Real Estate News from Montalvo Realty of Saratoga

Three tips for staging your home to sell

2012-02-07T10:59:00.000-08:00

Today's buyers are looking for turnkey homes. That is, they want to move right in without having to do a lot of work. Buyers with busy lifestyles pay a premium for listings that are in prime condition. Staging can make the difference between a listing selling or not, the time it takes to sell, and the ultimate sale price.

Sellers who are financially strapped often have a hard time accepting that they'll need to invest in preparing a house for sale even though they may sell for less than they paid. Fix-up costs can mount up; your agent can help you prioritize so that you don't waste money. It's important to keep your goal in mind, which is to sell your house in a difficult market.

Recently, a home in an affluent city came on the market in "as is" condition. It had been lived in for decades without much upgrading. Although located in a desirable area, the listing was vacant, dark and showed poorly. The sellers refused to do any work to improve its appeal.

After months on the market with no significant interest, the sellers pulled the house off the market and made improvements. The wall-to-wall carpet was pulled up to reveal hardwood floors that were then refinished. Painters lightened the interior and a professional stager was hired to bring in furniture, artwork, house plants and accessories. The listing was put back on the market with a fresh look and sold right away.

HOUSE HUNTING TIP: Although listings staged by a good decorator show well and often sell quickly, you don't need to spend a lot to put your home into shape for marketing. Most homeowners have too many personal possessions in their home from a sale standpoint. Decluttering is something most sellers need to do.

Consider hiring someone to help you sort, pack, donate and recycle items that you no longer want. You may be able to take a tax deduction for things you donate. Make sure to get a receipt. Your real estate agent should be able to recommend someone who can help you clear your house of clutter if you are overwhelmed by the project.

Your agent, or stager, may ask you to put away collections of art, personal photos, etc. This can be difficult for most sellers because, for them, it's part of the emotional appeal of their home. Your house won't look like your home after you've removed personal possessions and moved what's left around to display the house to its best advantage.

That's the point of the preparation process. You don't want prospective buyers focusing in on your personal property; you want them to focus on the house. Keep in mind that how you live in your home and how it should look when it goes on the market are not the same.

Some sellers complain that their house looks too stark without all their possessions. Even so, it helps you to detach yourself emotionally from the property. Also, less personal property usually gives homes a more spacious feel. When buyers are looking for the most for their money, bigger is usually better.

To close the deal, a listing should be spotless and inviting. Bring in new house plants to put in strategic locations, like orchids in the bathrooms. In dark spots that need a dash of warmth and color, use bromeliads.

THE CLOSING: If you can't pull this together yourself, or with the help or your agent, hire a good stager for a consultation or a proposal for full or partial staging.

Dian Hymer is a real estate broker with more than 30 years' experience and a nationally syndicated real estate columnist and author.

Refinance or modify while it's still possible

2012-02-06T12:18:00.001-08:00

By Jack Guttentag

Interest rates have been very low for several years, and right now they are lower than ever, yet millions of mortgage borrowers who could profit from a refinance haven't.

Similarly, millions of borrowers who are having trouble making their mortgage payments but want to remain in their homes could have their mortgages modified to make the payment affordable but haven't.

The reasons in both cases probably include apathy, resignation and ignorance, but this article is about ignorance only. Many borrowers are even hazy about the difference between a refinance and a modification.

Refinance vs. modification

In a refinance, you take out a new mortgage, either from your current lender or from a different one, and use the proceeds to pay off your existing mortgage. In a modification, the terms of your current mortgage are changed by your existing servicer, usually for the purpose of reducing the payment.

Most often this involves an interest-rate reduction, but it may also include a term extension and, in some cases, the loan balance may be reduced.

A refinance is a market-based transaction entered into by a lender who wants the new loan. A modification is an administrative measure designed to prevent the costs of a foreclosure. In both cases, however, the borrower must document an ability to make the new payment.

Refinance profitably if you can

In general, borrowers should refinance if a profitable refinance option is available to them. A refinancing will not drop a borrower's credit score, while a modification will. Refinancing borrowers can deal with their existing lenders but are free to shop alternatives.

A modification is a lot more complicated, takes a lot more time, and borrowers are wholly dependent on their existing servicers, which means that they have no bargaining power.

Qualifying for a refinance vs. qualifying for a modification

Declining home values have severely restricted the ability of many borrowers to refinance by eroding the equity in their homes. (Equity is property value less the mortgage balances.) With an important exception noted below, borrowers who have negative equity cannot qualify.

Borrowers with equity of 3 percent to 20 percent can qualify if they purchase mortgage insurance, which in some but not all cases will eliminate the profit from the refinance.

Borrowers with equity of 20 percent or more are best positioned to refinance profitably. In contrast, insufficient or negative equity will not bar a modification.

A low credit score will also prevent a refinance, but not a modification. Because lenders have become extremely risk-averse in the post-crisis market, credit scores have increased in importance and are related to equity.

On a Federal Housing Administration (FHA) mortgage, for example, the minimum score is usually 620, but a 620 score may require equity of 15 percent. If the borrower's equity is the minimum of 3 percent, the required credit score is likely to be 660.

Borrowers who have suffered income declines to the point where the ratio of housing expense to income is viewed as excessively high will have their refinance applications rejected. However, an income decline of this magnitude will not necessarily prevent a loan modification.

On the contrary, an income decline that weakens the ability of the borrower to continue current payments but still enables the borrower to afford lower payments is the major problem loan modifications are designed to meet.

Borrowers can check on whether they qualify for a refinance using the new qualification calculator on my website.

The HARP exception

The earlier statement that borrowers with negative equity cannot refinance has a major exception: If their loan is owned by Fannie Mae or Freddie Mac, they are eligible for refinancing under the Home Affordable Refinance Program (HARP). This program was recently extended and liberalized.

The previous negative equity ceiling of 25 percent was eliminated for fixed-rate mortgages; fees were reduced; the requirement for a new appraisal was eliminated in some cases; and incentives were provided to the lenders servicing the loans to refinance them.

Qualifying for a modification

Determining whether a borrower is eligible for a modification is a complicated exercise on which the rules are anything but clear. The government-supported program, which differs from the strictly private programs, requires that the borrower's income be large enough to afford a reduced payment but it cannot exceed 3.23 times the current mortgage payment. Further, the borrower cannot have "sufficient liquid assets" to make the payments, whatever that means.

In addition, the owner of the loan must be better off with the modification than without it, which is determined by a complicated algorithm that is available to servicers but not to borrowers or to me. The servicer has the final say.

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

REO, preforeclosure properties selling at a larger discount

2012-02-06T12:17:00.000-08:00

Share of distressed real estate sales dips in Q2

By Inman News

The share of bank-owned homes and homes in some stage of foreclosure dropped 5 percent from the first quarter to the second quarter, falling from 36 percent to 31 percent, but was up from 24 percent in second-quarter 2010, according to a report released today by foreclosure data provider RealtyTrac.

And distressed properties are selling at a larger discount these days, RealtyTrac reported:

• The average sales price of a bank-owned (also known as real estate owned or REO) home was $145,211 in the second quarter, which was about 40 percent below the average sales price of a nonforeclosure home. That compares with a 36 percent discount in first-quarter 2011 and a 34 percent discount in second-quarter 2010.

• The average sales price of a preforeclosure home (preforeclosures, which are homes in default or scheduled for sale at public auction, are often sold in a short-sale process) was $192,129 in the second quarter, which is 21 percent below the average sales price of a nonforeclosure home. That compares with a 17 percent discount in first-quarter 2011 and a 14 percent discount in second-quarter 2010.

There were 162,680 sales of bank-owned homes to third parties in the second quarter, RealtyTrac also reported, roughly flat compared with the 162,900 reported in the first quarter and down 10 percent from second-quarter 2010.

REO sales accounted for 19 percent of home sales in the second quarter, compared with 23 percent in the first quarter and 15 percent in second-quarter 2010.

There were 102,407 sales of preforeclosure homes to third parties in the second quarter of this year, up 19 percent from the first quarter but down 12 percent compared to second-quarter 2010. These sales accounted for 12 percent of sales in the second quarter of this year, flat with the first quarter and up 10 percent compared to second-quarter 2010.

"The jump in preforeclosure sales volume, coupled with bigger discounts on preforeclosures and a shorter average time to sell preforeclosures, all point to a housing market that is starting to focus on more efficiently clearing distressed inventory through more streamlined short sales -- at least in some areas," said James Saccacio, RealtyTrac CEO, in a statement.

"This gives distressed homeowners who do not qualify for loan modification or refinancing -- or who are not interested in those options and want to sell -- a better chance of completing a short sale to avoid foreclosure."

Expedited short sales, he added, "also give lenders the opportunity to more pre-emptively purge nonperforming loans from their portfolios," and avoid a lengthy foreclosure and REO process.

Among those metro areas with at least 100 foreclosure-related sales in the second quarter, Louisville, Ky., had the largest average foreclosure discount -- 54 percent below the average sales price of nonforeclosure homes. Florida's Sebastian-Vero Beach metro area was second on the list with an average foreclosure discount of 53 percent, followed by Milwaukee (51 percent), Pittsburgh (51 percent), and Kalamazoo, Mich. (50 percent), RealtyTrac reported.

American dream of homeownership continues amid foreclosures

2012-01-03T09:26:00.001-08:00

By now, nearly five years after the real estate market meltdown began, you'd think virtually no housing consumer has been unaffected. To start, more than 5 million homes have been foreclosed and repossessed by lenders; 10 million homeowners are underwater (owing more on their homes than the homes are worth); and untold millions who want to offload their homes either can't or are trying -- and struggling -- to sell.

And while nearly everyone who pays for the place they live in has experienced some impact from the real estate recession, it looks like one thing remains insulated from damage: our belief in the value of homeownership.

Surprisingly, the people who you would expect were the most emotionally and financially scarred by the foreclosure crisis -- homeowners who have lost their homes -- still cling tightly to their belief in the value of homeownership, according to the results of a Yahoo! Real Estate study that polled 1,500 housing consumers, including more than 400 foreclosed homeowners.

Only 43 percent of the respondents who had actually lost their homes said their belief in homeownership had suffered as a result.

Further, there was not much difference in the share of respondents who had personally experienced foreclosure who still believe that homes are good investments (64 percent) compared with those who had no personal experience with foreclosure who hold the same belief (76 percent).

The results underscore how resilient the dream of homeownership truly is. Survey respondents who had lost their personal homes to foreclosure were as likely to say they plan to buy a home in the future as respondents who hadn't experienced the financial and emotional trauma of losing a home to foreclosure.

Foreclosed homeowners have experienced firsthand the advantages of homeownership -- especially the tax, lifestyle and psychological advantages -- and they miss them, the survey shows.

You might wonder what would possess a foreclosed homeowner -- after going through the months or years of stress while missing mortgage payments (and/or trying to get the bank to modify their loans), the breathless anxiety of having to move or being evicted, and the years of credit and financial rehab after the foreclosure -- to ever want to buy or own another home again?

As I see it, several phenomena might be at play in keeping their desire to be homeowners alive. It's entirely possible that this group had a stronger-than-average belief in homeownership before they even bought the homes they lost in the first place.

This might have made them more likely to take a subprime loan or buy a more expensive home than they could sustainably afford, making them more susceptible to foreclosure than others.

If you loved living in and owning your own home, decorating and customizing it at will, and knowing that a big chunk of your monthly housing costs (i.e., your mortgage interest and property taxes) are tax deductible, it can be tough to take what feels like a personal financial step backward from owning to renting a home -- no matter what the financial pundits might say about renting vs. owning.

From a psychological perspective, there's even an argument that the fact that these people have lost their homes might be making them want homes even more than they would have had they never been homeowners to begin with.

And lest you think buyers and renters have gotten a free pass from foreclosure crisis effects, millions of would-be buyers who are desperate to strike while the home-value iron is hot are finding themselves stymied, unable to qualify for today's tight mortgage guidelines.

Even renters now have much more competition, in the form of foreclosed homeowners, which has driven rents up -- way up, in some markets. And 72 percent of surveyed home buyers and sellers said the housing crisis has affected their housing plans.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

By Tara-Nicholle Nelson

Six must-haves for mortgage approval

2012-01-03T09:25:00.001-08:00

Interest rates are hovering around historical lows, and low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender's strict underwriting are all too common.

Some buyers are turned down for illogical reasons. For instance, if you have investments -- even if they're performing well -- an underwriter might deny the mortgage because your portfolio doesn't fall into the underwriter's risk assessment model.

One couple was turned down because the husband had worked at his current job for less than a year -- even though he was making more money at the new job than he was before.

These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.

Generally, it's more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you're self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won't lend to buyers who have more than three or four residential properties.

If you're buying a new home before selling your current home, you'll need to have 30 percent equity in your current home. This needs to be verified by the lender's appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month's rent to verify rental income if needed to qualify.

HOUSE HUNTING TIP: As soon as you're serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don't make your selection based on interest rates alone. A good track record counts for a lot.

Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you're not turned down at the last minute, it's worth it.

Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you'll need to do to satisfy the underwriter.

Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won't be included as livable square feet.

If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.

There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.

THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.

Dian Hymer is a real estate broker with more than 30 years' experience and is a nationally syndicated real estate columnist and author.

By Dian Hymer

Three ways to buy into high-demand real estate market

2011-12-02T14:59:00.000-08:00

You'd think with so many homes for sale, there would be no problem finding one to buy. However, plenty of buyers who would like to buy now to take advantage of low interest rates and prices can't find the right home.

One problem is that the most desirable areas don't have an oversupply of good homes for sale. Sellers who don't have a good reason to sell now aren't, so the supply of good listings is low.

Many listings that are available in these coveted areas either need a lot of work or are overpriced for the market.

Fixer-uppers aren't popular because they add to the uncertainty of the transaction. Most buyers are already concerned about the market, their jobs and the state of the economy. They shy away from homes that need a lot of work because it raises more questions and uncertainty. How much will it cost? Could it cost more than expected? How long will it take to complete the job?

HOUSE HUNTING TIP: Buyers who have the vision to imagine a home in its fixed-up condition can keep costs down if they live in the home while the work is being done. Expect it to be a stressful experience and plan on the work taking longer than anticipated. Uncontrollable factors, like rain, can hold a project up due to no fault of the contractor.

Most contractors like to work on a time and materials basis, which leaves the ultimate cost unknown. A fixed-price contract may cost more, but if unanticipated work needs to be done, it won't cost you more. It's like paying for insurance.

A listing that has been on the market for some time is likely to be overpriced. Try making a low offer. You might be able to negotiate a mutually acceptable price. Before making an offer, ask your agent to find out if the sellers are planning on reducing the price. If so, make your offer quickly. When listings are lowered to the market price, more than one offer can appear.

Have your agent search the multiple listing service to see if there are any listings that might suit your needs that didn't sell and were withdrawn from the market. If the owners still want to sell and are willing to be flexible on price (the listing probably didn't sell because it was overpriced), make an offer and see if you can reach an agreement. First, ask to see disclosures and reports to find out if there's any reason, other than price, why you wouldn't want to buy the property.

Another approach is to broaden your search. If you've been focusing on only one area, you might consider several other neighborhoods that could work for you. This opens you up to more new inventory.

One couple was set on buying in a particular neighborhood for the location and schools. There was so much demand in their price range and so few listings that they were priced out of that niche market. They bought a home in a neighboring county where they got much more for their money and good schools, although they had to sacrifice on location.

Easing up on your homebuying requirements helps you to buy sooner rather than later. For instance, if you'd like a view but can drop that requirement, you'll have a much easier time finding a home to buy. All home buyers need to make compromises. But don't buy a home that won't serve your ongoing housing needs. In this market, it makes sense only to buy for the long term.

THE CLOSING: It's better to rent until the right place comes along than it is to buy a home that you'll need to sell again soon.

Dian Hymer is a real estate broker with more than 30 years' experience, and is a nationally syndicated real estate columnist and author.

By Dian Hymer

Three mortgage mistakes you can avoid

2011-12-02T14:58:00.001-08:00

The mortgage market is in a state of tumult these days. Rates are bizarrely low, but many homes are worth much less than the mortgage balances they secure.

People are still losing their homes left and right, but millions of mortgage applications of creditworthy borrowers are being rejected every year.
Against this backdrop, it's really no wonder that would-be buyers and homeowners alike are in a state of confusion about which end is up in the mortgage marketplace.

To shed some light into this darkness, here are three very common mortgage mistakes that you might be making as we speak -- and some strategies for avoiding or correcting them.

1. Failing to try to refinance because you're upside-down. At last count, nearly 11 million Americans were upside-down on their homes -- meaning they owe more in mortgage(s) than the home is worth -- and that's about 23 percent of all American homes. With interest rates having dropped to historic low after historic low, more than 10 million Americans have refinanced their mortgages since 2009.

But most homeowners with negative equity feel like they are trapped in their 6, 7 or even 8 percent interest mortgages, unable to save the hundreds of dollars every month of a mortgage at today's sub-4 percent rates, because no lender will refinance them.

The fact is, multiple options abound for lowering your interest rate and monthly payment if you're upside down on your home loan. Banks are increasingly amenable to simply modify existing mortgages to render them less prone to default and foreclosure -- especially when the homeowner is trying to recover from a financial hardship like interrupted income due to job loss or illness, and especially with upside-down loans (which are particularly liable to strategic default, without modification).

Also, many banks offer refis on underwater mortgages (so long as no payments have been missed) through the Obama administration's Home Affordable Refinance Program and the less widely adopted Federal Housing Administration Short Refinance Program.

Contact your own mortgage bank's loss mitigation division about a loan modification or a refi under HARP, or reach out to any mortgage broker that offers FHA loans to apply for the Short Refi Program.

2. Walking into the bank branch to get a mortgage. Unless your bank happens to be a neighborhood credit union or one of the few large banks that ranks highly in customer satisfaction (e.g., USAA), you'll likely not be satisfied with the speed, customer service or assertiveness of a mortgage banker you meet just walking into the branch.

If you work with a mortgage broker or a private mortgage banker you meet by referrals from your circle of friends and relatives, chances are good you'll get someone who understands that the long-term health of their business depends on you and clients like you getting a deal closed in a timely manner.

Specifically, you should request referrals from folks you know who have bought or refinanced homes relatively recently, as the mortgage pros who are still in business and closing deals successfully these days are necessarily skilled at navigating a very tricky and restrictive mortgage market.

Also, if you work with a mortgage broker whose company also has its own bank, you get the best of both worlds: a professional who will shop lots of banks' offerings to find the best options for you, and someone who can coordinate your transaction via a small pool of local, experienced appraisers. Many large banks select appraisers who don't know the area, which can kill your deal in the long run.

3. Thinking you're stuck with it for 30 years. I've heard people say they didn't want to buy a home because they were depressed by the thought of a debt that would last 30 years. I've heard others regret that they couldn't afford the payment on a 15-year mortgage and instead were stuck with a 30-year loan.

The fact is, you control when you pay your mortgage off, and it doesn't take a lottery or inheritance windfall to pay yours off sooner than later.

Some people pay half their mortgage payment every two weeks, which results in a full extra payment every year and can pay your mortgage off as much as five years early. Others just pay an extra $100 or so as often as they can, and ask their loan servicer to apply the overage to principal.

Some do much more, applying paycheck raises over the years or amounts they once paid to extinguish credit card debt toward their mortgage balances in an effort to pay them off early.

The theme is that, as a borrower, you may have much more power than you thought, from exploring little-known options for getting your upside-down mortgage's payment lowered to being aggressive about paying your home off sooner rather than later. So get clear on your personal goals for your mortgage, get educated about your options and get assertive about making them happen -- now.

Tara-Nicholle Nelson is an author and is the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

Congress votes to restore FHA loan limits

2011-12-02T14:56:00.001-08:00

House and Senate leaders signed off on a conference report for a "minibus" appropriations bill that included language restoring FHA's ability to insure loans of up to $729,750 in high cost markets through 2013.

