unless they have basic skills or training to tackle the work. And he definitely dissuades nearly all owners from taking on major electrical, plumbing or roofing work.

Still, there are many small kitchen projects that could be appropriate for homebound sellers. One typically involves improvements to kitchen cabinets.

“If you have wood cabinets, you can make them look a lot better through a thorough cleaning with Murphy Oil Soap, followed by a rubdown with lemon oil. If that doesn’t do the trick, sand and restain your cabinets or paint them in a high-gloss white. Also, be sure to add new hardware, which shouldn’t cost you more than $50,” Davis says.

Another low-cost kitchen improvement involves replacing worn flooring. Davis says the skills needed for this task are easily acquired through an online class from a home center store.

“Vinyl flooring is the cheapest, but the price for a nice tile floor has come down dramatically,” Davis says.

-- Embark on interior painting jobs.

One proven strategy for adding appeal to your interior is to paint the walls and trim throughout. For advice on painting technique, consult the websites of major paint companies.

“The only major element to a good painting job involves solid preparation, mainly sanding and surfacing -- and attention to detail,” Davis says.

Though painting is a cost-effective way to put your property in peak selling condition for a small amount of cash, he says it’s essential to select your paint carefully.

“Relative to its impact, paint isn’t expensive. However, grades vary widely. To get a good grade, you spend extra per can. But the quality differential for excellent paint makes a huge difference,” Davis says.

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

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Tips for Seniors Who Want a Second Home

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | March 18th, 2020

Many seniors close to retirement aspire to finally buy a second home in a vacation setting. Surprisingly low mortgage rates make that goal seem all the more viable at present. Yet because the volatile economy is now eroding savings accounts, many want to be doubly sure they’re making a safe move.

Take the case of a self-employed couple in their early 60s who dreamed of building a mountainside cottage. But before signing a contract, they first reviewed their finances.

To be sure they were on solid ground, the couple headed to the office of Shawn Koch, a certified financial planner. She helped them compare their savings against their expected future cash flow needs in retirement. She also factored in the Social Security benefits they could collect to help cover their income needs during their non-working years. This gave them the confidence to move forward with their plans.

The reason this self-employed couple could afford to fulfill their home-building plans was that they’d lived frugally and built a sizable retirement portfolio. Equally important was that both could qualify for substantial Social Security benefits once they reached 66, what the government currently defines as their “full retirement age.”

“Although it will never make you rich, collecting Social Security is like purchasing a government-backed annuity with built-in cost-of-living adjustments for the rest of your life,” Koch says.

Lesley Brey, the founder of a fee-only financial planning firm who’s developed an expertise in Social Security, urges anyone contemplating retirement to wait beyond age 62 before starting to collect their benefits, assuming they can afford to do so.

“Social Security benefits are for the rest of your life -- however long you live. People shouldn’t give up this longevity insurance lightly,” says Brey, who’s worked in the financial planning field since 1997.

Here are a few home-buying pointers for those nearing retirement:

-- Seek help to outline a retirement budget.

Eric Tyson, a consumer expert and co-author of “Personal Finance for Seniors for Dummies,” recommends that before they start shopping for a second home, seniors ask an accountant or financial planner to help them develop a retirement budget. Alternatively, they can create their own budget with the use of one of the free retirement calculators available on the internet through such companies as Vanguard (vanguard.com) or T. Rowe Price (troweprice.com)

In making your calculations, Tyson, who formerly worked as a financial counselor, strongly recommends you assume you’ll survive into your 80s or even 90s.

The only people who can afford to assume an abbreviated life span, Tyson says, are those diagnosed with serious medical issues.

-- Avoid claiming Social Security benefits just to fund your second home.

Brey says once they’re eligible, many people find the notion of tapping benefits tantalizing. This is especially likely if they’re anxious to purchase a second home.

“At age 62, the temptation to start drawing Social Security benefits right away can be very, very strong,” she says.

But Brey urges anyone who can hold out for larger retirement benefits at age 66 or beyond to do so. And she says it would be particularly unwise to claim early, with lesser benefits, for the purpose of helping fund a second home purchase.

“In case you live to 94, you want to be sure you have a sufficient financial buffer,” she says.

-- Factor lifestyle preferences into your second home decision.

For many who’ve long been attentive to the need for retirement savings, Tyson says Social Security represents a relatively minor component of their retirement plans. Those with a large nest egg can typically afford to wait until age 66 or even later to start collecting benefits.