Because the minibus appropriations package also contains a continuing resolution to avoid a government shutdown and continue federal operations until Dec. 16 -- or until Congress completes nine remaining appropriations bills -- lawmakers didn't dally in approving it.

The House approved the bill in a 298-121 vote, and it sailed through the Senate 70-30.

The ceiling on so-called jumbo conforming loans -- raised in 2008 after the collapse of secondary markets for loans that don't lack government backing -- dropped, as scheduled, to $625,500 last month.

The formula for determining the jumbo conforming loan limit within that ceiling in high cost housing markets, which for much of the last four years has been 125 percent of median home price, was also trimmed back to 115 percent of median home price.

In October, Senate lawmakers approved an amendment to the same spending bill that would have restored through 2013 the $729,750 ceiling and 125 percent formula in high cost markets for FHA, Fannie Mae and Freddie Mac. But there were doubts that the proposal would fly in the Republican-controlled House.

The compromise plan hammered out by a Conference Committee excluded Fannie and Freddie.

A summary of the "minibus" bill issued by House Appropriations Committee Chairman Hal Rogers, R-Kentucky, said the bill does not increase the limits for Fannie and Freddie, which have been "under public scrutiny for their questionable businesses practices and use of billions in federal bailout funds, some of which have been used for extravagant management bonuses."

FHA, the summary said, "is subject to greater congressional scrutiny and oversight."

FHA expects claims on defaulted mortgages to climb to new peaks during the next two years, but is unlikely to require a taxpayer bailout unless there's another recession, according to assessments by independent actuaries.

If there is another recession, FHA could require $13 billion to $43 billion in taxpayer assistance to build up its loss reserves, depending on the severity of a second economic downturn, those studies show.

Dr. Joseph Gyourko, chairman of the real estate department at the University of Pennsylvania's Wharton School, thinks those projections are overly optimistic.

In a paper published by the American Enterprise Institute for Public Policy Research, Gyourko predicts that even without an unexpected deterioration in housing markets, FHA will need $50 billion to $100 billion in taxpayer assistance.

In an annual report to Congress, the Department of Housing and Urban Development (HUD) maintains that loans insured after the first quarter of 2009 are generating profits that will allow FHA to build its capital reserves back up to statutory minimums by 2014.

But the report acknowledges that the loan guarantee program is facing a massive backlog of claims on loans insured during the housing boom, particularly those made with seller-financed down payment assistance.

"FHA has not yet seen the peak of claim expenses from this national housing recession," Secretary of Housing Shaun Donovan said in the report.

Although the robo-signing scandal has slowed down claims, Donovan said, there will soon be a day of reckoning for loans now stuck in the foreclosure pipeline.

"Current expectations are that claims could come in very large numbers this next fiscal year and, as a result, capital resources decline significantly over (fiscal years 2012-2013) as loss reserves are expended," Donovan said.

In fiscal year 2011, which ended on Sept. 30, FHA had a $2.2 billion cash flow deficit as it collected $7.6 billion in premiums and $6.1 billion on sales of foreclosed homes but paid out $14.9 billion in claims and racked up $1.1 billion in property maintenance expenses.

Projections show that even if an economic recovery remains on track, FHA will have a $19.5 billion deficit in fiscal year 2012, which begins Oct. 1, as claims rise to $35.7 billion, outstripping revenue from insurance premiums ($8.7 billion) and sales of foreclosed properties ($7.5 billion).

That dramatic increase in claims -- nearly equal to the $37 billion FHA paid out in the past three years -- will put a serious dent in FHA's $32.4 billion in net capital resources. In the event there is not another recession, FHA's net capital resources are projected to bottom out in fiscal year 2014 without dipping below $10 billion.

But Gyourko argues that actuaries have overestimated the value of FHA's Mutual Mortgage Insurance Fund, in part because they have made overly optimistic assumptions about expected declines in default rates.

Previous studies failed to acknowledge that borrowers who used the federal homebuyer tax credit to fund down payments pose a higher risk, he said, and underestimated the amount of negative equity on homes backing FHA's mortgage insurance portfolio.

"Rather than requesting that Congress strengthen its capital resources as the housing bust deepened, FHA decided to pursue a strategy of growing out of its problems beginning in 2008," Gyourko said in his paper.

While FHA's total insurance-in-force has more than tripled from $305 billion at the end of the 2007 fiscal year to just over $1 trillion, FHA has not increased its capital resources proportionally, he said.

"Unless one believes that the risk of the mortgages it insures has declined substantially, FHA has become a much riskier organization," Gyourko concludes.

But FHA does believe the mortgages it's insuring today are much less risky than many of those it guaranteed during the boom.

Losses on loans insured through the first quarter of fiscal year 2009 are expected to reach $26 billion within a few years, Donovan said. Net losses on seller-funded down payment assistance loans -- banned in 2009 -- grew by $1.8 billion over the past year to $14.1 billion, he said.

But lower default rates and higher premium charges on loans FHA has insured since then will boost the economic value of the MMI Fund by $18 billion, Donovan said. The mortgages FHA expects to insure next year alone will boost FHA's bottom line by an additional $9 billion.

The FHA's mortgage insurance program has been self-sustaining since it was created in 1934 during the Great Depression. Although the program faced similar challenges during the 1980s, borrower premiums have always covered claims.

Even as HUD projects that the more profitable loans FHA is insuring today will help the mortgage insurance program squeak through the downturn without taxpayer assistance, it's also expecting to insure fewer loans going forward.

The Obama administration has said it wants to see the government gradually reduce its role in mortgage lending to make way for the return of private capital.

In terms of the dollar volume of single-family loans insured, 2011 was FHA's third biggest year ever, second only to 2009 and 2010. But FHA's share of the purchase loan market fell from 19 percent in 2009 and 2010 to 15 percent this year.

FHA raised mortgage insurance premiums three times in 2010, and "We are already seeing signs that premium rate increases we have put in place are causing a shift of some business back to the conventional mortgage market," Donovan said.

Homeowners can obtain conventional mortgages backed by Fannie Mae and Freddie Mac with down payments of as little as 5 or 10 percent by purchasing private mortgage insurance.

Another change that could also dent FHA's market share was the reduction of FHA loan limits in 669 counties on Oct. 1. HUD estimates that about 3 percent of the loans insured by FHA in 2010 -- 33,300 mortgages -- would have been ineligible under the new limits.

Mortgage Bankers Association Chairman Michael Young said it's not surprising that FHA's financial reserves are under stress, given the "persistent troubles in the economy and real estate markets" and FHA's mission of providing access to home loans for lower-income and first time homebuyers.

With its low, 3.5 percent minimum down payment requirement, 75 percent of the purchase loans FHA guaranteed in 2011 were for first-time homebuyers.

"FHA plays an important countercyclical role in the housing market, with its greatest contributions coming during those times of market stress, like those we have seen in recent years," Young said in a statement. "Without FHA's support, our housing market would be in far worse shape than it is today."

By Inman News

Home improvements that pay off

2011-08-01T12:09:00.002-07:00

The temptation is strong: Clean up the yard, declutter the house, and put it on the market without spending time and money sprucing the place up for sale. This is especially the case if you anticipate losing money on the sale.

Some real estate agents recommend you do little if anything to get your home ready for sale. This could work if you price the listing to look like a bargain. However, most buyers in today's market are nervous and picky. They aren't in a hurry and they want a house that's move-in ready.

An agent who is looking for a fast sale might steer his or her clients away from doing any fix-up work. It takes a lot of time and coordination, not to mention money, to get a home properly prepared for sale in today's market. Some agents don't want to take on the effort, or haven't the vision to see the home's potential. This could cost you on the sale.

One agent told his clients that they needn't do anything to get their house ready for sale. True, the house had inherent charm and good bones. But, the seller's furniture was much too big to show the rooms off to advantage. The dogs had damaged the hardwood floor and the beautiful garden was overgrown. The house didn't sell until the sellers found another agent who recommended a laundry list of items to take care of before selling, including moving most of the seller's furniture out and having the house staged.

Unfortunately, market values declined between the first and second times the home was listed. Even though the house sold quickly with multiple offers the second time it was listed, it sold for less than it would have if it had showed well the first time it hit the market.

HOUSE HUNTING TIP: Choose an agent to work with who has experience helping sellers prepare their homes for the market. Ask an agent you're thinking about hiring for references. Call past sellers and ask them how effectively the agent helped them get their home sold and whether they made back the money they invested getting the home ready for sale. A good agent should be able to supply you with a list of tradespeople who can help you paint, change outdated floor coverings and light fixtures, etc., at reasonable prices. And your agent ought to be able to provide access to the home for the people you select to help with the fix-up if you are out of town or at work.

Ideally, you should work with your agent who will help you prioritize the things that should be done to bring about a timely sale. For example, an outdated kitchen can usually be improved considerably by painting, changing light fixtures, refinishing or replacing a worn floor, and changing cabinet pulls.

It might make sense to change extremely old appliances and counters. However, it's not a good idea to gut the kitchen and completely remodel it for sale. You won't get that money back when you sell. The aim is to make cost-effective improvements that make your home appealing to the broadest number of buyers possible.

Painting is the least expensive improvement you can make that is likely to return more than you invest, provided you select the right colors. One seller repainted the exterior of his home before he selected a real estate agent. He painted it the same dowdy colors that adorned the house for decades. The first thing the buyers wanted to change was the exterior paint color.

THE CLOSING: For the best result, talk to a color consultant before you paint.

Dian Hymer is a nationally syndicated real estate columnist, and author.

By Dian Hymer

Refi before sale can backfire

2011-08-01T12:09:00.000-07:00

Homeowners who anticipate that they will be selling their house within a few years want to net as much from the sale as possible. The usage of the verb "net" indicates that what matters is not how much they receive for the house but how much they have left after repaying the mortgage. Real estate agents counsel borrowers on ways to get the best sale price, such as repairing obvious defects, keeping the house sparkling clean for potential buyers to view, and so on. But some owners view an impending sale as a way to save money on the mortgage if they can refinance into a lower payment. The borrowers who do this often ignore the impact of the refinance on the size of the loan balance that they will have to pay when they sell. Here is an example: The current balance on a 4.125 percent mortgage is $300,000, with a payment of $1,685 and 23 years remaining. The borrower expecting to sell in two years refinances into a new interest-only adjustable-rate mortgage (ARM) at the same rate, reducing the payment to $1,031.

The refinance cost is $6,000, but the borrower reduces his payment by $654, which over two years sums to $15,696. Hence, by his logic, he is ahead by $15,986 minus $6,000, or $9,986.

What he has overlooked is that if he had stayed with his existing mortgage, he would have paid down the balance by $16,307, which would have resulted in net proceeds at sale $16,307 larger. His supposed gain of $9,986 is actually a loss of $6,321.

Of course, if the new loan has a significantly lower interest rate than the existing loan, the refinance could result in larger net proceeds at sale. But if the refinance is profitable over a short period, it would be even more profitable over a longer period, which means that the borrower should do it despite an impending sale rather than because of it.

Can you time a lock to your advantage? Home mortgage prices are based on the secondary market prices of mortgage-backed securities (MBSs), but changes in MBS prices seldom impact mortgage prices immediately. Typically, mortgage lenders set the prices they deliver to their loan officers and mortgage brokers in the morning, after markets open, and keep them unchanged through the day unless MBS changes during the day are large enough to justify the cost of another change.

The MBS market closes at 3 p.m. Eastern Standard Time (EST). Mortgage borrowers who have been cleared to lock by their lender can do it between 3 p.m. and 5 p.m. EST, and sometimes even later. In principle, therefore, a borrower who knows what happened to MBS prices that day could judge whether mortgage prices the next morning would be higher or lower, and therefore whether they should lock then or wait another day.

Some advisors encourage borrowers to lock as soon as possible, on the grounds that 1) borrowers can't predict future interest rates, and 2) locking ASAP may prevent larcenous behavior by the lender. Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

By Jack Guttentag

Up to 1M foreclosure filings pushed to 2012, beyond

2011-08-01T12:06:00.000-07:00

RealtyTrac: Foreclosure activity drops to lowest level in nearly 4 years

Foreclosure activity fell 29 percent in the first six months of this year compared with the first six months of 2010, according to a report from foreclosure data site RealtyTrac.

A total of 1.17 million properties nationwide received foreclosure filings -- including default notices, auction sale notices or bank repossessions -- in the first half of this year, down 29 percent from the first half of 2010 and 25 percent from the second half, the report said. The nation's foreclosure activity rate was 1 in 111 housing units, or 0.9 percent of all units.

Foreclosure activity fell year-over-year for the ninth straight month in June, though it rose nearly 4 percent month-to-month. For the second quarter as a whole, filings fell nearly 11 percent compared to the first quarter and 32 percent compared to the second quarter of 2010, to a total of 608,235 properties. That's the lowest quarterly total since fourth-quarter 2007, the report said.

That low is not from an improving housing market or economy, however, said James J. Saccacio, RealtyTrac's CEO, in a statement.

"Processing and procedural delays are pushing foreclosures further and further out -- we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later," he said. "This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number."

For homes foreclosed in the second quarter, it took an average of 318 days for a home to go through the foreclosure process from the initial notice to the completed foreclosure, a 14.8 percent rise from 277 days in second-quarter 2010. The state to see the longest processing timeline was New York, at an average of 966 days, followed by New Jersey (944 days) and Florida (676 days).

By contrast, Texas (92 days) and Virginia (106 days) had the shortest timelines.

Bank-owned properties (REOs) sold in the second quarter took an average of 178 days to sell after being foreclosed, an 8.5 percent rise from 164 days in second-quarter 2010.

Properties took the longest to sell in New York (an average of 309 days), New Jersey (285 days), and Minnesota (268 days).

Properties in the foreclosure process, typically short sales, sold in the second quarter took an average of 213 days to sell from the beginning of the foreclosure process, up from 195 days in second-quarter 2010, the report said. Nevada had the nation's highest foreclosure rate in the first half of 2011, with 1 in 21 units receiving a foreclosure filing -- a total of 53,217 properties. That's a decrease of 17 percent from the first half of 2010.

Foreclosure activity in the state fell year-over-year for the fifth straight month in June, despite a 19 percent jump in bank repossessions, the report said.

Arizona and California had second- and third-highest foreclosure rates among the states, with 1 in 36 units and 1 in 51 units, respectively, receiving a filing.

Properties in California accounted for more than a fifth of all U.S. properties to receive a foreclosure filing. The state had 263,500 properties with foreclosure filings -- the highest total among all states, even though it declined 23 percent compared to the first half of 2010.

A total of 113,641 properties in Florida received a foreclosure filing in the first half of 2011, a 59 percent drop from the same period a year ago.

Although overall foreclosure activity fell year-over-year in the state in June, on a month-to-month basis default notices and scheduled auctions rose 44 percent and 17 percent, respectively.

Arizona had the third-highest state total, with 77,525 properties receiving a foreclosure filing in the first half of the year. Foreclosure activity in the state fell 15 percent compared to the first half of 2010.

By Inman News

4 Signals It Might be Time to Buy (vs. Rent) Your Home

2011-04-29T10:56:00.001-07:00

To rent or to buy: what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery. Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.

Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

Mortgage rates are going up. Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come. And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time.

Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

Rents are going up. Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. As a result, rental homes are in high demand – and rents are rising. Rising rents at a time when the prices of homes for sale are low and, in some places, falling? One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell. Read on for more on how to plan for the long term and minimize your homebuying risk.)

Your income and career are stable for the foreseeable future. The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).

When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

You can reasonably predict the home you’ll need in the years to come. Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire - and might not want to climb two flights of stairs to get to and from your bedroom - 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.

It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one - are in a row before you make your move.

By Trulia

A minefield of mortgage charges: What's shopable?

2011-04-29T10:55:00.000-07:00

Shopping for a mortgage would be a breeze if borrowers paid only an interest rate and lenders paid for everything else, embedding their expenses in the rate.

The reality is just the opposite: Not only do lenders impose fees of various sorts, but a large number of other players will have their hands in your pocket before you land a mortgage.

The best way for borrowers to navigate this minefield is to identify at the outset the charges that are "shopable" and those that aren't. Don't confuse "shopable" with "negotiable."

A service is shopable if different providers quote different prices, but that does not imply that any of them will negotiate their price. They might or they might not. In many cases, services are shopable, but not negotiable.

Shopping occurs before the borrower has chosen the service provider. It is the only point in a long process at which the borrower is in full control. The service is shopable because the service provider wants to be chosen.

In contrast, negotiations occur (if they occur) after the borrower is at least partly committed to the service provider. Backing out is costly to the borrower, and the further along he is in the process, the higher the cost -- and the less likely it is that the service provider will negotiate.

Lender fees: There are many, but don't get distracted by what they are called or what they are for. The only thing that matters is the total amount at a specified interest rate. It is item A on Page 2 of the new Good Faith Estimate (GFE), but you won't receive that until after you have applied for the loan.

Lender title policy: You are required to purchase a title insurance policy that will cover the lender for the amount of the loan. But you need not buy this policy from the title agency recommended by your REALTOR® or lender. Title insurance can be shopped at EntitleDirect.com and other online providers.

Note that the agent writing the title policy will often be providing the closing services as well, and the focus of the pricing is the sum of the two charges. That should be your focus as well. Shop the sum of the title policy, the closing services and also an owner's title policy if you elect to buy one.

Closing services: These services are provided by the title agent in title agent states, and by an attorney in attorney-preference states, but that should not affect your shopping strategy of combining the two. The GFE combines the two into "Title Services and Lender's Title Insurance".

Owner's title policy: Because the lender's policy only covers the amount of the loan, title insurers offer an optional add-on that covers the remainder of your exposure. For example, if you pay $200,000 for a home and take a $160,000 mortgage, the lender's policy covers title-related losses up to $160,000. To protect $200,000 you have to buy an owner's policy which is available for an additional premium.

The risk that a title claim against your property will arise and require an owner's policy to protect you in full is very small. If you want an owner's policy, you should shop for the complete package covering the lender policy, closing services and owner policy.

Homeowners Insurance: You are required to have a homeowners policy that protects your home against fire and most hazards other than floods. You should have such a policy, even if it were not required. Homeowners insurance is easy to shop for online, at Netquote.com and other sites.

Flood Insurance: If your home is on a flood plain, the definitions of which can change over time, you will be required to purchase flood insurance.

If you don't know that your house is on a flood plain, you will receive the bad news in the appraisal. You can shop for flood insurance at the same time as you shop for homeowners insurance, since the companies that offer one also offer the other.

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

By Jeff Guttentag

New mortgage roadblocks on horizon

2011-04-29T10:45:00.000-07:00

Going through the mortgage approval process hasn't been easy these last few years, due to lender tightening and underwriting scrutiny. Aside from requiring mounds of documentation, large down payments, and sterling credit scores, conforming lenders now want more of the buyer's money.

Even though interest rates are low, the borrower's cost of financing has increased recently due to new Fannie Mae and Freddie Mac add-ons to cover the cost of perceived risk factors.

For example, well-qualified buyers with credit scores above 800 and a 20-percent cash-down payment are now charged an extra 1/4 percent of the loan amount. So if you're applying for a $500,000 mortgage, you'll be charged an extra $1,250 at closing. The extra 1/4 percent is waived if the borrower puts 25 percent cash down.

The extra fee is higher for buyers with lower credit scores, lower cash downs and other perceived risks like an interest-only loan.

On April 1, the Dodd-Frank bill regarding mortgage compliance requirements took effect. Part of Dodd-Frank deals with how loan originators (mortgage brokers or loan agents) are compensated.

Dodd-Frank prohibits mortgage originators from basing their loan origination fee on the interest rate or terms of the loan. They cannot steer borrowers to a loan with a higher interest rate in order to collect a higher fee, unless they can prove that this was done in the client's best interest.

Loan originators can still base their fee (called points) on the loan amount. However, under Dodd-Frank loan originators can't charge the buyer points and collect an origination fee from the lender (called rebate financing).

Although the intent of the legislation is to protect consumers from being overcharged, there could be complications for buyers trying to get approved for a mortgage in a timely fashion. Most buyers don't know when they make an offer if they want a loan with points or a no-point loan with a higher interest rate. Dodd-Frank could make it more difficult to move from one loan product to another.

HOUSE-HUNTING TIP: In addition to checking into add-on fees and how Dodd-Frank might affect your ability to switch loan products mid-stream, buyers should find out who their loan originator uses for appraisals. In most cases, mortgage approval is dependent on the lender's underwriter accepting an appraisal of the property that will secure the loan. Appraisals that come in lower than the price the buyers have agreed to pay can cause a transaction to collapse.

Due to changes in Fannie Mae home mortgage appraisal guidelines last year, loan originators are no longer permitted to select the appraiser. They are also prohibited from having any direct contact with the appraiser during the course of the appraisal process. Many mortgage lenders have used third-party appraisal companies to comply with this guideline.

This has in some cases resulted in unsatisfactory appraisals when inexperienced, out-of-area appraisers who don't know the local market are hired to do the job. The third-party companies are often located out of state and they retain a portion of the appraiser's fee. Many good appraisers won't work for these companies.

Local appraisal services have sprung up that provide realistic appraisals from knowledgeable local appraisers. Some lenders and mortgage bankers who weren't satisfied with the quality of the appraisal they received from third-party appraisal companies have set up their own group of local appraisers.

THE CLOSING: An employee from the lender, who is not involved in loan origination, selects the appraiser.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

By Dian Hymer

Make cost-effective home improvements

2011-04-04T10:17:00.000-07:00

Imagine walking into an important job interview looking like you just dragged yourself out of bed. You'd be unlikely to make a good impression and diminish your chance of securing the job.

The same goes for selling a home. First impressions are lasting. Some buyers won't even look at the inside of a listing that doesn't have good curb appeal.

Today's buyers are picky. There is no sense of urgency in the market, so buyers are holding out for the best home they can find that will work for them for years to come. In some areas, there are a lot of homes for sale. It's important to make sure that buyers will be attracted to your home before they even walk through the front door.

Fortunately, exterior improvements needn't be expensive. The recent Remodeling Cost vs. Value Report 2010-2011 found that the improvements that yielded the highest return on the investment when sold were a new steel front door and a new garage door.

The average cost nationally for a new front door was $1,218; the return was 102 percent. The average cost for a new garage door was $1,191; the return was 83.9 percent. The top nine of 10 most cost-effective improvements nationally were for exterior projects. Curb appeal is as important as ever, and may be more so in this market.

The Remodeling Cost vs. Value Report is a collaborative report done annually by Remodeling Magazine and the NATIONAL ASSOCIATION OF REALTORS®. It compares construction costs with resale values, which are based on estimates from more than 3,000 REALTORS® and appraisers.

Sprucing up the front yard for sale needn't be costly. Clean out weeds and dead plants. Add flowering plants for color and mulch to tidy up areas that aren't heavily planted. Replace a lawn that has seen better days with less lawn and a border bed of flowering shrubs.

Do in-ground planting well in advance, if possible, so that plants have a chance to get established before your home goes on the market. If you have no choice and must plant at last minute, be sure to remove the ID tags from the nursery.

A deteriorated fence should be removed, repaired or replaced. Any peeling paint on the front walk and steps and house exterior and trim should be refreshed. The side of the house that gets the most exposure needs the most maintenance. If you've let it go, you'll be docked dollars by the buyers unless you repaint where needed before you sell.

HOUSE HUNTING TIP: The amount returned on home improvement investments varies from one location to the next. It's important to consult with your local real estate agent before you embark on an upgrade to make sure that you don't overpay on an improvement that won't generate the desired result. Most homeowners assume they'll get their money back and more when they sell. In fact, most upgrade investments often don't return 100 percent of the amount invested, particularly in a down market.

A minor mid-range kitchen remodel returns 72.8 percent nationally, according to the 2010-11 Remodeling Cost vs. Value Index. In the Pacific region of the U.S., you're likely to recoup 84.1 percent.

However, a major upscale kitchen remodel pays back only 59.7 percent nationally and 66 percent in the Pacific region. It makes sense to take on a major remodel project only if you're staying in your home and can enjoy the use of the improvements before selling. A deck addition ranked high on the list of popular exterior improvements. Although, nationally the cost recouped is only 72.8 percent, it may be an essential enhancement if your home has no outdoor living space and all the homes for sale in your neighborhood do.

THE CLOSING: Supply and demand in your local area will also impact how much you'll recoup from your fix-up investments.

By Dian Hymer
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

How public record errors hurt real estate sellers

2011-04-04T10:16:00.000-07:00

Real estate buyers today often turn down a listing because they think it's priced too high relative to the livable square feet it has to offer. In some neighborhoods, like planned unit developments, price per square foot might be a fairly reliable value indicator because there is little variability in the housing stock. It's of limited use in neighborhoods with great variability in home style, size, age and condition.

Regardless of what the sellers report as the livable square footage, the buyers usually want to know what the public record on the home says. For example, if the sellers say their house has 3,000 square feet of living space, but the public record reports only 2,300 square feet, the buyers expect an explanation for the discrepancy.

It's not only prospective buyers who are concerned when the public record differs from what is reported in the multiple listing service. Due to recent lender tightening, many appraisers consider only legal square footage, that can be verified with a building permit, to establish valuation.

Owners of homes that were added onto over the years without the benefit of building permits from the local planning authority could end up with a low appraised value. A lender will lend only a certain amount (usually 80-95 percent of the appraised value). If the price on the purchase contract is much higher, the transaction could fall apart unless the buyers put down more cash or the sellers lower the price, or both.

A low appraisal might not cause a problem if the buyers are making a large cash down payment. If they make a 50 percent cash down payment ($150,000) for the purchase of a $300,000 house and the house appraises for $250,000, the lender will likely lend up to $200,000 with 20 percent down, or $50,000. However, if the purchase contract includes an appraisal contingency, the buyers could withdraw without penalty based on the low appraisal.

HOUSE HUNTING TIP: The information reported in the public record is often wrong. Before you put your home on the market, find out what the public record reports on the characteristics of your home and try to correct any mistakes that could work against a sale.

In California, properties are reassessed for property taxes based on renovations and additions done legally, with permits. Often, the local assessor's office will update its record but the information doesn't get into the public record that is accessible by real estate agents, buyers and appraisers.

In one case, a couple had purchased a vacant lot and architectural plans from the previous owner who couldn't afford to build. The couple then added more than 1,000 square feet to the plans and built a bigger house.

The public record showed a 3,600-square-foot house, which was the size of the house that was originally planned. The Certificate of Occupancy issued by the city planning department reflected the larger 4,800-square-foot house that was built. Armed with this documentation, the appraiser had no problem appraising the property for the purchase price.

Sometimes, when an addition is made to a home, the public record is not amended to include the additional square footage. In some areas, a seller can visit the Assessor's Office and ask for a copy of the Property Characteristics Report on their home. If it's not accurate, the seller can request that changes be made.

Mistakes in the public record aren't confined to livable square feet. The public record also includes information about such things as the number of total rooms, the number of bedrooms and bathrooms, and whether there's a garage.

THE CLOSING: It can take months for changes to show up in the public record, so start working on this early.

By Dian Hymer
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Little-known secret to reduce mortgage payment

2011-04-04T10:14:00.000-07:00

A mortgage recast is an adjustment in the monthly payment that makes the payment fully amortizing. The recast will be a payment increase when the existing payment is less than fully amortizing, and a payment decrease when the existing payment is more than fully amortizing.

For example, let's say your home loan has a balance of $100,000 at 5 percent with 300 months to go and a payment of $450 that, if continued, will not pay off the balance. The payment recast is an increase to $584.60, which will fully amortize the balance over 300 months. However, if the current payment was $650, the recast would be a payment decrease to $584.60.

Payment-increase recasts occur on two kinds of mortgages. One carries an interest-only option, where the required payment for some initial period, often 10 years, covers only the interest. The payment-increase recast occurs at the end of the interest-only period.

The second type of mortgage open to a payment-increase recast is the adjustable-rate mortgage (ARM) that allows payments that are less than fully amortizing. These ARMs sometimes have recasts at specified intervals, often every five years, or the recast may be triggered by the loan balance reaching some limiting value, such as 110 percent of the original loan amount. This can happen at any time, or it may not happen at all.

Payment-increase recasts are designed to protect the interest of the lender by making sure that the loan will pay off as scheduled. All interest-only loans and all ARMs that allow payments that are less than fully amortizing have explicit provisions for recasts in the loan contract.

Provisions for payment-decrease recasts, in contrast, which are designed to meet the needs of borrowers, are not included in loan contracts. The lender can agree to a recast; can agree subject to a charge, which can range from nominal to extortionate; or can refuse it. I have encountered all three such responses.

The borrowers who request recasts usually have fixed-rate mortgages (FRMs) on which they have been making extra payments in order to pay off before term, and then unexpectedly encounter a financial reversal. With their income reduced, their objective shifts from paying off early to reducing the payment, for which purpose they need a recast. They deserve it, and the cost to the lender is nominal, but some lenders will take advantage of them just because they can.

The borrower's right to a payment-reducing recast ought to be mandatory for all home mortgage contracts. Borrowers should not have to grovel for what can be critically important to them and of little consequence to lenders. Making recasts into a right would have the side benefit of encouraging borrowers to make extra payments as a form of contingency insurance.

Note that payment-reducing recasts are needed for fixed-rate mortgages much more than for ARMs. The reason is that when the interest rate is adjusted on an ARM, the payment is automatically recast. On ARMs that reset the rate every year, no additional recasts are needed. On ARMs with initial rate periods of 5-10 years, however, the need for a recast can arise in the early years just as it does on FRMs.

Today, borrowers are motivated to make extra payments primarily with the hope of getting out of debt sooner. With a right of recast made explicit, they will also view extra payments as a worst-case backstop. The more you pay when you have the means, the larger the payment reduction you can command in an emergency. I can't think of an easier way to motivate consumers to save more.

By Jack Guttentag
Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

Preapprovals prove less reliable

2011-03-01T10:22:00.000-08:00

In a tight market, preapprovals are needed more than ever to establish the financial bona fides of home purchasers. Unfortunately, preapprovals have also become less reliable, especially for self-employed borrowers.

A preapproval is a statement by a lender that a prospective buyer has the income, assets, and credit to be approved for the mortgage required to purchase a house of some assumed value. The statement is an opinion, not a commitment. REALTORS® frequently recommend that prospective purchasers get preapproved so that home sellers will take them seriously.

A preapproval letter may be expressed in terms of a maximum monthly mortgage payment, a maximum loan amount, and/or a maximum ratio of loan to value. If a mortgage payment is shown, the interest rate used to calculate it may be shown, but the rate used is not guaranteed and won't be until the borrower submits a complete application and the rate is locked.

If a maximum loan is specified, it will be contingent upon an appraisal of some minimum amount. The preapproval also will be dependent upon verification of information provided by the borrower and underwriting approval of the transaction.

Borrowers need not shop for a preapproval, and they don't need more than one. Lenders offer them as a way of generating loan business, hoping that the purchaser will view the preapproval as the first step in obtaining a loan.

But the borrower is not committed to the lender providing the preapproval, anymore than the lender is committed to making a loan. Hence, when the time comes to convert the preapproval into an approval, other loan providers should be shopped as well.

A mortgage preapproval is stronger than a prequalification because preapproval includes an assessment of the borrower's credit, but prequalification does not. A preapproval is weaker than an approval, however, because the property value is preliminary and the mortgage rate is not known.

In addition, lenders may not take the same care in verifying the borrower's income or assets for a preapproval as they would for an approval.

As mortgage markets became increasingly restrictive after the financial crisis, more potential homebuyers were unable to qualify for the loans they needed. This increased the importance of preapprovals to home sellers, but it also reduced the reliability of preapprovals.

Lenders are never obligated to make a loan that does not meet their conditions, and preapprovals are so full of conditions and provisos that there is no way that they can be held to them. The problem is that the conditions have become much tougher than they had been, and especially so for self-employed borrowers, who now must run a gauntlet of rules and checks.

The bottom line for home sellers is that the reliability of preapprovals is not what they once were, especially for self-employed borrowers. The moral for self-employed borrowers with preapprovals is to avoid putting down earnest money until the preapproval has become an approval, which requires that the lender has reviewed and accepted all the documents.

-By Jack Guttentag. Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

Five steps to first-time-buyer happiness

2011-03-01T10:17:00.000-08:00

The first step in the home-buying process is to find out what you can afford to pay for a house, condo or co-op. This will depend on the amount of cash you have available for a down payment, your credit, income, assets, and overall financial situation.

Mortgage qualification is easier for buyers who work as employees whose income can be easily verified. Self-employed individuals or buyers with income from investments may find the qualification process more difficult.

A wrinkle in the financing end of the home-buying process is that it's not as easy to get a preapproval letter from your mortgage broker or loan agent as it used to be. As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) began requiring lenders and mortgages brokers to issue a binding Good Faith Estimate (GFE) within three days of receiving a loan application.

Before then, buyers shopped around for a mortgage. When they saw a house they wanted to buy, they asked their loan agent or broker to provide a preapproval letter to accompany their purchase offer. The loan person would run a credit check and verify the buyers' income and assets without, in many cases, taking a formal loan application. On the basis of this information, a preapproval letter was written.

Without a formal loan application, many lenders today will issue only a prequalification letter, which does not carry the weight of a preapproval letter. Find out from the loan representatives you talk with what kind of letter they can provide and what you have to do to get a preapproval letter.

HOUSE HUNTING TIP: You are in a much stronger position negotiating with a seller if you have a preapproval letter stating that you are qualified for the mortgage you will need to close the sale. It could be essential if you are in a multiple-offer competition. A prequalification letter may suffice in an area where there is a surplus of inventory of unsold homes.

Your goal is to buy in the best neighborhood you can afford without overextending yourself financially. Don't buy a home that you will outgrow in the next couple of years. The economic recovery is going to take years. You don't want to be caught having to sell at a price lower than what you paid. Even if prices don't decline further, you won't break even if you sell for the price you paid after taking the costs of sale into account.

Buy a home that has good resale potential. Many homes that aren't selling in today's market have incurable defects, such as a steep or shared driveway, a lot of stairs leading to the front door, or a location on a busy street, next to a freeway or too close to a commercial zone. An incurable defect is one you can't change. A curable defect includes such things as deferred maintenance or an outdated décor. These can be improved.

When home prices are escalating, buyers are more willing to compromise. They'll buy a home with an incurable defect, just to have the opportunity to buy in their desired neighborhood. Sellers don't always have control over when they sell.

THE CLOSING: It makes sense to buy a house that has broad-based appeal and will sell well in any market.

-By Dian Hymer

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

HUD monitoring REO vendors

2011-02-07T15:15:00.000-08:00

The U.S. Department of Housing and Urban Development (HUD) has hired a consultant to help it track the performance of vendors it employs to manage, maintain, market and sell foreclosed FHA homes.

HUD is using a real estate owned (REO) performance evaluation model developed by Walzak Consulting Inc. of Deerfield Beach, Fla., to measure whether vendors are following HUD guidelines and providing cost-effective and reliable performance, the company said.

The model will allow HUD to understand what factors produce the best results when measuring vendor performance, and reward top-performing companies by assigning them more properties to manage.

Under a new Federal Housing Administration management and marketing program detailed in a November 2010 Federal Register notice, HUD employs three types of vendors to help it dispose of REO properties:
• Mortgagee compliance managers, who are intended to protect HUD's interests by reviewing property inspections and providing guidance to lenders on their responsibilities;

• Field service managers, who inspect, secure and maintain properties;

• Asset managers, who are responsible for the marketing and sale of REO properties.

Brokers who wish to list HUD REO properties must be selected by HUD's asset manager vendors.

Any broker can represent buyers interested in HUD REO homes by submitting a broker application and selling-broker certification form to HUD and being assigned a name and address identification number (NAID). Only brokers who are registered with HUD may show homes and submit contracts for purchase.

HUD pays brokers a commission of up to 6 percent of the selling price, to be split evenly between the listing broker and selling broker (also known as a buyer's broker).

Before HUD REO properties are publicly listed for sale, they are evaluated to determine if they qualify for a "first look" and direct sale to local governments and FHA-approved nonprofit organizations. Those properties are generally located in designated Revitalization Areas.

HUD REO properties that are not sold under any special programs are listed on HUD Home Store and multiple listing services, and offered on an exclusive, priority basis to owner-occupant purchasers. Following an exclusive sales period, unsold properties are then made available for purchase to all interested buyers, including investors.

As of November 2010, HUD's inventory of REO properties totaled 55,486, up 37 percent from the same time a year ago.

Not including reverse mortgages, FHA insured loans on 6.75 million homes, up 18 percent from November 2009, and 568,863 of those loans were in default -- an 11 percent increase from a year ago.

Although some of those borrowers will be able to get current on their loan, obtain a loan modification, or negotiate a short sale, many will be foreclosed on. Lenders convey properties that complete the foreclosure process to HUD after filing an FHA insurance claim.

Top perfomers will get more homes to manage

By Inman News

Need-to-knows before you buy

2011-02-07T15:13:00.000-08:00

There are obvious decisions that need to be made before embarking on a home purchase. How much can you afford to pay? How much do you feel comfortable paying? Which neighborhoods offer the kinds of homes and amenities -- like good schools, shops and transportation nearby -- that you want? How secure is your employment? Do you have enough cash reserves for emergencies?

In addition to these practical considerations, you should find out as much as possible about the local area. Does it have a strong and diversified economic base? Is employment improving or are employers laying workers off? Are businesses moving into or out of the area?

Are new facilities planned that will impact the community, like a freeway that might change the character of a neighborhood by creating unwanted noise? This could negatively impact property values.

However, a new rapid transit station under construction within walking distance of where you want to buy could make commuting to the closest urban center easier. This might have a positive impact on local property values and cut your commute time considerably.

HOUSE HUNTING TIP: Residential real estate is a localized business. Home prices differ from one area to the next. State laws governing home-sale transactions also differ. Federal law requires sellers to disclose lead-based-paint hazards. But, state laws differ on whether or not sellers need to disclose other defects, like a drainage problem. Many states have mandatory seller disclosure requirements. In other states, seller disclosures are voluntary, not mandatory.

Agency relationships also vary from state to state. For example, dual agency, where one broker represents both the buyer and seller, is illegal in many states. It's legal in others. In states where dual agency is legal, like California, the broker has a split loyalty to the buyer and seller. However, in states like Massachusetts, Michigan and North Carolina, designated agency is an option. With designated agency, both buyer and seller are represented by the same broker, but by different agents. Each agent owes loyalty to the party he or she is representing.

It's important that your real estate agent explain the different agency relationships recognized in your state, particularly if you're coming from another state where different agency relationships are recognized. You should also find out how much disclosure about property defects you can expect to receive from the sellers. You should always have a property you're considering buying thoroughly inspected by qualified professionals. Include an inspection contingency in the contract even if the sellers have provided presale inspection reports.

Work with a knowledgeable, experienced local real estate agent that can inform you about issues, statutes and ordinances that will affect you when you buy or sell a home in the area. Many real estate companies require buyers and sellers to sign generic disclosures, sometimes 10-18 pages long, covering such things as ordinances, disclosures and agency laws, rent control and schools.

THE CLOSING: Be sure to read these and ask your agent if you have any questions. Most buyers and sellers don't take the time.

Local economy, seller disclosures can impact resale value
By Dian Hymer

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Real estate negotiation tips that pay off

2011-01-03T13:22:00.001-08:00

Find out as much as you can about who you'll be negotiating with before you start the process. Sellers need to know if the buyers are financially qualified to close a deal. Most sellers get hung up on the price. But, the highest price doesn't always come from a buyer that can actually close the deal.

For example, if the buyers make a low cash down payment and the lender's appraised value is for less than the purchase price, the lender may not give the buyers a large enough mortgage to close the sale unless the buyers come up with more cash. This can lead to further negotiations and a failed transaction.