Moreover, many in this group can consider the purchase of a second home without reliance on Social Security to help cover their mortgage payments.

As Tyson notes, some financial planners are biased against buying real estate in the years prior to retirement. After all, many planners (except those who work on a “fee-only” basis) make their living on commissions from the sale of investment products, as well as insurance, and not real estate.

But Tyson says people who’ve amassed a large war chest of retirement assets or who are entitled to benefits from a healthy traditional pension program, or both, could now be well-positioned to actualize a second home purchase.

“Preparing for retirement is not all about numbers. It’s also about having a great quality of life going forward,” he says.

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

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Tips for Buyers in a Tough Market

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | March 11th, 2020

Mortgage rates are spectacularly low, yet many wannabe homeowners are feeling anxious about their odds of scoring a successful purchase. The list of their fears is growing ever longer.

Buyers are fretting about the steady rise in home values, causing them to fear they’ll be priced out of the market. As of December, prices across the country rose 3.8% on an annualized basis, and many popular metro areas reported even bigger jumps, according to the widely watched S&P CoreLogic Case-Shiller National Home Price Index.

Meanwhile, economists say buyers are now petrified they’ll lose out to fellow purchasers due to a serious shortage of available property -- a shortage that’s especially acute in metro areas where first-timers wish to live and where the job base is very strong.

“Low mortgage rates have brought buyers back into the housing market, but a lack of listings means buyers are having to compete with one another to secure a sale and lock in a mortgage rate,” says Daryl Fairweather, the chief economist at Redfin, the real estate brokerage firm.

Added to these concerns among wannabe homeowners are general uncertainties about the U.S. economy.

“It’s not as carefree as it once was to contemplate a first-home purchase, which many still consider the centerpiece of the American dream,” says Merrill Ottwein, a longtime real estate broker.

Yet Ottwein -- who works primarily with buyers, not sellers -- says many young owners who faced their fears squarely are glad they bought as soon as they could.

“Don’t let worries divert you from your basic objective of homeownership,” says Ottwein, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

Here are a few other pointers for buyers:

-- Take counsel from your elders who bought homes years ago.

Ottwein, who’s sold homes for decades, encourages you to listen to older friends and family members who bought property years ago. It’s very likely your parents were happy they bought a place as soon as they did, despite fears about paying too much.

Also, with mortgage rates hovering near record lows, your elders will likely remind you there’s no guarantee that rates will always remain in the low single digits.

Of course, no adult American of any age can forget the real estate downturn that occurred around 2008, causing properties to drop in value and foreclosures to occur in numerous cases. But the reality is that foreclosures are now rare and that in most neighborhoods, property values have more than rebounded in the intervening years.

-- Look to a trustworthy mortgage lender for guidance.

In this era of conservative lending, most mortgage lenders are going to great lengths to ensure that the loans they originate are solid. This means borrowers must be very prepared to respond to the lender’s requests for documents.

“The right lender will help make sure you assemble every single document needed to get your loan approved,” says Sid Davis, a real estate broker and author of “A Survival Guide for Buying a Home.”

As proof of income, many lenders now insist on much more than the customary pay stubs and W-2s. For example, they’ll likely ask you for tax returns. In addition, they’ll probably want assurances that the funds you’ve amassed for your down payment have been in your savings or checking account for some time and weren’t borrowed from a family member five weeks ago.

“Lenders are more risk-averse now on how much they’ll lend. But the good ones can offer you a lot of guidance as you go through the process,” Davis says.

-- Hold out for the right property, even in a tight market.

In the most coveted neighborhoods -- especially those that are considered “walkable” to restaurants, stores and public transit -- many buyers feel under pressure to bid quickly on homes that surface in their price range and to offer even more than the asking price to outdo rivals.

“Competition pushes up prices, which means that even though buyers can get a good deal on a mortgage now, they are often paying a higher sticker price,” says Fairweather, the Redfin economist.

Still, veteran real estate pros caution against competing for any home that’s an obvious poor choice for you. For example, no matter how attractive the neighborhood, a couple with three kids is unlikely to do well in a two-bedroom house.

“Those of us who’ve worked with buyers for many years know that you don’t want to jump the gun on property selection, regardless of the market. Have faith that if you wait a short while, a house that’s a better fit for your family will soon become available. I’ve seen a reasonable level of patience rewarded countless times,” Ottwein says.

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

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