You'll also want to know how long the buyers have been looking for a home. Have they made other offers? Were any accepted? If so, why didn't they close? Did the buyers back out or was the seller unreasonable? Your agent should be able to get answers to your questions by talking with the buyers' agent.

Sellers should be aware that there are buyers who repeatedly make ridiculously low offers. Often these buyers have a reputation in the local real estate community. Ask your agent to check around before wasting time.

HOUSE HUNTING TIP: Buying and selling a personal residence is an emotional experience. Try to be as rational as possible in your decision-making process. Sellers should plan to counter any offer, even if it's for less than the list price if it's from a bona fide financially qualified buyer. Buyers should anticipate a negotiating process that could involve many counteroffers. Don't give up until you've exhausted all possibilities. But, don't pay more than current market value.

Many buyers and sellers view negotiation as adversarial. Turn this around and look at the dialogue as a process where both parties attempt to reach a common goal -- the sale of the property.

Before buyers start negotiating, they should attempt to determine if the sellers are realistic. You can waste a lot of time and emotional energy trying to make an impossible deal work. Some sellers will sell only if they get a certain price. If that price is way out of line with current market value, move on to sellers who are eager to sell.

Find out the sellers' motivation level. Have they already bought another home and now have two? Are they involved in an employment-related transfer? Does the house no longer suit their needs? Perhaps, they are empty-nesters in a home that's bigger than they need. Or, is the home a surplus property due to a death or divorce?

Even though you want to make a good attempt at putting a deal together, don't show all your cards at once, For example, if you're a seller and the buyers make an initial low offer, counter it, if the buyers are legit. But, leave some room in the price, which sends a message that the buyers need to come up in price to buy the home.

Buyers who can pay all cash might initially make an offer that is contingent on obtaining approval for a mortgage. During the course of the negotiation, you could increase your cash position significantly or offer to pay all cash in exchange for a break on the price. Everyone needs to compromise when buying or selling.

There are niches of the market where demand exceeds the supply, and multiple offers are still in vogue. In this case, you may have only one chance to let the seller know your best offer. Coming in low and negotiating to a mutually acceptable price may not be an option.

THE CLOSING: Try to have your offer presented in person; make sure your agent has good communication skills and is skilled in the art of negotiation.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Best time to make a price adjustment

2011-01-03T13:21:00.001-08:00

There was a time when a price reduction tainted a listing. That was several years ago when listings in many areas sold quickly. At that time, it was assumed that something was wrong with a listing if it needed a price reduction.

In today's market, price reductions are common. Sometimes, sellers aren't content with listing unless they try a price that's higher than what the comparable sales data indicate. Or, a price reduction could be necessary simply because it's difficult to price homes in a changing market, particularly if the local housing stock is varied in size, condition, age and style.

It's easier to establish current market value in housing developments where the homes are similar to one another, particularly if there are a number of recent comparable sales. It's hard to price right for the market in any neighborhood if few or no homes have sold recently.

It's best to list your home at a price that buyers will perceive as a good value. Overpriced listings sit on the market. Real estate agents and buyers forget about them.

The home-sale market slowed in some areas this summer. Today's buyers are cautious about buying. Some are back on the fence waiting for a clear sign that the market has hit bottom and that prices won't drop further.

Although some markets appear to have stabilized, there is no guarantee that prices won't slip. Buyers who realize that they can't time the market and who want to take advantage of low interest rates are moving ahead with their home search. They are very selective, are buying for the long term, will wait for the right home, and won't pay over market value.

HOUSE HUNTING TIP: As difficult as it may be for sellers to consider a price reduction after only a couple of weeks on the market, this is often the best strategy. Buyers and their agents focus on the new listings. If you bring your home on the market priced too high, but it's otherwise a nice house in good condition and in a good location, a price reduction early in the marketing period is likely to attract the attention of agents and buyers who still have the listing fresh in their minds.

Make sure that your agent gives your listing a renewed marketing effort to generate enthusiasm about the property. More than 85 percent of today's home buyers use the Internet to search for a home. Some sign up for services that notify buyers when a new listing is submitted to the multiple listing service (MLS) and when there is a price reduction or pending sale.

Your agent should schedule an open house for brokers as soon as possible after a price reduction to alert real estate agents who may have missed the price reduction when they ran an MLS update. MLS updates list price changes.

It's a good idea to have a Sunday open house for the public as soon as possible after the price is reduced. The open house ads for the open house should showcase the price reduction.

Depending on your local market, you may need to lower the price more than once, particularly if you waited months to make a price adjustment. If market values have moved down since you listed, you could find yourself out of sync with the market again. Don't rely on what your neighbors are asking for their homes. If they aren't selling, they are probably overpriced for the market. Rely on sales of comparable properties that closed after you put your home on the market.

THE CLOSING: Ideally, you want to reduce the price before your competition does.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Buyers don't forgo 'final walkthrough'

2010-12-02T09:38:00.001-08:00

Imagine taking possession of your newly purchased home and finding that every light bulb has been removed, the place is filthy, and the dining room light fixture that was to have been included in the sale is gone. Not only frustrating and disappointing, it's natural to wonder what else might be missing and what to do next.

First, call your real estate agent and report the general condition of the property. The purchase contract should specify what condition the property should be in when the sellers turn it over to you. The contract might specify that sellers' personal property that isn't specifically included in the sale and debris must be removed. If an item like a dining room chandelier that is permanently attached to the house is not included in the sale, this should be spelled out in the contract.

If you're unable to resolve the issue directly with the seller or with the help of the agents involved, check your purchase contract for the section that deals with dispute resolution. Then call a knowledgeable residential real estate attorney for advice.

Situations like this rarely occur. That is, unless you're buying a foreclosure property on the courthouse steps. These buyers rarely have a chance to preview the property before it's purchased. These properties are often stripped free of appliances, bath fixtures -- anything that has salvage value. This sort of purchase should be left to savvy investors and avoided by inexperienced home buyers.

In a conventional home sale, the buyers' contract should include a provision for the buyers to take a final walkthrough of the property within five days or so before closing. This is not a contract contingency. It gives the buyers an opportunity to confirm that the property is in substantially the same condition it was when they entered into contract to buy the home.

Also, if the sellers completed any repairs on the property between contract acceptance and closing, like fixing a leaking plumbing pipe, the buyers can confirm that this work has been done. Sellers should document in writing any such repairs, and the buyers should sign that they received this information.

HOUSE HUNTING TIP: Unless you've made numerous visits to the property to take measurements or figure out furniture arrangement and are confident the sellers will leave the property in good condition, you should not forgo your right to do a final walkthrough. Many sellers won't vacate until closing takes place. So, you may not be able to see the property vacant on your final walkthrough. But, you should have an indication if there are any red flags, like the sellers haven't even started packing.

You should not take possession of a tenant-occupied property unless you're buying the property as a rental and have made arrangements with the tenant to stay on. Otherwise, you could have difficulty evicting an obstinate tenant, which can be costly and time consuming.

Ideally, the sellers will plan to meet with you at some point during or after your walkthrough to point out anything about the house that you might have difficulty figuring out on your own: the location of a light switch that isn't obvious; how often certain systems -- furnace, water heater, roof gutters, drainage systems -- need maintenance; and how to operate the irrigation system, to name a few. This will save you time.

If the sellers moved out early, ask them to leave a list of items you should be aware of. This should not include new disclosure information, merely operating manuals for appliances and utilities and copies of all transferable warranties.

THE CLOSING: Ask for a list of contractors, and their contact information, who have worked at the property that the sellers recommend. This is invaluable information.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Assemble your real estate A-team

2010-12-02T09:37:00.001-08:00

It has always been important to assemble a top-notch team of real estate professionals to assist you with a home purchase. Today, it's more important than ever.

One of the key players on your team is the real estate agent who will represent you and guide you through the process to a successful closing. The other is the mortgage broker or loan agent who will arrange financing for you unless you are paying all cash.

The Internet is a great resource for getting started on your home search and gaining general information about the market, past sale prices, active listings, and local neighborhoods. However, the home-sale market is extremely localized. Neighborhoods within blocks of one another can have different pricing structures and demand levels.

HOUSE HUNTING TIP: Make sure you hook up with the best agent you can find who specializes in the neighborhoods where you want to live. Your agent should educate you about the idiosyncratic characters of various neighborhoods -- information that is difficult to glean from the Internet.

The NATIONAL ASSOCIATION OF REALTORS® reported in its 2009 NAR Profile of Home Buyers and Sellers that 90 percent of home buyers used the Internet for their home search, up from 2 percent in 1995. Seventy-nine percent who used the Internet used a real estate agent to assist them with their purchase.

Only 37 percent of these buyers thought an agent's technology skills were important in selecting an agent. More than four out of five buyers thought knowledge of the process, honesty, integrity, responsiveness, communication, and negotiation skills were very important.

You should not only work with an agent who embraces these characteristics, your agent should specialize in the kind of property you want to buy. If you're interested only in distressed sales (short sales or bank-owned foreclosure properties), work with an agent who has experience in this area.

These can be very difficult transactions. One-third of all short-sale transactions never close. Pick an agent who has experience working with this particular type of transaction and who knows how to navigate the process.

The mortgage business has changed dramatically in recent years. The approval process can be grueling and appraisals problematic. Find a good mortgage professional who has a good track record closing loans in the current lending environment.

Ask how many loans your prospective mortgage professional has closed within the last several months in loan amounts similar to the one you need. Your agent or acquaintances who bought recently can provide recommendations for the best person to work with.

A good mortgage professional will be able to look at your financial documentation and credit scores and determine in advance what a lender's underwriter will require from you in order to approve your loan -- perhaps additional documentation or paying down existing debt.

A good mortgage broker knows which lender to submit your loan package to in order to maximize approval. Underwriting requirements differ from one lender to the next. One buyer wanted to use a lender that offered the lowest rate. That lender, however, was a stickler about work done to the property without building permits.

Not only would unpermitted areas not be counted as livable square feet, thereby lowering the appraised value, the bank wouldn't loan on the property unless all power sources to these areas were ripped out so that the areas couldn't be used. The loan was submitted to another lender that didn't allow the unpermitted space to be used for appraisal purposes. But, nothing had to be demolished.

THE CLOSING: Remember that you are part of the team; in fact, you're the captain. You are the decision maker. Never turn over important decisions to your agent, attorney, or loan agent, even if you're busy and would rather have someone else take care of everything.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

New incentive for home sellers

2010-12-02T09:36:00.001-08:00

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is offering a new program that pays a home buyer’s mortgage if he or she is laid off. The Home Payment Protection Program (HPPP), a program similar to the successful C.A.R.H.A.F. Mortgage Protection Program, is offered by REALTORS® to sellers at the time of listing as an added incentive to prospective buyers. The program is paid for by the seller and is completely optional.

The program covers both first-time and repeat-buyers for 12 months from escrow closing and provides up to six mortgage payments up to $1,000 or $1,500, depending on the coverage level the seller chooses. A seller can choose to pay $200 for six mortgage payments up to $1,000 or $275 for six mortgage payments up to $1,500.

For more information about the Home Payment Protection Program, contact your REALTOR®.

The 10-year rule for real estate

2010-11-02T13:19:00.001-07:00

It may not be the best time to sell, but it might not be the worst either. Recent economic forecasts suggest that the housing recovery could take years. As a seller who has a strong motivation to sell, do you try to sell now or hold on for a better market? First consider where you want to be in 10 years. How do you envision your lifestyle? Is your current home too big, too small, or in the wrong location? Homeowners intent on moving from one house to another can take advantage of low interest rates, if they are able to sell their current home. You'll probably sell for less than you would have several years ago, but you may get a deal on the home you buy.

However, if you don't plan on living in your next home for the next eight to 10 years, this might not be a good time to make a move.

For sellers who purchased in recent years, selling requires a huge readjustment in their expectations. Many probably will sell for less than they paid; in some cases, a lot less. If they highly leveraged the purchase, or refinanced and pulled out equity, they may need to contribute cash to close the deal.

Sellers who have no cash reserves and need to sell for less than the amount of the loans secured against the property will need lender approval to complete a sale. This is called a short sale. In this case, or with a foreclosure, sellers don't have the option of buying another home until their credit is restored, which takes about two to three years for a short sale and five years for a foreclosure.

Some listings in prime, high-demand markets come on the market and sell quickly, leaving other sellers in the area perplexed. Why isn't their home selling? Why aren't they receiving bids from multiple buyers?

Listings that sell quickly are priced right for the market. They are homes that will work long term for the buyers, which means 10 or more years; they don't need updating; they're in move-in condition; and, they are usually located in high-demand, low-inventory neighborhoods. Buyers are waiting for these prime listings and will move quickly when they come along.

HOUSE HUNTING TIP: It's frustrating for sellers whose listings don't receive an overwhelmingly positive response, especially if they put time and money into fixing them up for sale, and they thought they priced right for the market. Motivated sellers will need to accept the probability of a longer marketing period and a lower price.

Expect low offers if your home has been on the market awhile. It's natural for buyers to try to buy a home as inexpensively as possible to cover for the possibility of a further downturn in the market. Don't take it personally; counter any offer from financially qualified buyers who make a clean offer that's not encumbered with complicated contingencies.

It may take several offers and failed attempts to find the right buyer. It isn't easy for most sellers to reach a successful closing in this market. But those who stick it out can reach their goal. Waiting to sell could net you more for your home, but it's impossible to know when that better time will arrive. The market will be volatile. Good economic news will trigger a pickup in the market. Bad news will cause buyers to pull back.

THE CLOSING: To take advantage of a pickup in the market, your home needs to be on the market or ready to go on a moment's notice.

By Dian Hymer

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Resolving price vs. location debate

2010-11-02T13:19:00.000-07:00

Location has been touted by housing experts as the most important factor to consider when buying a home. Does this adage still hold, or has price trumped location as the most important consideration?

Historically, home values were largely dependent on location. Homes near major metropolitan centers were more coveted, and more expensive, than similarly sized homes in outlying suburban areas.

The recent frenzy of distressed homebuying activity in places like Concord in the East San Francisco Bay Area and Riverside County in Southern California raises the question of whether a fire-sale mentality has permeated the residential housing market.

Most of the foreclosure-sale activity that occurred in the fourth quarter of 2009 was speculative. Investors bought at huge discounts from peak price levels in areas that are not, by traditional standards, thought to be prime locations.

The profitability of these investments will depend on the strength of the economic recovery. To fix up and flip a foreclosure for profit depends on demand from financially qualified buyers.

Foreclosures that are fixed up to rent require tenants with jobs who can afford to pay enough to cover the investor's expenses and hopefully generate cash flow. In a strained economy with high unemployment, this can be risky proposition.

HOUSE HUNTING TIP: Although buying cheap housing may be a good strategy for some investors, buyers searching for a home they'll occupy should not let price be the primary factor influencing which home they buy.

A home that won't work for the long term is not a good deal even though it's cheap if you'll have to move again in a few years. In fact, you could lose money using this approach, particularly if home prices haven't stabilized by then.

It's also not a good idea to buy a home that's not quite right for you just to take advantage of today's low interest rates. The winning strategy for today's home buyers is to buy and hold.

The homes with qualities that are in high demand are located near a major metropolitan center or have good public transportation to get there. They are close to shops, cultural venues, restaurants, parks, and have good public or private schools close by and good public services.

The location within a neighborhood, condominium complex, or cooperative can make a big difference in value. A home on a quiet cul-de-sac generally will sell for more than one in the same neighborhood that's on a busy street. Premiums are paid for homes with views, leveled-out private backyards and good natural light.

Be wary of listings that appear to be underpriced. They could be priced low to generate multiple offers, so they might sell for more than the list price and more than you can afford to pay. Or, there could be other reasons why they are listed at a lower price.

Often the lower-priced homes in an area don't sell for more because they have incurable defects. An incurable defect is something you can't change like a shared driveway, close proximity to a freeway or an entry to the home that's two flights of stairs up from the garage.

These homes may sell well in a hot sellers' market when buyers overlook defects because prices are rising rapidly. But, these homes can be hard to sell in a down market when buyers are less forgiving and are willing to wait for the right house.

THE CLOSING: Ideally, you want to buy a home that will be in demand in any market. If you can't afford to buy one that's in move-in condition, it's better to buy a home you can afford and that needs only minor improvements than one that looks great but has an incurable defect like an unworkable floor plan.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Buyer beware when home lacks permit

2010-10-01T16:14:00.000-07:00

It's an all too common situation. You find a perfect home for sale in an ideal neighborhood. It's been beautifully remodeled, and it has everything you've been searching for. Even the price is right. Something tells you it might be too good to be true, but you put in an offer anyway, and it's accepted.

You start doing all the paperwork, and sure enough you discover the catch that you always somehow suspected was there. The sellers did all of that remodeling work without any building permits.

So now you're faced with a dilemma. You really want this house. The sellers insist that all the work was done by licensed contractors, and that they have full documentation and photographs of all the work as it was being done.

The sellers also tell you that they're willing to allow any type of inspection on the home that you'd like -- except for one by the city.

They explain that they had a bad experience with a building inspector on a previous home, or that they have an ongoing feud with the city over their water bill, or they're protesting the fact that the city hasn't fixed the pothole on Main Street yet, or some other reason that they refuse to become involved with the local municipality.

Through all this, you still want the house. Red flags are waving, but you're trying to ignore them. After all, the remodeling really does look like it was done well, and you can certainly understand why the sellers would be protesting that big pothole, rather than trying to cover up bad workmanship on their own remodeling.

Perhaps you decide to go one step further and pay for inspections on the home, in the hope that someone is going to tell you that all is well, despite the lack of permits. You may even think that you can write some provisions into your sales contract that will offer some future protection for yourself.

Unfortunately, it's probably time to walk away from this "too good to be true deal."

A few hard realities

If the sellers are telling the truth about all of the work having been done by "licensed contractors," then they should be willing to provide you with a list of all of their names, so that's one of the first things you should ask for the sellers to provide. It's doubtful you'll get it, because in most states those contractors are risking hefty fines and even the loss of their licenses for doing remodeling work without a permit.

If the sellers are "open to any type of inspection," ask if they're willing to have all the walls opened up at their expense so your electrician and your plumber can thoroughly inspect the condition of the wiring and the pipes inside all of the concealed spaces.

This is what the city building inspectors that they were so anxious to avoid would have done. And this is what you, as the buyer, now have no access to. That's one of the big problems here: If you decide to buy this house, you have no idea what's hiding inside those walls.

If, at a later date, you have a fire or a water loss that's related to some defect that's been hidden somewhere by the seller or one of his contractors as part of this unpermitted work, your insurance company could deny all or part of your claim as a result.

I've personally been on jobs where that's happened. Can you even imagine having a loss in your home that runs into the tens or even the hundreds of thousands of dollars, and then finding out it's not covered because the previous owner didn't like city building inspectors?

Still can't live without that particular house? Then here's what you need to do to protect yourself:

• The sellers need to provide all necessary building permits for the remodeling work.

• If they can't do that, then they need to pay for a licensed structural engineer, a licensed electrician, a licensed plumber, and any other necessary professionals to inspect the work and issue letters stating that the structure currently meets or exceeds all current building codes. Using those letters, the sellers then need to contact the city building officials and obtain whatever the equivalent would be to a completed building permit.

• Once you have that paperwork, show it to your attorney and your homeowners insurance company to be certain it's sufficient protection, and be sure that a copy of it is recorded with the escrow company.

By Paul Bianchina

Pricing to sell in today's market

2010-09-01T17:03:00.000-07:00

Putting yourself in the right mindset to sell is essential. It's the most difficult aspect of selling for most sellers. Your home is worth what a buyer is willing to pay, which may not be what you think it is worth. Detaching yourself emotionally from your home is difficult. Clearing out years of clutter, depersonalizing your home by removing personal memorabilia, and staging your home for sale can help you step back and view the home as a commodity that needs to be sold rather than as your personal sanctuary. Putting your home on the market at a price that reflects what you want and not what the market will bear can cost you time and money as it sits on the market unsold.

The home-sale market is a localized phenomenon. The only way to get a clear picture of what your home is likely to sell for is to find out which listings are selling in your neighborhood and for how much.

The most recent sales -- those that closed within the last three months -- will be the most informative. Be sure to take a hard look at the list prices of homes that are new on the market.

If the list prices are lower than they were two or three months ago, this indicates that prices are declining. This needs to be taken into account when you select a list price.

HOUSE HUNTING TIP: Pay close attention to your competition. Don't fall into the trap of pricing your home higher than your neighbor's home because yours is better. If your neighbor's price is too high for the market, neither of your homes will sell.

Ask your listing agent to call the listing agents of properties similar to yours to find out what kind of showing activity they are receiving. Have they had offers? If so, why weren't they accepted? Were the offers too high? If so, you should set your sights lower.

Some listing agents recommend that you list considerably under market value in order to stimulate multiple offers. In some cases, this can be an effective strategy.

For example, in the low-end foreclosure market, this was common practice at the end of 2009. Some listings priced way below market value received more than a dozen offers.

However, it can be risky to price significantly lower than market value on a more expensive property for which the demand is lower. You could end up with more than one offer, but you could also receive under-market price offers.

Your home needs to be perceived as a good value to a buyer to sell in this market. However, you could shortchange yourself by discounting the price too much.

Your home is most marketable when it is new on the market. Buyers wait anxiously for the new crop of listings. Listings that don't sell relatively quickly often languish on the market.

Price reductions often follow as the sellers try to find market value. A listing that has been on the market for months is likely to receive a low offer -- if a buyer makes any offer.

A listing that receives a lot of showing activity when it first hits the market but gets no offers is probably overpriced for the market. In this case, it's best to lower the price to market value as soon as possible while the listing is still fresh in agents' and buyers' minds, even if this is within two to four weeks of the listing date.

THE CLOSING: Listings in neighborhoods where sales activity is slim require a longer marketing period. Even so, pricing right for the market is imperative.

By Dian Hymer
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Pay attention to home inspection

2010-09-01T17:00:00.001-07:00

For just about anyone, a home is the single-most expensive and single-most complex thing that you'll ever own. So when making that purchase, you certainly want to do everything possible to be an informed buyer and to protect yourself and your investment.

One of the ways to do that is to have a home inspection prior to closing the deal on the purchase. A home inspection will give you a lot of information about the physical condition of the home you're considering buying, and should alert you to any potentially serious problems.

But as a potential home buyer, it's important that you understand what a home inspection includes and doesn’t include. There are certain things you legitimately can expect your inspection to provide for you, and certain things that it won't. And you also need to understand that the more you participate in the inspection process, the more you'll get out of it in return.

Finally, understand that just like there are good and bad contractors, there also are good and bad home inspectors. Expect to have to do a little homework to find one of the good ones.

What is a home inspection?

A home inspection is a visual inspection of the home you're thinking of purchasing, performed by an objective third-party inspector. The inspector will examine the physical structure of the home from top to bottom, as well as the home's operating systems. Typically, a home inspector will look at the following things:

• Outside: The exterior home site; general condition of the foundation and basement walls; condition of the exterior walls, including the siding, exterior trim, windows, exterior doors and exterior paint; type and condition of the roofing; condition of gutters, downspouts, flashings, and vents.

• Inside: The condition of the attic, roof support structure, attic insulation and attic moisture issues; condition of the basement and crawl space, including insulation and moisture issues; garage and carport; electrical system; visible plumbing system; heating, cooling and ventilation system; general interior condition of the home.

A short time after the end of the inspection you'll receive a written report detailing the inspector's findings. Any defects the inspector identified will be noted. Inspectors never should attempt to sell you anything, such as their services to come in and fix anything that was identified in the report. To do so would be a clear conflict of interest.

It's important to understand that inspectors do not do what is known as "destructive testing." In other words: they don't cut holes in walls or otherwise open up inaccessible areas to look inside. Everything is based on their visual inspection of whatever they can access. They're also not there to comment on anything that's readily apparent from a cosmetic standpoint, such as a sloppy paint job. What types of things does the inspection not cover?

It's equally important to understand what a home inspection doesn't cover, because this is where you need to be sure that you continue with your due diligence when you're buying your home.

For example, your home inspector will point out any obvious signs of visible mold or mildew in the home. However, he will not be performing any type of actual mold inspection. If you suspect a mold infestation in the home, you need to have testing done by a trained hygienist.

Home inspectors will point out structural problems that have been caused by insect damage. But they're not there to perform a complete termite inspection. They also don't do inspections for the condition of the well, septic tank, or any type of soil contaminants.

You also need to be very aware of the fact that a home inspection has nothing to do with code violations or zoning issues. You need to check those things out for yourself with the local building and planning offices. It's up to you to assure yourself that any prior work on the house was done with the necessary building permits.

It's also up to you to check that there are not any issues when it comes to how the house is currently zoned, or how the current zoning might affect your use of the property in the future.

What do you need to do?

You have a couple of other responsibilities in this process as well. First of all, know who your inspector is, and what's required of him. Different states have different regulations pertaining to how home inspectors are regulated, so find out what's required.

Interview the inspector before you hire him. Be sure he complies with all those requirements, including whatever license, insurance and bond is needed. Ask for and verify references. Ask for and read a sample report. Be sure it gives you the type of information you need, in a format you can understand. Find out if the inspector belongs to any professional trade organizations, and what their standards and codes of ethics are.

The other important thing is that you need to attend the inspection. Follow the inspector around, even up into the attic and into the crawlspace if you're physically able to do so. See what he's looking at. Understand the potential problems. Ask questions and take notes. When you get your report, read it over from cover to cover at least twice, and be sure you understand it.

You paid for it, and it's one of the most important documents you'll ever have. So if you don't understand any of it, be sure someone explains it to you.

By Paul Bianchina

Playing the Real Estate Waiting Game

2010-09-01T16:59:00.000-07:00

Buyers often are reluctant to make an offer to buy a home they find early on in their search. After looking for months and not finding anything comparable, some buyers regret not having moved quickly on a listing even though they saw it early on.

In most cases, you should consider yourself lucky if you find the home you want to own for years relatively quickly. It's not uncommon in some low-inventory markets for buyers to look for a year or more before they are able to buy. For the last few years, sellers who haven't had a pressing need to sell have been waiting for a better market before putting their homes on the market.

In one case, the inventory was so paltry that buyers who purchased in the Upper Rockridge area of Oakland, Calif., looked for four years before finding the house that would work for them in the long term.

In high-demand niche markets, there can be a shortage of listings and a lot of buyers waiting for the same kind of home. A couple who purchased in the Oakland Hills looked for more than a year in an area where not much that suited their needs was available. They made two offers during that time and ended up losing in multiple-offer competitions before they were finally able to secure a new home.

HOUSE HUNTING TIP: Buyers who find the right home soon after starting their search need to get a quick education about the local market in order to be able to keep from making a bad decision.

You don't want to pass on a house and kick yourself later for doing so. You also don't want to buy a house that doesn't work out for you, particularly in the current market. You'd be unlikely to sell the home again soon and break even.

Find out how often a listing like the one you're considering comes on the market. High-quality, well-located homes in coveted locations come on the market infrequently in some areas.

Ask your real estate agent how many listings like the one you're interested in came on the market in the last six months or one year. How long did it take them to sell? Were there multiple offers?

In other areas that have lots of homes for sale similar to the one you like, you have the luxury of shopping the market awhile. If someone else buys this home, you'll be able to find another in a reasonable period of time.

There's no urgency, unless interest rates are rising and locking in a low rate is key to being able to afford the home you want.

To ease your concern about buying a home before you've seen many, scour the Internet for other similar homes for sale in the area. Ask your agent to show you any other homes currently on the market that might work for you. This is how to determine the range of housing options in the area as well as understand local pricing.

Buyers from out of the area are at a disadvantage if they are not familiar with the housing market in the new location. The Internet helps buyers gain information about what kinds of homes and how many are available in the new location.

THE CLOSING: Although no one likes to make an interim move to a rental before buying, it does have the benefit of letting you live in the new community and decide which neighborhood will work best for you.

By Dian Hymer
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist.

Good Faith Estimate contains some 'quirks'

2010-08-02T13:25:00.001-07:00

As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) required lenders to provide mortgage borrowers with a new three-page Good Faith Estimate (GFE) to protect consumers who are applying for a mortgage.

The intent of the GFE is to educate consumers about the key terms and costs of a mortgage, both at origination and ongoing. A loan originator completes the form, giving the borrower a summary of the loan particulars and information necessary to shop rates and to be sure they're comparing like-type mortgages.

Although there's grumbling, mostly from mortgage brokers, lenders and closing/escrow agents, the format and information included in the new GFE is a step in the right direction. There are, however, some quirks.

For example, the GFE doesn't provide a complete and accurate account of the borrower's costs. Page two provides an itemization of loan origination and settlement costs. The origination charge is itemized as one lump sum; it's not broken down.

So, you don't know how much you're paying the appraiser for the appraisal, the loan originator for the origination fee, or other miscellaneous fees.

Another shortcoming is in the way transfer taxes are disclosed. The entire amount of any transfer taxes is entered on the GFE, even if the sellers pay part or all of it. This could inflate the buyer's estimated settlement costs.

To get around having to generate a GFE for buyers before they have committed to a given loan originator, some mortgage originators have developed worksheet quotes for buyers to use if they want to shop rates. HUD is adamant that these worksheets can't be used instead of a GFE. Furthermore, they provide the borrower no protection.

HOUSE HUNTING TIP: The new federally mandated GFE provides protection for borrowers against being charged extra fees at closing that weren't disclosed on the GFE. An informal worksheet provides no such protection.

Origination and settlement fees are grouped into three different categories. The first category is fees that can't increase between the time the GFE is issued and closing. Included in this category are the lender or mortgage broker's origination fee, transfer taxes and adjustments to loan origination charges after the borrower locks in an interest rate.

Loan originators who miscalculate, causing fees to run higher at closing, have to make up the difference out of pocket. To cover themselves, some loan originators pad the Category one figure.

The second category of fees can increase up to 10 percent at closing and includes such things as government recording charges and title insurance -- if the title insurer is identified by the lender, not by the borrower. This is done to encourage lenders to shop for the most cost-effective coverage for the consumer.

The third category of fees can change at settlement and includes homeowners insurance and title insurance coverage if the borrower, not the lender, identifies the title insurer.

The new GFE also includes a tradeoff table that shows what the interest rate would be if you paid a higher origination fee vs. a lower origination fee: the higher the fee, the lower the rate; the lower the fee, the higher the rate.

Finally, there's a loan-shopping chart to use the mortgage information provided by one lender to compare with other lenders. There is no obligation to use a loan originator who completes a GFE for you. A loan originator can't refuse to provide a GFE to a prospective borrower who asks for one.

As soon as a prospective borrower provides essential application information, such as Social Security number, property address, etc., the originator is to provide a GFE.

THE CLOSING: Lenders are required to provide a GFE within three days of receiving the borrower's application.

by Dian Hymer
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Water audits prepare you for the future

2010-08-02T13:25:00.000-07:00

Despite a very wet season this past winter, the increase in rainfall didn’t make up for many years of below-average water levels. In 2009 California Governor Arnold Schwarzenegger declared a state of emergency in an effort to manage the drought crisis. Since then, many water companies have put into place mandatory water rationing with financial penalties for homeowners who don't comply. Before you find yourself paying more for your water, be prepared for the future by conducting a water audit (don't worry, you don't have to find all your water bills from the past two years).

A water audit analyzes a home's water use and identifies ways to make it more efficient. A water audit's primary focus is to check for leaks in plumbing fixtures, appliances, toilets, faucets, hoses, and sprinklers (as well as ponds, fountains, and pools, where applicable). A water audit also can determine if older appliances and faucets need to be replaced with newer energy-efficient products, which can save both water and money on your monthly utility bills; Simply installing a low-flow showerhead you can save 8,000 gallons of water a year per person.

Beyond doing a physical check for water leaks, a water audit also looks at how much water you can save in daily tasks. Do you take long showers? Do you use the dishwasher and clothes washer only when they are full? Do you turn off the water when you are brushing your teeth? According to the American Water Works Association (AWWA), the average indoor water use per person is 94 gallons of water per day. Simply adjusting everyday habits can cut back on water usage by as much as 30 percent. That’s more than 30 gallons a day per person.

With global warming and droughts plaguing the West, water rationing will become mandatory by most utility companies. California's state water department forecasts that the Sierras, which are one of California’s main water sources, will have 25 to 40 percent less snow by 2050. A water audit saves money, saves water, and prepares you for an inevitable future. To find out how your household's water use compares to the rest of the country, go to H2O Conserve's website (www.h2oconserve.org) or the Water Use It Wisely site (http://www.wateruseitwisely.com/100-ways-to-conserve/home-water-audit.phptry) for their user-friendly H2O calculators. They will show how much water you use and give tips on ways to conserve. For more information on water audits, visit the AWWA website (www.awwa.org).

By Michelle D. Alderson

Seven rules for room additions

2010-08-02T13:24:00.000-07:00

If you're happy with your home and your neighborhood but are craving a little more space, maybe adding on is a better alternative to moving out. Room additions can be a terrific alternative for many homes, adding space for a growing family and adding resale value at the same time.

But be forewarned. A good room addition involves a whole lot more than just slapping on some additional square footage. Here are some important rules to keep in mind as your planning gets under way:

1. Know why you're adding on: This is the first rule, and it happens before you lift a hammer. Why do you need to add on? And no fair cheating and saying, "I need more space!"

Do you need another bathroom? Bedroom space? A laundry room or mud room? An improved kitchen flow? More space to entertain? Better accessibility due to health issues? More storage? A larger garage or hobby area? The only way the addition will meet your needs is to know what those needs are in the first place.

2. Good additions never look like additions: This is the other top rule of room-addition planning. When you're done, the addition -- no matter what its size or where it's located -- should never look like an addition. The architectural styles of new and existing need to blend.

The exterior materials need to blend as well, or at least complement each other. To the extent possible, use the same type of windows, roofing, doors, siding and other materials. If the original home has wood windows, using new vinyl windows in the addition screams "add-on" and lowers the appeal and the value. Don't overlook the need to blend landscaping and hardscaping as well.

3. Out, up, down, or a combination: The how and the where of a room addition is always a fun and exciting challenge for everyone involved. Some homes are situated on larger lots and lend themselves very nicely to adding out. Others seem best suited to adding up by building on a second or even a partial third floor.

Some houses are even laid out in such a way that it's possible to excavate under them and add new living space in the form of a daylight basement. Or it could be that a combination of two or even all three of these options makes the most sense for your particular home.

Keep your mind open to the possibilities. Work with a good contractor and a good designer and you'll be amazed at what you can come up with.

4. Don't let the interior become an afterthought: I've seen a surprising number of additions that look great from the outside but seem to have no thought put into them on the inside. Flooring doesn't match. Trim doesn't match. Sometimes even the interior floor heights don't match. Remember that how the interior of your addition looks and flows on the inside is just as important as how it looks and flows on the outside.

Use the same materials or the same style of materials. Match up ceiling, floor, and wall levels. Here again, no matter how you view the addition, inside or out, it should never look like an addition.

5. Create convenient access: This is another afterthought in a lot of additions. Let's say you have a three-bedroom, one-bathroom house, and you want to add a second bathroom. Typically, that's an addition that's going to have a good payback.

But then you build the addition so that the only access to the second bathroom is through the kitchen. You now have a three-bedroom, two-bath house, but since the layout is lousy, you've actually gone backwards in terms of desirability and resale value.

Are you going to create a beautiful second-floor master suite that can be accessed only by a tiny spiral staircase from the family room? Is the only way into your great new kitchen via a convoluted hallway that leads through the laundry room?

When planning your addition, never lose sight of how you're going to access the new spaces, and make sure that access is both convenient and inviting.

6. Don't overwhelm your lot: Granted, room additions are expensive. So when you're doing one, and all those workers are onsite, there's a temptation to get as much square footage as you can. But don't cram your lot full of house. Remember that open space is important as well, both to you and your family, and, later on, to potential buyers.

This is a good time to go back to Rule No. 1 and reconsider the "why" part of your room addition. Don't add space just to add it -- stay focused on your overall goals.

7. Understand the legalities: There are lots of rules and regulations that come into play regarding room additions. These include property line setbacks, zoning restrictions, and restrictions imposed by homeowner associations and architectural review committees.

In some historic areas, your addition may have to comply with certain historic guidelines. In other areas, there may even be solar shading restrictions that limit the height or the orientation of your roof line. Be sure you check into all of this before you get too far along with your planning.

By Paul Bianchina

Presale inspections for smoother sales

2010-07-01T14:35:00.000-07:00

Homes are selling for less. Everyone's trying to cut back. Yet, many real estate agents think it's wise for sellers to provide presale inspections for buyers to review before they write offers. Is the cost, which could run from a few hundred to $1,000 or more, worth the expense?

Last year, a home seller in the hills above Oakland, Calif., did a lot of work renovating a home before putting it on the market. Her agent recommended a home inspection, which involves a more comprehensive investigation of the property. A wood pest or termite report covers damage caused by wood-destroying organisms, and conditions that would be likely to lead to future infestation.

A complete home inspection usually covers the roof to the foundation and everything in between, although this differs from one inspector to another. The seller in the above example was financially exhausted after taking care of the fix-up work and decided against providing a presale home inspection.

The house was priced under market value and showed well. It brought in multiple offers and sold well over the asking price. However, the buyers' home inspection revealed that the foundation needed replacing. The deal stayed together, but only after a much lower price was negotiated.

Changing the price in the middle of a transaction can be a red flag to the lender, particularly if it's a significant price reduction. The lender could require the work be done by closing, which could delay the closing by months. If the buyer's loan commitment expires, the transaction could collapse.

HOUSE HUNTING TIP: One benefit of providing presale inspections on your home is that you have the opportunity to correct defects before marketing the property. This will make your home more salable and increase the odds of a smoother transaction.

Another benefit is that by providing as much information about the property as possible upfront, you decrease the risk of a transaction falling apart when buyers discover information about the property they weren't aware of when they made their offer.

One seller failed to provide a foundation report to the buyers before they made an offer. When the buyers were given the bad news, the transaction fell apart.

If you have reports on your home, make sure that the buyers receive copies of them before they decide whether or not to buy your home, especially if the reports reveal conditions about the property that could influence the buyers' decision to buy or what they would pay.

Sellers often see no good reason to pay for inspection reports upfront because the buyers will want to have their own inspectors investigate the property. Buyers should have the property inspected by their own inspectors.

The purpose of getting presale inspections is not to preclude the buyers from having inspections -- it is to educate the sellers and buyers about the property condition before they enter into a contract.

Sellers are in control of who inspects their home when they pay for presale inspections. Make sure to use inspectors who are well respected in the area. The buyers' comfort level with your presale reports will be higher if their agent can vouch for the inspectors.

Even though the buyers will probably do their own inspections, having presale inspections can cut down on negotiations that can occur after the buyers do their inspections. However, don't be surprised if the buyers ask for something as a concession for removing their inspection contingency.

Recently, buyers of a home in Oakland's Rockridge neighborhood asked the seller to have the garage roof replaced, even though they were given a roof report and replacement proposal before they made their offer. Their offer was based on taking the property in its present condition.

THE CLOSING: The seller said no and the buyers removed their contingency.

By Dian Hymer

Not all buyers are worth a counteroffer

2010-07-01T14:32:00.000-07:00

After mustering the emotional energy to make an offer on a listing, it can be devastating if you hear nothing back from the seller.

In most cases, if the offer isn't what the sellers are looking for, they will issue a counteroffer detailing the price and terms they can live with. When a seller doesn't respond at all to your offer, it's usually because the offer is so low that the seller thinks it's a waste of everyone's time.

Ask your agent to talk to the listing agent to find out why the seller didn't counter your offer. Then, make another offer if you think the house warrants a higher price. If the sellers want too much for their house, take a breather. Let the listing sit on the market awhile before you make another offer.

The risk of this approach is that another buyer could come into the picture who is willing to pay the sellers' price. Nothing is lost if you wouldn't have paid that price.

Your agent should keep in touch with the listing agent during your wait-and-see period. Ideally, you'd like to know if the sellers are going to reduce the price before it shows up on the multiple listing service. A price reduction to market value could elicit interest from multiple buyers.

Risk-averse sellers can be skittish about working with buyers who have a low cash downpayment. It's wise to include a mortgage preapproval letter with your offer. Also, some sellers aren't in a position to accept an offer that's contingent on the sale of the buyers' home.

Another reason buyers don't receive counteroffers is because there were multiple offers. The sellers can accept only one offer in primary position. If there were five offers and yours was the lowest, you're not likely to receive a counteroffer.

Multiple offers are occurring in low-inventory, high-demand markets. Buyers were out early this year due to lower home prices, low interest rates and homebuyer tax credits.

HOUSE HUNTING: A typical reaction from buyers who lose in a multiple-offer competition is that they would have paid more. When you're competing against other buyers, you need to make your first offer your best offer. This seems counterintuitive because you run the risk of paying more than you might need to.

One way to ensure that you don't pay too much is to include an appraisal contingency in your purchase offer. Generally, an appraisal contingency allows the buyers to withdraw from the contract if the house doesn't appraise for the purchase price. In today's wary lending environment, lenders are requiring appraisers to be conservative on appraisals, particularly in declining markets.

Be aware that some buyers in a competitive situation will not include an appraisal contingency in their contract. If they have a large enough cash downpayment and the appraisal value is less that the contract price, the lender may still approve a loan amount that will enable to the buyer to proceed with the sale.

THE CLOSING: Buyers who want a house badly enough will often pay more than the appraised value if they have enough cash to make up the shortfall.

By Dian Hymer

How does your garden grow?

2010-07-01T14:31:00.000-07:00

If you’d like to have a garden, but think you don’t have the space, think again. Urban gardening techniques are allowing small-space gardening to take root in unlikely places, such as balconies, raised planters, roofs, windowsills, and postage stamp-sized backyards. Condominium dwellers and homeowners alike are getting their fingers dirty and growing their own produce, succulents, and flowers in these tiny slivers of dirt.

According to Texas A&M horticulturalists, nearly every plant that grows in a spacious garden can grow in containers, such as hanging pots, windowsills, or even tubes--bags of potting soil with slits for the plants to protrude. Some plants are ideally suited for container growing, including tomatoes, peppers, eggplant, green onions, beans, lettuce, squash, radishes, and parsley. Texas A&M offers pointers on everything from soil preparation to container selection at http://aggie-horticulture.tamu.edu/extension/container/container.html.

Topsy-turvy Turnips?

One urban gardening option gaining popularity is germinating plants upside down from hanging containers. That is, the plants dangle upside down from homemade planters, such as five-gallon buckets, or commercially available planters. A recent New York Times article at http://www.nytimes.com/2010/05/20/garden/20tomato.html spotlighted this technique. These hanging options allow those without a yard to grow fresh produce, and those with a backyard garden to add a rack of hanging planters and boost their gardens’ yields. Condo dwellers can get in the act too with easy-to-make hanging window pots. For a step-by-step pictorial on making your own upside-down soda bottle container, see http://www.cheapvegetablegardener.com/2010/05/2-liter-bottle-upside-down-tomato-planter.html.

Succulents

If your interest in gardening is ornamental versus gastronomical, then succulents are an ideal match for you and California’s climate. Not only are these plants suitable for indoor and outdoor settings, these heat-tolerant and drought-resistant plants require little maintenance if you become an erstwhile gardener.

According to Debra Lee Baldwin, author of Designing with Succulents and Succulent Container Gardens: Design Eye-Catching Displays with 350 Easy-Care Plants, “Succulents are carefree plants for small-space gardens.” She notes that succulents come in all shapes, sizes, colors, and varieties—from delicate sedums with rice-sized leaves to trees that are reminiscent of the vegetation in a Dr. Seuss book. Succulents can accent any setting—windowsills, sitting areas, walkways, and, of course, yards. The author’s Web site features how-to videos at http://www.debraleebaldwin.com/ and http://www.succulentchic.net/ and a beautiful array of examples of the design possibilities. In no time, you’ll be creating your own windowsill boxes of sansevierias (mother-in-law’s tongue).

A Tree Grows in Brooklyn

What started as an experiment to grow vegetables in a Brooklyn apartment window has evolved into a collaborative online community’s effort to empower inner-city residents to grow food in windows. This Internet-based collective shares ideas and techniques for building and using low-cost hydroponics to grow vegetables. Visit http://www.windowfarms.org/ to learn how to create your own 365-day garden of edibles using low-impact materials or recyclable materials in your outbound trash. You also can purchase starter garden kits from the site. Either way, these gardens will brighten any window.

More Resources • Cactus and Succulent Society of America (www.cssainc.org/) • HGTV (http://www.hgtv.com/topics/container-gardening/index.html) • Container Gardening Guide (http://containergardeningtips.com/) • National Gardening Association (www.garden.org/home)

By Paula Hess

How pros drill through masonry

2010-07-01T14:29:00.000-07:00

When it comes to drilling holes in concrete, concrete blocks, stone and other masonry, using a standard drill can be a real exercise in futility. The rotary motion of the drill bit -- even a carbide-tipped masonry bit -- is simply not sufficient to power through tough masonry surfaces.

Instead, you need a drill that combines rotation with an in-and-out hammering motion. This combined action helps to break down the masonry as the bit advances, making for much faster drilling without burning the bit. There are two basic types of drills that offer this rotational and hammering combination: The hammer drill and the rotary hammer. The two tools are often confused, but there is a definite difference between them. Hammer drills

A hammer drill looks very much like a standard drill, and is available in both corded and cordless versions. Hammer drills have a heavy-duty keyed or keyless chuck, and will accept standard drill bits and screwdriver bits in addition to carbide-tipped masonry bits. They tend to be a little less powerful than a dedicated rotary hammer, but since they can be used for both hammer drilling and conventional drilling and driving, they are more versatile.

Like everything else in the tool world, you get what you pay for. Some lower-end hammer drills, especially cordless ones, are frustratingly short on hammering power, and their inexpensive construction makes for a short life span. So if you're considering investing in a hammer-drill/drill/driver combination, look for one with the quality, durability, and features that will allow it to do all three tasks well.

One example of a high-end cordless hammer drill/drill/driver is the DeWalt DC927KL ($349). DeWalt is well known for high-quality tools that are designed with the needs of professional contractors in mind, so this is definitely a drill that will meet and exceed everything that the home handyman is looking for.

The DeWalt Hammer Drill uses their new 18-volt nanophosphate lithium ion batteries for more durability and longer life. To handle the stress of the hammering action it's a little heavier and more ruggedly built than a conventional cordless drill, but DeWalt has added a rubberized, non-slip grip for comfort.

The DC927 also has an all-metal, three-speed transmission that lets you match the speed of the drill to the type of work you're doing. By turning a simple mode selector collar, you can choose the appropriate speed for hammer-drilling, conventional drilling or driving fasteners.

The heavy-duty all-metal chuck is 1/2 inch, and when you combine that with the auxiliary side handle you have a tool that will easily handle larger wood-boring bits and hole saws in addition to hammer-drilling concrete. The drill's variable speed is controlled by the trigger, and there's an adjustable clutch as well.

The complete kit includes a one-hour charger, two batteries, an adjustable and removable side handle, and a case.

Rotary hammers

Rotary hammers are more powerful than hammer drills, and while they'll also do some standard drilling, their real purpose is drilling in masonry. Rotary hammers deliver heavier hammering action than the typical hammer drill, and some models also have a hammer-only setting, which allows them to be used with a chisel bit for light- to medium-duty chipping.

True rotary hammers also use a different type of chuck and drill bits, known as SDS (slotted drive shaft). This type of keyless chuck slides back and forth to install the bits, rather than rotating. SDS chucks provide a non-slip grip on the bits that better withstands the hammering motion, but they will not work with conventional drill bits.

If you have or anticipate a fairly regular need for drilling in concrete and masonry surfaces, a rotary hammer is probably a better choice than a combination hammer drill. An excellent example of a professional-quality corded rotary hammer that would also be suitable for homeowners is the 11258VSR from Bosch ($159), another company that manufactures excellent tools. Faster than a conventional hammer drill, the Bosch Rotary Hammer is also very comfortable to use, and the SDS chuck is easy to operate and grabs the bits securely. Bosch has designed this drill to be quieter and produce less vibration than comparable rotary hammers, so you can use it for longer periods without fatigue. And because this tool is built specifically with hammer-drilling in mind, you can count on durability and long life.

The drill can be operated in hammer-drill or drill-only modes, and is switched with a simple dial on the side of the tool. The handle is comfortably padded, and the variable speed is trigger-controlled and reversible. Bosch also offers an optional snap-in three-jaw chuck adapter, which allows you to use the tool with conventional drill bits.

The 11258VSR comes with a comfortable and adjustable side handle, an adjustable depth gauge to help you drill holes to specific depths, a selection of three different SDS carbide-tipped masonry bits, and a carrying case.

By Paul Bianchina

Find property problems before you buy

2010-06-02T12:30:00.000-07:00

To avoid a bad experience that could end up in a legal battle with the sellers over property problems, make sure your purchase agreement includes an inspection contingency.

Your mission during the inspection contingency period is to find out as much as possible about the property and surrounding area, insurability of the property, permit history, zoning issues and cost to repair defects. Investigate any issues that could affect whether or not the property will suit your long-term needs at a price you can afford.

Most states have home seller disclosure requirements. If you are buying in a state that doesn't require sellers to disclosure material facts, ask the sellers to disclose in writing any property defects or neighborhood issues they know about.

Also, find out if there are systems that require routine maintenance, such as the furnace, drainage system, skylights and roof. After you clear the inspection hurdle, ask the seller to provide you with contact information for any people who have worked on the property that the sellers would recommend.

Find out when major components were replaced and when the house was last painted. Find out how much the sellers pay for utilities. Ask for copies of proposals and paid invoices for any significant work done on the property.

Basically, you want to know any problems the seller had with the property, what was done about it, by whom and when. If the roof was recently replaced, find out if it's covered by a warranty and if it's transferable to you.

You may feel uncomfortable asking the sellers to provide additional information at the time you make the offer, particularly if there are multiple offers. In this case, ask the sellers for answers to your questions during the inspection contingency time frame. Questions will undoubtedly come up during your inspections.

HOUSE HUNTING TIP: Even if the sellers have provided presale inspection reports and disclosures, have your own inspectors give the property a thorough exam. Some buyers hire the seller's home inspector to meet them at the property to explain the presale report and ask questions. This may save you money. But, saving money should not be the primary goal when having a property inspected.

Buyers of newly built homes should ask the sellers for any construction-related documents like the geotechnical report, engineering calculations, and letters to the planning department confirming that the geotechnical engineer monitored the construction and confirmed that the house was built according to his recommendations. Ask the seller to leave the architectural plans, if they're available.

Verifying livable square footage is a big issue in today's cautious mortgage environment. Many lenders won't count additions or renovations that add square footage in the appraised valuation of the property.

If the sellers can't provide the supporting documentation, such as copies of approved permits, the property could appraise for less than you agreed to pay. This might jeopardize the transaction if the lender approved a lower mortgage amount than you requested.

It's a good idea to check the permit history at the planning department yourself if the sellers can't provide copies of permits for work done. This should let you know if renovations were done with permits and if the permits received final approval. You should have this information before removing the inspection contingency.

Many planning departments won't issue a new permit if there is a permit on record that never received final approval. The new owners might incur fees to clear up any outstanding permits before they can move forward with new improvements.

THE CLOSING: With probate and REOs (bank-owned properties) you will receive minimal, if any, information about the property condition. Be extra careful with your due diligence investigations.

By Dian Hymer

Fixing to sell: Don't go overboard

2010-06-02T12:26:00.000-07:00

Fixer-uppers with upside potential were in high demand when the market was appreciating at a fast pace. Once depreciation took over, speculators disappeared until 2009, when low-end foreclosure properties in some areas became hot properties -- particularly if they were selling at a 50 percent discount from the peak in summer 2006.

In California, 70 percent of the homes bought by investors in 2009 were distressed-sale properties, according to the CALIFORNIA ASSOCIATION OF REALTORS®. Some were stripped of appliances and fixtures. But, at half price, there was profit potential for buyers who were up for a redo -- especially seasoned investors buying multiple homes to fix up and resell, or rent out.

Fixers priced over $500,000 aren't as easy to sell today. Most buyers in higher price ranges are buying a home to live in. They want a home in move-in condition that will suit their long-term needs.

There are exceptions. In high-demand market niches with few listings, there is occasionally a fixer-upper that draws a lot of attention. Usually, these fixers sell to buyers who will live in the property and fix it up themselves to save money. Often this is the only way they can afford to move into the neighborhood.

Sellers of fixers in such neighborhoods should make their property as presentable as possible by cleaning out clutter, both inside and out. Many homebuyers can't visualize a property's potential. It's often worth a modest investment to show the house at its best advantage.

Cosmetic improvements, such as painting, replacing outdated floor covering, or refinishing worn hardwood floors can pay off. Some fixers are staged, even though the property needs a lot of work, so that buyers can envision themselves living there.

Presale inspections will help buyers make a decision about whether or not to tackle the project. Make reports available to buyers before they make an offer to avoid having to put the home back on the market if the deal falls apart because the buyer's inspectors discover defects not previously disclosed.

HOUSE HUNTING TIP: How much you spend preparing a fixer for sale depends on several factors. How much did you pay for the property? How much do you owe against the property? Is there demand for fixer-uppers in your area? Finally, how much does your real estate agent think you can sell the home for given current market conditions?

Sellers who have equity in their home and cash to invest in fix-up for-sale work should consider making cost-effective renovations, like a kitchen upgrade, but not an entire renovation. Ask your agent what the home would sell for with and without these improvements before doing anything to it.

The investment may not yield a profit, but could recover the costs when the home sells. In areas where fixers aren't selling, sellers might need to enhance the property to sell at all. A good real estate agent should be able to provide references for reliable, reasonably priced professionals who can do the jobs for sellers who haven't the time or expertise to do the work themselves.

Buyers who bought at the peak may not be able sell for even close to what they paid. One possibility would be to rent the property, if it makes sense financially. You may need to fix up the property somewhat to attract a good tenant. Consult with a certified public accountant about the tax consequences of converting a single-family residence to a rental.

Another option, if you don't have to sell now, is to stay put for awhile and fix the property up gradually over time. Avoid investing a large amount of money in the hopes of getting a bigger return.

THE CLOSING: The housing market in your area may be too uncertain for speculation.

By Dian Hymer

What is post-consumer content?

2010-06-02T12:00:00.000-07:00

By Michelle D. Alderson

What is it?

You've most likely heard of the common green jargon: energy-efficient, recycled material, reusable -- the list continues. However, the term post-consumer content might be new to you. You may even be using products that are made with post-consumer content already and you just don't know it. Earth911.org (http://www.earth911.org) defines post-consumer content as "a material that has served its intended use and instead of being disposed of it is being reused in a different product. If a product is labeled 'recycled content,' the material might have come from excess or damaged items generated during normal manufacturing processes-not collected through a local recycling program." Simply put, products made with post-consumer content are items you can buy that have been made with recycled material.

Why is it important to buy it?

Probably the most common post-consumer content product you will find is paper goods: toilet paper, paper towels, envelopes, napkins, etc (http://www.nrdc.org/land/forests/gtissue.asp). The following are just a few examples of other products that can be made with post-consumer content: paint, carpet, mulch, bathroom and office partitions, office furniture, printing ink, corrugated cardboard boxes, cleaners, and hardwood floors. You might ask why it is necessary to buy these products when regular toilet paper seems quite fine. It is important to know that recycling doesn't just end when you put a can in a blue bin. It truly is cyclical. Buying post-consumer content products keeps the country's growing recycling programs afloat. If consumers don't buy products made with recycled materials, companies won't waste their time making them. In essence, buying such products keeps the landfills lean, the recycling business running, and inevitably helps the environment.

How much will it cost?

In today's economy, some consumers might fret over purchasing post-consumer content products because of cost. Is it better to help keep the environment green or keep that green in your pocket? If you are buying a post-consumer content product like used office furniture, you will see a significant discount, but new post-consumer content products can cost a little more. According to greenguardian.org (http://www.greenguardian.org), some products, such as post-consumer content recycled paper can cost about 10 percent to 20 percent more than regular paper. The good news is that as the demand for post-consumer content products grows, the price for such goods continues to drop. In addition, supplier competition often can create bargains for the consumer. The key is to search for the best price.

Tax Time Over but Many Credits Still Available

2010-04-29T13:03:00.000-07:00

By Paula Hess

If you’re a homeowner, it’s a given that you claim the mortgage interest deduction on your tax returns. If you are a green-minded homeowner, you may be eligible for a federal tax credit if you purchase or have purchased (keep those receipts) an energy-efficient product or a renewable energy system for your home.

These credits apply to the following if purchased between Jan. 1, 2009, and Dec. 31, 2010: Biomass stoves; insulation; heating, ventilation, and air conditioning upgrades; windows and doors; roofs; and non-solar water heaters. The credit allows homeowners every two years to claim 30 percent of the cost of the system, for a maximum credit of $1,500. This credit expires Dec. 31, 2010. Please note that some of these tax credits do not apply to installation costs, and not all ENERGY STAR products qualify for the tax credits. Please consult http://www.energystar.gov/index.cfm?c=tax_credits.tx_index for specifics.

If you’ve decided to purchase small wind turbines, a geothermal heat pump, or a solar energy system for your principal residence or a new home construction, you have until Dec. 31, 2016, to make the purchase. You also can receive a tax credit of 30 percent of the cost (no upper limit).

Check out the following resources:

• Database of State and Federal Incentives for Renewables & Efficiency (http://www.dsireusa.org/): Provides a comprehensive list of all local, state, and federal rebates, tax credits, and property tax reductions for green enhancements to homes and new construction.

• Better Than a Credit: If you participated in the Cash for Clunkers program and purchased a more fuel-efficient car, remember, your $3,500 or $4,500 rebate is not considered taxable income. If you actually purchased a hybrid, you may qualify for an energy tax credit (http://www.fueleconomy.gov/Feg/tax_hybrid.shtml). Cars purchased after Dec. 31, 2010, are no longer eligible for the energy tax credit.

• ENERGY STAR Rebates and Partners: Type in your ZIP Code and find tax exemptions, rebates, or discounts on ENERGY STAR-rated products in your local area--everything from DVD players to water heaters at http://www.energystar.gov/index.cfm?fuseaction=rebate.rebate locator.

Closing Costs Vary by Location

2010-04-29T13:01:00.001-07:00

By Dian Hymer

Closing costs, the costs associated with buying or selling a home, can add up. It's wise to get an estimate of how much you're likely to pay in closing costs before you make an offer to buy a home or accept an offer to sell.

Closing costs reduce the amount the seller nets from the sale. Buyers need to know in advance of entering into a home-purchase contract that they have enough cash to cover both the down payment and closing costs.

Closing costs vary with location. Often who pays what fees -- buyer or seller -- is dictated by local custom. For instance, in Northern California, buyers usually pay the title insurance premium, while sellers usually pay the premium in Southern California.

HOUSE HUNTING TIP: Some real estate agents use 1 percent of the expected selling price to estimate a seller's closing cost. This might be close to accurate in some cases. But, there are so many variables that can affect the closing costs in any given sale transaction that it's preferable to have your real estate agent give you an itemized list of the costs you are likely to pay.

Sellers' closing costs can include such things as the real estate broker's fee; transfer taxes, if there are any; costs associated with any mandated compliance requirements; title insurance, in some places; attorney fees, in some cases; closing or escrow agent fees; inspection fees, unless they were paid directly to the inspectors; a home warranty, if applicable; fees for drawing, notarizing, and couriering documents; recording fees; property taxes (if seller has overpaid, the buyer will credit the seller that amount); and homeowner association dues, if there are any.

In addition to the closing costs listed above, the sellers pay off the liens secured against the property and any outstanding interest owed at closing. When you make a mortgage payment, it pays interest owed for the previous month. So, if you were to close on March 1, you would owe the lender interest from Feb. 1 through the date the lender receives the funds, which may not be until a day or so after you close.

With short sales, where the sale price is insufficient to pay off the liens and closing costs, additional closing costs may apply, such as a short-sale process fee charged by the escrow or closing agent. If a third-party short-sale negotiation company is involved, there could be a fee as high as 1 percent of the sale price charged at closing.

Sellers who live in an area where a property survey is required and who customarily pay the cost might have significantly higher closing costs than would a seller in Oakland, Calif., for example, where there aren't any expensive point-of-sale compliance requirements.

Buyers' closing costs customarily cover such things as the fees associated with the buyers' new mortgage; transfer taxes, if there are any; title insurance, depending on the area; homeowner insurance premium for the first year (usually required by the lender); buyer's broker fee, if appropriate; attorney fees, in some cases; escrow or closing agent fees; miscellaneous fees for document preparation and notarizing signatures; and proration of property taxes and homeowner association dues, if there are any.

Buyers' closing costs can differ significantly depending on how many points their lender charges. "Points" is a term used for the loan origination fee; one point equals 1 percent of the loan amount. On a $600,000 mortgage, one point would add $6,000 to your closing costs. It would add only $1,500 if you paid 1/4 point, but your interest rate on the loan would likely be higher.

THE CLOSING: Even though local custom usually prevails, who pays a particular closing cost is negotiable.

Six Ways to Boost Curb Appeal

2010-04-29T13:00:00.000-07:00

By Paul Bianchina

If you're thinking of listing your home this spring, now is the time to be thinking about one of the most important elements of real estate marketing: Curb appeal. It's your one and only chance to make a first impression on a potential buyer, so make it a good one! Here are some suggestions to make your home stand out from the rest:

1. Get some new eyes: The thing about curb appeal is that you need to look at your house through a stranger's eyes, not through your own. You don't even notice the faded paint on the trim or the missing house numbers, but other people do. So if you can't be honest and objective about the overall condition of the exterior of your home, find someone who can.

If you have a friend, relative, or neighbor who you trust to be honest with you (and that you have a good enough relationship with that it will survive their bluntness, then ask them). Ask your real estate agent. If necessary, hire a landscaper or a contractor to act as a consultant.

The main thing is to get a comprehensive, written list put together of what needs to be done to the outside of your home to improve the first impression it makes. Concentrate on the front, but don't overlook the sides and back either.

2. Start with basic repairs: The very first thing on your curb appeal list should be basic repairs. Is there a broken window? A torn screen? A loose gutter or downspout? A sagging screen door? It doesn't matter what it is or how small it is, fix it. They may seem like little things, but making sure that everything is in proper working order can make a huge difference in how people perceive your house and the care you have taken with it as a homeowner. Make sure you have big, bright, easily visible house numbers. Oh yeah -- and don't forget to squirt a little oil on those squeaky door and gate hinges.

3. Next, do some cleaning: Break out the broom and clean the outside of your house better than it's ever been cleaned before. Rent a pressure washer, and clean the driveway, walkways and patio. Clean your decks and your siding (a scrub brush is a better choice in these areas than a pressure washer, to avoid damage to the wood). If your wood deck is badly weathered, consider a deck cleaner and brightener made specifically for that purpose -- available at paint stores. Wash all your windows, inside and out, including the window screens.

4. Declutter: Just as you would with the interior, you want to declutter the outside of your house as well. Pick up the kids' toys, and put away the garden tools and hoses (remember, you're going to have people visiting the house, so this is also a liability issue). Remove all that accumulated junk from the sides and back of the house, and haul it to the landfill. 5. Next, tackle the landscaping: As part of the decluttering and general cleaning, do the landscaping areas as well. Prune overgrown plants and trim back overhanging tree limbs. Pull out anything that's dead. Rake up leaves and needles, and pull weeds. If you have an underground sprinkler system, make sure everything is working properly. If you have a lawn, fertilize and water it regularly to green it up, and run an edger along sidewalks and driveway edges. In your planter areas, you can make a huge difference in how your house looks with the simple addition of some fresh bark and colorful flowers. And if you don't have any planter areas, create a few, or add some simple planter boxes to do the same thing. There's nothing like color to really catch the eye and give your home a bright, fresh appeal.

6. Consider a trip to the paint store: Few things help your home show better than a fresh coat of paint. If it's been awhile since the outside of your home's been painted, this might be a worthwhile investment, especially in a tough seller's market. If you're handy with a brush and an airless sprayer, you might just want to undertake the project yourself. A long weekend and a few hundred dollars in paint can make a world of difference in how well the home shows and how quickly it sells. Otherwise, talk with a licensed painting contractor for an estimate.

Maybe painting the entire house isn't really necessary. Sometimes just a fresh coat of paint or maybe a new color on the trim, exterior doors, garage door or window shutters can make a big difference as well. A word of caution about paint colors: When painting the house for resale, select colors that complement the house and the neighborhood and that will appeal to the greatest number of buyers, whether they happen to be your favorites or not. You may really have been itching to paint the house purple with black trim, but save that for another day.

It Still Pays to Remodel

2010-04-29T12:48:00.000-07:00

By Dian Hymer

The home-sale market has taken a beating in the last few years, which begs the question: Does it makes sense financially to invest in home improvements?

Remodeling Magazine's annual “Remodeling Cost vs. Value Report for 2009-10,” published in agreement with the NATIONAL ASSOCIATION OF REALTORS®, indicates that remodeling still pays off, but more so on less expensive projects.

Most high-end remodeling projects don't return dollar for dollar on the investment even in a good market. That is, unless homes are appreciating at a fast clip. In this case, you might get your money back due to appreciation. But the profit on the sale might not be as much as it would have been if you hadn't done a high-end renovation.

Just as today's homebuyers are making pragmatic decisions, so are today's homeowners when it comes to making improvements. Most of the remodeling projects with the largest return were for such things as replacing exterior siding and windows. On average the cost involved was less than $14,000, according to Remodeling Magazine.

These projects returned from 71 to 83 percent nationally depending on the materials used. The project that paid back the highest return was a midrange front-door replacement that cost approximately $1,200 and returned an average 128.9 percent nationally.

Sellers may wonder why it would make sense to invest in an improvement just for the sake of selling if it won't repay the amount invested. In today's challenging home-sale market, these improvements may be warranted for the home sell at all if there is a lot of inventory in your neighborhood. Buyers expect more for their money and gravitate to listings that are in the best condition for the price.

HOUSE HUNTING TIP: Be judicious about how you spend your money fixing your home up for sale. For example, if your kitchen is a disaster, it makes more sense to do a midrange than an upscale renovation. According to the “Remodeling Cost vs. Value Report,” a midrange minor kitchen upgrade will return an average of 78.3 percent nationally. A major upscale kitchen remodel will pay back only 63.2 percent.

The national average returns on remodeling investments do not give an accurate picture of the renovation returns that might be typical in your neighborhood. For instance, the payback for Honolulu homeowners for most of the 18 remodel projects analyzed returned 100 percent of the investment. San Francisco was close behind with 10 projects paying back the full investment.

The cost versus value report recommends the following cost-effective improvements you might consider to prepare your home for the market: tidying up the kitchen cabinets using organizers will make your cabinets roomy; add an inexpensive tile backsplash to a tired kitchen, and use inexpensive tile to give an old bathroom a new look; add a breakfast bar by cutting an opening between the kitchen and family room; and install granite tile rather than slab.

Other suggestions include: Replacing outdated light fixtures; freshening up the basement; giving the kitchen cabinets a new look by reconditioning and adding new knobs or having cabinet doors and drawers replaced; updating a bathroom without replacing tile by changing the medicine cabinet, light fixtures, vanity, cleaning the grout or replacing it and adding glass shower doors.

The findings of this report were based on a survey sent to 150,000 appraisers and real estate agents in the summer of 2009. The survey included information about the cost and description of the remodel projects and median price data for the 80 metropolitan areas surveyed. Some 6,233 survey respondents estimated how much value the improvements would add to the house at resale in the current market.

THE CLOSING: Before starting any fix-up-for-sale projects, seek your real estate agent's advice so that you don't waste money on improvements that won't pay back much in your area.

Buying an existing home that’s “green”

2010-04-01T12:20:00.000-07:00

By Michelle D. Alderson

With rising energy costs and growing awareness – and availability – of environmentally friendly products, it's no wonder that interest in purchasing green homes is rising. Green remodels on existing homes both save the environment and save homeowners money on monthly bills. As green home remodeling becomes more abundant, so does the demand to purchase these homes. This increased interest in existing green homes has created a need to educate buyers on what is really considered "green."

Over the past several years, many organizations such as Build It Green, (http://www.builditgreen.org), an independent nonprofit organization, have been created to offer a third-party unbiased evaluation. Because of the growing desire to purchase existing green homes, states Bruce Mast, development director at Build it Green, "the Real Estate Council has been setting the stage to incorporate GreenPoint Rated results into MLS listings in several areas." What is GreenPoint Rated? Mast explains that, "GreenPoint Rated provides an independent assessment of a home across five categories: community design, energy efficiency, indoor air quality/health, resource conservation, and water conservation."

Other organizations that have similar rating systems for homebuyers include the U.S. Green Building Council (http://www.usgbc.org), a non-profit community; and Green Globes (http://www.greenglobes.com), an assessment and rating system. The USGBC has created the REGREEN (http://www.greenhomeguide.org/guide_for_green_renovation/index.html) program in partnership with the American Society of Interior Designers' Foundation. Working with LEEDs for Homes, a LEED (Leadership in Energy and Environmental Design) certification offers an unbiased green home inspection for possible buyers. In addition, Green Globes boasts a rating system that has an easy-to-use online questionnaire for a minimal cost. Once the questionnaire is completed, the user automatically receives a report. All three organizations have online tools to answer questions and guide interested parties through the certification process.

Part of this process includes understanding what different elements make a home green. The elements can range from simple re-landscaping to more complicated structure updates. But all share a common goal: to help preserve the planet and save on energy costs. The following are just a few examples of "greening" a home:

• Buying ENERGY STAR (http://www.energystar.gov) appliances is the most popular way to go green. These EPA- and Department of Energy- approved appliances use less energy than conventional appliances. • Another easy way to green a home is by replacing standard light bulbs with energy-saving CFLs (Compact Fluorescent Light Bulbs), (http://www.energystar.gov/index.cfm?c=cfls.pr_cfls) which can be found at most supermarkets and drugstores. • Using VOC (volatile organic compounds) (http://www.epa.gov/iaq/voc.html) also receives green certification recognition. VOC paint is just one example of how this compound is used. • Installing low-flush toilets, solar paneling, and low-emittance windows helps lower water and energy bills. • Planting native vegetation and drought-resistant landscaping can save on water usage as well.

When thinking about purchasing a green home, a buyer might wonder if it's really worth all the effort and cost. Aside from saving the planet, green remodels on existing homes have proven to be cost-efficient. Veronica Cortes, a homeowner in Northern California recently did an entire green remodel on her 1957 ranch-style home. Currently she pays $30 per month on average for her energy bill after installing solar paneling. In the winter months, her neighbors pay anywhere from $276 to $500. Cortes says all the heartaches of a remodel were worth it: "Our house nurtures us in ways that it never did before: … the place is flexible and its spaces can accommodate different uses depending on our needs, [and] it's cheap to run."

Window trim: from boring to bold

2010-04-01T12:08:00.000-07:00

By Paul Bianchina

If you look closely at homes with beautiful windows, you'll typically find one thing in common: wood trim. No matter what the style of the window is or what material it's made out of, a painted or stained wood surround enhances the beauty of the window far more than the inexpensive "drywall wrap" that's common on a lot of today's homes.

Creating wooden surrounds for your windows is enjoyable, fairly inexpensive, and can be done by anyone with a few finish carpentry skills. And you can do one or two windows at a time, which is a lot less invasive to your home life than a lot of remodeling projects.

First, a couple of definitions
In the world of finish carpentry, there are a couple of terms that are helpful to know:

Window surround: A window surround consists of the four pieces that wrap the inside of the window frame, between the face of the window and the face of the wall.

Stool and apron: A window stool is the same as a window sill. It's the horizontal board at the bottom of the window surround. The trim board beneath the stool, which covers the joint between the bottom of the stool and the face of the wall, is the apron.

Drywall wrap: A type of surround in which all four sides of the surround are done with drywall instead of wood.

Three ways to trim the window:
There are basically three options for how you can trim out a window with wood. The simplest is to wrap the two sides and top of the window surround with drywall, and then install a stool and apron at the bottom. The drywall pieces are installed first and finished, prior to installation of the stool. If you already have drywall-wrapped windows, all you need to do is remove the bottom piece of drywall from the surround, to expose the rough framing underneath.

The stool is cut from finish-grade lumber. You can use oak, maple, fir, or other clear grades of wood if the wood is to be stained. If you'll be painting the stool, consider poplar or medium-density fiberboard (MDF), both of which paint out very nicely. The stool is typically ripped to a width that's one inch wider than the distance from the face of the window to the face of the wall, and onr inch longer than the distance between the two side pieces of the surround.

The stool is then simply notched on each end to fit into the opening in the window surround. It will overlap the wall face by an inch, and there will be two "ears" that extend past the edge of the surround by one-half inch on each side. The apron, which is a piece of trim of any desired size and style, is cut one-half inch shorter than the overall length of the stool, and is installed below the stool to finish things off.

Method No. 2 is to make a wooden surround with no stool, which is done by building a box. You need four pieces of lumber ripped to the same width as the distance from the face of the window to the face of the wall, then cut and assembled into a simple box that's slightly smaller than the inside dimensions of the window frame opening. Slip the box into the opening, shim it until it's centered, then nail it in place. The installation is completed by installing four pieces of matching trim on face of the wall, sized so as to cover most of the edge of the wooden box and mitered at the four corners.

The third method is a combination of the first two. In this case, you would construct a three-sided box -- two sides and a top -- then cut a stool as described above and use it as the fourth side (the bottom) of the wooden box.

Install the box in the opening and shim it into place. Now install three pieces of trim on the face of the wall -- a top piece and two sides. The trim is mitered at the two top corners, and extends down on the two sides to rest on top of the stool. An apron, installed below the stool as described above, completes the installation.

There are dozens upon dozens of variations on these three basic themes. Before you get started, take some time to peruse a few architectural and carpentry magazines and books and you're sure to find a look that's perfect for your home.

Sizing up purchase deposits

2010-04-01T12:03:00.000-07:00

By Dian Hymer

In most states, it's customary, or required by law, for the buyers to include a good faith deposit when they make an offer to purchase a home. The deposit should not be given directly to the seller, but held by a trustworthy third party that maintains a trust account specifically for home purchase deposits, such as an escrow or title company, real estate firm, or real estate broker.

The deposit can be in the form of a check made out to the third-party company or it can be wired into the appropriate account. The size of the deposit you make is usually determined by market conditions and local custom, except for specific types of sales, such as probate sales or sales of homes in a housing development where a minimum deposit is required.

HOUSE HUNTING TIP: Your deposit will become part of your downpayment if the sale goes through. Depending on how your contract is written, your deposit should be refundable if you are unable to satisfy a contingency, after exercising due diligence to do so. Your contract should include contingencies for inspections, satisfactory condition of title to the property, your ability to line up financing, and the lender's approval of an appraisal of the property.

For example, if your inspections reveal defects that can't be satisfactorily negotiated with the seller, your deposit should be returnable if your contract provides for this. However, the deposit won't be released by the holder to either the buyers or sellers without a release signed by both parties indicating how to disperse the funds.

Be sure to check with a knowledgeable real estate attorney to determine who is entitled to the deposit if you back out for a reason that's not provided for in the contract. Real estate agents who also are not attorneys cannot advise you on this issue. If you end up in a dispute, the deposit holder won't release the money to either party until the dispute is resolved.

How large a good faith, or earnest money, deposit you make will depend on several factors. In any case, your deposit should indicate your intent to abide by the terms of the contract and close the sale. There is usually no set amount required by law.

In California, where home purchase contracts can include a liquidated damages clause, deposits are often 3 percent of the purchase price. This clause puts a limit on damages that could be awarded to the sellers if the buyers don't close the sale.

If buyers and sellers agree to include this clause in the contract, state law limits the amount that can be awarded to the seller to 3 percent of the purchase price. In many areas of California, deposits tend to be 3 percent of the offer price, even if the contract doesn't include a liquidated damages clause.

Like most elements of a purchase contract, the amount of the deposit is negotiable. So, if you offer a $10,000 deposit on a $500,000 house, the seller might counter your offer and ask for a deposit of $15,000, which is 3 percent of the purchase price.

The deposit can be made in two steps. You could offer $5,000 as an initial deposit, and increase that amount to a total of $15,000 upon removal of contingencies.

In a hot seller's market, you might want to offer the full amount up front, or make a larger deposit than you would if you weren't potentially competing, to show your sincerity to the seller.

THE CLOSING: If you're buying a short-sale listing that might take two or three months for lender approval, you might want to keep the deposit to a lower amount so that you don't tie up more money than necessary for a long time period.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Appraisal rules tough on additions

2010-04-01T11:58:00.000-07:00

By Dian Hymer

Recently a homeowner in the hills above Oakland, Calif., applied for a refinance. An appraiser visited the property and measured both levels of the house. The appraiser called the homeowner a few days later to find out if the lower level had been added with a permit. The public record indicated the house had three bedrooms, two bathrooms, and 1,513-square feet.

The actual house in its current configuration has four bedrooms, three baths and a recreation room, giving it considerably more square feet than the public record indicates. The owner didn't know if the lower level had been added legally, claiming the house was in its present configuration when he bought it about 30 years ago.

Due to changes in appraisal guidelines for residential properties that took effect in 2009, appraisers usually don't give livable square footage credit for work that was done without building permits. Without the extra square footage, the appraised value will be less than it would have been if the work were done legally.

This doesn't mean that the lender won't grant a loan. But, if your house appraises low and you were expecting a loan amount based on a higher figure, you'll be disappointed and perhaps unable to complete the refinance -- or, if you're a buyer, you may be unable to purchase.

Let's say you wanted a loan for 70 percent of an $800,000 value, or $560,000. The appraisal comes in at $600,000. On a refinance, the lender probably won't lend more than 70 percent of $600,000, or $420,000, which is $140,000 less than what you requested.

HOUSE HUNTING TIP: What can you do in a situation like this to increase the appraised value of your home? The first thing to do is go to the local planning department and request copies of all permits on the house going back to the original building permit. If you can find a permit for the additional work that was done, give a copy to the appraiser. The appraiser will have measured the unpermitted square footage. With confirmation that this space is legal, the appraiser will be able to include the additional square feet and increase the appraised value.

Take a copy of the permit that confirms more rooms than is reflected in the public record to the county assessor's office and have them update their records. You may be reassessed based on the fact that your house has a legal addition, so your property taxes could increase. However, your house will appraise and sell for more if you can substantiate that the additional space was added with permits.

If you discover that the work was done without permits, you can attempt to have the work legalized after the fact. This can be a complicated and expensive project, depending on when the work was done and how many square feet were added. If the addition is 10-20 percent of the size of the house, the permitting process will be less onerous than if the illegal space equaled 50 percent of the entire house.

You will need to meet certain code requirements. For example, if a stairway leads to the unpermitted space, it must be 36 inches wide. Replacing an entire staircase can be prohibitively expensive.

Walls may have to be opened to inspect the plumbing and electrical. If something doesn't meet current code requirements, it will probably have to be brought into compliance. You might have to add or change windows. Plus, if the building inspector discovers other items in the house that do not comply with current code requirements, you might have to correct these in order to receive final approval of the project.

THE CLOSING: Sometimes contractors take out permits for work, but don't take the time to have the final inspection done. In this case, call the contractor and have him finish his job.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Using CFLs have both pros and cons

2008-12-16T11:25:00.000-08:00

By Dinah Eng

To many consumers, Compact Fluorescent Lamps (CFLs) are most commonly thought of as those squiggly light bulbs that offer energy-efficient lighting and are advertised to last at least six times longer than incandescent bulbs.

Advocates say the biggest advantage of using CFLs is the energy savings and long life of the bulbs. When it comes to cutting electric bills, a CFL uses 75 percent less energy than an incandescent bulb. At the same time, while prices for incandescent bulbs can run as low as 25 cents each, CFLs may range from $2 to $5 each.

“For long-term savings, one CFL bulb is the equivalent of replacing 6 to 10 incandescent bulbs,” says Gabrielle Boose, CFL product manager for General Electric.

But CFLs also come with a cautionary warning -- an essential ingredient in the CFL’s glass tubing is mercury, considered a hazardous waste in large amounts. Exposure to mercury, which is a toxic metal, can affect the spinal cord, brain, liver, and kidneys, causing memory loss, trembling hands and difficulty moving. While CFLs are not legally designated hazardous waste, the U.S. Environmental Protection Agency urges consumers to dispose of the bulbs properly when they burn out. Retailers like Home Depot now offer recycling programs.

“While Home Depot is the first to offer a national recycling program, there are many retailers, like Wal-Mart and Ace Hardware, who offer take-back programs on a local level as well,” Boose says. “Consumers should understand, though, that the amount of mercury used in CFLs is very small. Our average dose in a bulb is 3.5 ml, which fits on the head of a pin. In comparison, household thermometers may have 1,000 ml of mercury in them.”

If recycling isn’t offered in your area, the EPA recommends placing the CFL in a sealed plastic bag and disposing of it as you would batteries, motor oil and oil-based paint at a local Household Hazardous Waste Collection Site. Caution should also be used if a CFL breaks in your home. Be sure to open windows so that any vapor that escapes can disperse, sweep up the fragments with a broom, and wipe the area with a disposable paper towel. Do not touch anything with your hands, and do not use a vacuum. Place all fragments in a sealed plastic bag and dispose as outlined above.

There are many different types of CFLs now available, designed to look more like traditional bulbs, hiding that once bulky spiral element. Some CFLs even work with dimmable switches as well. Truly green-minded consumers are waiting for the development of LED (Light-Emitting Diodes) technology, which was invented by GE scientists in the 1960s. LEDs can offer up to 90 percent energy cost savings, minimal maintenance, and are not made with mercury.

Common applications today include car taillights, cell phone displays, camera flashes and architectural accent lighting. “LED is the next future wave of lighting,” Boose says. “In terms of consumer use, LEDs are not ready to take the place of incandescent bulbs like CFLs are. They’re where CFLs were 10 to 15 years ago.”

To find information on CFL recycling and household hazardous waste programs in your area, check Earth911.org, which will identify the nearest recycling facility. You also can call (800) 253-2687 for an automated hotline, or the local government entity responsible for household hazardous waste collection.

Curb appeal tips that pay off

2008-12-16T11:23:00.000-08:00

By Dian Hymer

Imagine going on a job interview looking shabby, or trying to sell your car for a good price when it's filthy and loaded with stuff. In a competitive market, you wouldn't do well.

The same can be said about selling your home. If it looks neglected and in need of work, some buyers won't even take a look. This is particularly the case in today's market where, in many parts of the country, there are far more homeowners anxious to sell than there are buyers interested in buying.

In a business where emotions and pride of ownership play a big role, first impressions can have a lasting effect. Most buyers lack the ability to imagine what a house might look like with a different exterior paint color or a landscaped yard. When there is a lot of inventory on the market, you may have only one chance to catch a buyer's attention. Make sure it's not lost before he or she walks through the front door.

One of the first items on a home seller's agenda should be a critical evaluation of how the home and yard look from the street. It's a good idea to ask your real estate agent to help with this. Sellers often have strong emotional attachments to their homes and have difficulty seeing it objectively.

Your goal is to identify cost-effective changes you can make to your house and yard that will make it more appealing to buyers. This could be as simple as cleaning up the yard, adding colorful plants, mulching, power washing the entry walk, and washing dirt off the exterior of the house.

However, if the paint is peeling, shutters are deteriorating, the fence is leaning and the yard is a mess, you have a bigger project on your hands. You can sell a house in this condition. But, it will appeal to a limited number of buyers who are willing to tackle a fixer-upper in order to get a bargain price.

HOUSE HUNTING TIP: Your home will appeal to a larger audience and will sell more quickly and for a better price if you put the time and money into improving its curb appeal. Curb appeal refers to how your house appears from the street. Even if you're selling a fixer-upper, it's a good idea to do some cleanup so that buyers can perceive the potential.

You don't need to spend a fortune to get the work done. Your goal is to have good, not superb, work done at a reasonable price. It's wise to get bids from several contractors. For instance, exterior paint estimates can vary widely. Your real estate agent or neighbors ought to be able to provide references.

By the way, if you are going to paint the exterior of your house before selling, this could be a prime opportunity to improve curb appeal. Consult with a color expert to pick colors that are currently in fashion for the house, trim and front door.

One seller had the exterior of his house repainted before consulting with his agent or a color expert. It was painted the same drab color it had been for decades. Most of the buyers who seriously considered the house mentioned that they thought the house needed an exterior paint job because the color was so unappealing.

It usually doesn't make financial sense to completely re-landscape a front yard that is shot. Salvage what you can, bring in new plants to replace dead ones and roll out new sod, if necessary.

THE CLOSING: Mulch does wonders to freshen up a garden, particularly one that is sparsely planted.

Want a fancier-looking room? Try wainscoting

2008-12-16T11:09:00.000-08:00

By Paul Bianchina

One way to really dress up a room and try your hand at some different decorating techniques is to consider wainscoting. There are a number of ways to combine materials to create some very attractive wainscoting effects, and the cost doesn't need to be prohibitive.

Traditionally, wainscoting is tongue and groove boards or raised or flat paneling sections that are applied to the lower part of a wall. The wainscoting extends from the top of the baseboard up to a height of usually between 3 and 5 feet off the floor, and is topped off with a horizontal molding. In addition to its decorative appeal, wainscoting had the very practical advantage of protecting the lower portion of the wall from wear and tear.

Today, however, wainscoting has taken on a somewhat less specific definition. It can be just about any combination of materials, including paint, wood, wallpaper and even fabric.

A wainscoting application consists of three elements: the lower portion of the wall, the upper portion of the wall, and the dividing line between the two. How you mix and match those three elements is up to your individual taste and budget.

Splitting Up the Wall

One of the first things to decide for any wainscoting project is where the dividing line will be between the two different materials. For a room with an 8-foot-high ceiling, a division of approximately 3 feet on the lower half and 5 feet on the upper half tends to give the best balance. Many Craftsman-style homes used the reverse of that, with about 5 feet of paneling on the lower half, capped with a wider molding that was suitable for shallow storage. For best appearance, the dividing line should not be exactly half way up the wall.

To get a better idea of how different proportions will work, tape some newspaper or other material on the wall at a couple of different heights. This will give you a better representation of how the two halves will balance out, and you can adjust them accordingly.

Installing Traditional Wainscoting

To achieve the look of a board wainscoting, you can install individual narrow, tongue and groove boards; you can install wider boards that are milled on the face to look like two or three narrower boards, which simplifies installation; or you can install 4-foot-wide beaded paneling, which again replicates the look of individual boards but installs faster. With any of these methods, finish off the top of the boards with a horizontal molding such as a wainscot cap or a chair rail.

For a paneled look, there are kits available that include a routed base molding, a routed top molding, routed vertical strips, and the panels themselves. The pieces all interlock with one another, and as long as you take some time with the layout to ensure that the panels are balanced to the width of the wall, you can achieve a beautiful, traditional paneled wainscoting in a relatively short time. If you are an avid woodworker, there are specialized router bits that help you cut the individual pieces yourself and save some money.

With wood, you have the choice of painting or staining the material to get the look you want. For painting, the boards and paneling are available in medium-density fiberboard (MDF), which paints nicely and is less expensive than solid wood. For stained wainscoting, you can select from pine, fir, oak, cherry, maple and other woods.

Wood strips, paneling and moldings can all be found at most home centers and lumberyards, along with all the installation materials you need. Some larger stores also carry the paneling kits, or they can order them for you. You will also find a wide selection of wainscoting paneling kits online.

Other Wainscoting Materials

In addition to traditional wood, there are lots of other material combinations that will work very well together. You can experiment with different combinations of materials to achieve the exact look that works for your décor. In general, heavier materials such as wood and fabric look best on the lower half of the wall. Also, darker paint colors and darker, more heavily patterned wallpapers look best on the bottom.

Your wainscoting choice may be something as simple as two different colors of paint. You can also use a solid paint on one section of the wall, and some type of textured paint effect on the other section.

Another easy wainscoting can be achieved with two different wallpapers. Select a lighter paper with a more open pattern for the upper half of the wall, and a darker paper or one with a vertical stripe or heavy pattern for the bottom. You can also combine the two materials by using paint on one section of the wall and wallpaper on the other.

With any of these combinations, separate the two sections of wall with a painted or stained wood molding. To really accent the installation, finish everything off with a crown molding as well.

Will shopping multiple lenders hurt credit?

2008-11-04T17:04:00.000-08:00

By Dian Hymer

It's not uncommon for home buyers to talk with several mortgage brokers or lenders to compare loan products and interest rates. One buyer who shopped around was scolded by a mortgage broker when he found out she was talking to more than one broker. He told her that she was ruining her credit score by allowing multiple credit inquiries.

Too many credit inquiries can negatively affect your credit score, but you can control the damage. And, credit inquires make up a relatively small part of your credit score.

For example, the FICO credit score from Fair Isaac Corp. that is widely used by mortgage companies for qualifying borrowers uses five types of information to calculate a credit score. Each type counts as a percentage of the total credit score. They are: payment history (35 percent); amounts owed (30 percent); length of credit history (15 percent); new credit (10 percent); and types of credit in use (10 percent). Credit inquiries fall into the "new credit" category, which accounts for less than 10 percent of your credit score.

Only voluntary inquiries are taken into account, such as the inquiries made at your request when you shop loan rates. Loan agents usually need to know your credit score before they can quote you an interest rate.

The FICO credit-scoring model ignores all mortgage inquiries made within the last 30 days, so they will have no impact on your credit score. An older version of the scoring formula uses a 14-day time span. A newer version uses 45 days. The lender decides which version of the scoring model it wants to use.

There's no need to panic if you don't line up your mortgage in 30 days. The scoring formula looks for mortgage inquiries older than 30 days. It counts all the mortgage inquiries within a certain period, which varies depending on the scoring model used, as one inquiry. For some borrowers, one inquiry might not affect their credit score at all. If it did, it should be less than five points off your score.

Let's say you talked to four lenders during a week in September. You authorized each to check your credit. Then you postponed buying until November, when you shopped rates again within 30 days prior to closing the sale. The most recent credit inquiries wouldn't affect your credit score. The four that were made in September would count as one inquiry.

HOUSE HUNTING TIP: There’s a wide range of rates being quoted. This is a time when it could pay off to shop carefully for the best rate and mortgage product to suit your needs.

For example, one mortgage broker quoted 6.75 percent on a conforming loan (to $417,000) for a 5-year, interest-only, adjustable-rate mortgage (ARM) with no points. (One point -- a loan origination fee -- is equal to 1 percent of the mortgage amount). Another broker offered a 5-year ARM that is fixed for the first five years at 5 7/8 percent with no points. And, this rate was available for loan amounts up to $650,000.

Nonconforming jumbo financing for mortgage amounts over $1 million is still high -- in the 8 to 9 percent range. Some buyers are achieving a lower blended rate by combining a conforming jumbo (to $729,750) with a second loan. Borrowers who have good credit and an established banking relationship with a lender might be able to arrange a preferential rate.

Before you authorize a credit check, find out what kinds of mortgage products a lender offers and provide a brief summary of your financial situation. Try to focus your rate shopping within a 30-day time period.

THE CLOSING: Don't authorize a credit check until you've narrowed your search down to likely prospects.

No such thing as a "green" car, but there are "greener" options

2008-11-04T17:02:00.000-08:00

By Amy Westervelt

Unless you've been cut off from all forms of media for the last two years, you're aware of the fact that vehicle transportation is a major contributor to climate change. According to the Environmental Protection Agency (EPA), transportation accounts for 29 percent of total greenhouse gas emissions in the United States. Transportation also is the fastest growing source of emissions, accounting for 47 percent of the net increase in total U.S. emissions since 1990. And that's just getting from point A to point B -- the figures don't factor in the emissions created by manufacturing automobiles or refining fuel.

On top of the environmental cost, the price of gas is not likely to come down too terribly much, and even oil companies’ scientists attest to the fact that we are running out of oil. All of which points to a crucial need for better public transportation and vehicles that are both fuel-efficient and low-emission.

Thanks to our collective century-plus love affair with the automobile, U.S. public transportation systems still have a way to go before the majority of people can reliably get where they need to go without a car. Thankfully, from large automotive companies to small start-ups, we're starting to see a number of choices for fuel-efficient, low-emission automobiles, so much so that it can sometimes be confusing to pinpoint the benefits of each and the differences between them. Following, a simple breakdown of energy-efficient, low-emission vehicles:

Hybrids

Hybrids run off both an internal combustion engine and an electric engine with rechargeable battery. The battery is recharged when the car brakes. Because hybrids switch over to electric power at lower speeds, they make the most of gasoline, getting roughly 40 miles to the gallon, depending on the model. While hybrids have been the poster child for the "green" movement over the last few years, in reality they are only slightly better than conventional vehicles. Because they have two engines, the manufacturing emissions associated with hybrids are higher than those associated with conventional cars; furthermore, there are numerous conventional diesel vehicles in the European Union that get up to 70 miles per gallon.

Plug-in Hybrid Electric Vehicles

The next generation of hybrid vehicles, plug-in hybrids (PHEVs) run primarily off the electric engine and use the combustion engine for back-up. Their batteries are larger and more powerful, enabling them to run for longer without recharging. When they do need to be charged, they can be plugged into an electrical outlet. The result is much higher fuel efficiency, and much lower emissions, than a conventional hybrid. However, the electric engine comes with its own suite of environmental issues - first, it plugs into the grid, and "the grid" for most of us, is still powered by coal-fired power plants, which means your car use is still tied to a large amount of pollution. Then there's the manufacture and disposal of batteries. Finally, manufacturers are still working out the kinks of battery technology, which is why we're not likely to see PHEVs on the road until about 2010. By that time, hopefully more of the grid will be powered by sun and wind.

Electric Vehicles

Fully electric vehicles emit nothing when you're driving them, and get a range of about 120 - 200 miles per charge. Their primary environmental impact come from the electricity used to power them - if you're plugged into a coal-fired grid, there are still emissions associated with your drive. However, as more and more states add larger amounts of renewable energy to the grid, the associated emissions will go down. Currently available models are typically fairly high in cost, but more affordable models are coming on line in the next one to two years from Mitsubishi, GM, Ford, Nissan, and California start-up Tesla, which currently sells its high-end roadster, a fully electric high performance sports car. The manufacture and disposal of batteries, however, especially large batteries produced at a scale to supply all the current car drivers, is still problematic for environmentalists.

Biodiesel-fueled Car

Standard diesel engines can be converted to run on biodiesel -- fuel derived from various plants and/or waste oil from restaurants. There are even DIY converter kits that run about $600 (check out greasecar.com). Biodiesel is not a fossil fuel and is more fuel-efficient than conventional diesel, but it still emits greenhouse gases when burned. According to the EPA, biodiesel emits less CO2 and particulate matter than conventional fuels, but more nitrous oxide, which also is a greenhouse gas.

Hydrogen-fueled Cars and Fuel Cells

For a long time, many believed hydrogen fuel cell cars were the wave of the future. Cars that run off hydrogen fuel cells can feasibly run just as well as currently available vehicles, and emit only water, which could be used for other things (and guess what? we're running short on water these days too). However, there are numerous engineering obstacles to overcome with hydrogen - namely infrastructure (building hundreds of stations stocked with high-pressure hydrogen canisters is hard to imagine), cost (as with most new fuels, cost for hydrogen fuel is currently prohibitive), and safety (there are still concerns about how hydrogen fuel cells would react in an accident). However, companies such as BMW are continuing to make strides in these areas, while electric car proponents argue that the emphasis should be on increasing the range of existent battery technology.

Power tools make house painting a cinch

2008-11-04T16:54:00.000-08:00

By Paul Bianchina

A sure-fire way to make your home look better, prolong the life of your siding and add resale value all at once is to give the exterior a fresh coat of paint. But with a contractor paint job running in the thousands of dollars, you may be considering undertaking the task on your own this summer. If so, here are some tips and a couple of new tools from Wagner that will help you get the job done quickly with professional results.

Proper Preparation

Proper preparation of the siding is absolutely essential to a good-quality, long-lasting paint job. Loose and peeling paint must be removed first and the edges of the remaining paint feathered down to create a smooth surface for the next coat. Painting over old paint that is not well-adhered is pretty much a guarantee that the new paint job will fail. There is no way around this less-than-enjoyable task, so just resign yourself to it.

But while you can't avoid it, you can make it a little easier by using the proper tools. One new tool you might want to consider is Wagner's PaintEater ($74.99). The PaintEater is a hand-held electric tool that is somewhat similar to a disc sander, but instead of using sandpaper, it uses a 3M disc made from spun fiber. The fiber disc is aggressive in removing paint, but its unique design prevents the old paint from clogging up the sanding surface, so you get a lot more work done without constantly replacing the paper.

The PaintEater removes loose paint quickly, and will also feather down the edges of the remaining paint for a better, smoother surface. It can be used on wood, masonry and cement, but be aware that the rotary motion and aggressive paint-removal disc make it unsuitable for siding shingles or textured siding.

In addition to a tool such as the PaintEater, you'll also need a hand scraper and a sander to take care of the corners and the hard to reach areas. With any of these tools, be sure to wear eye protection to shield your eyes from flying paint chips -- which can be surprisingly sharp and dangerous -- as well as a dust mask or respirator to protect you against inhaling the dust.

When you're done with the scraping, the bare surfaces need to be primed to protect the wood and provide good adhesion for the top coat. Use a good-quality exterior primer that's compatible with your top coat, and apply one or two coats on all bare surfaces.

When preparing the siding on an older home, you need to be very aware of the possibility of lead paint. Even if the home has been repainted with latex, one or more of the underlying layers may contain lead. For more information about testing for and removing lead paint, contact the Environmental Protection Agency (EPA) online at www.epa.gov/lead, or by phone at 1-800-424-LEAD (424-5323)

Airless Painting

Professional painters rely on airless paint-spraying equipment to apply paint quickly and cleanly with minimal overspray. You can rent a professional-grade airless sprayer, but the occasional user might want to consider investing in Wagner's Paint Crew Plus ($249.99).

Designed with homeowners in mind, the Paint Crew Plus has a 2800 PSI piston pump that's driven by a 1/2-horsepower electric motor, so you have plenty of power for spraying a variety of finishes. The sprayer features a pressure selector that allows you to vary the pressure between 1000 and 2800 PSI, which is very helpful in choosing the best pressure for the finish you're working with. Higher pressures are needed for spraying many of today's exterior latex paints, and you can dial the sprayer down to a lower pressure to give you better control and less overspray when working with thinner materials.

The Paint Crew has wheels and a telescoping handle for easy transport, as well as a 2 1/2-gallon paint hopper that's removable for easier cleaning. You also get a 25-foot high-pressure spray hose, a professional-grade metal spray gun and a reversible spray tip. A convenient hose wrap holds the hose when not in use, and there is a storage area for additional spray tips. Also included is a roller-arm assembly, which attaches to the hose in place of the spray gun, allowing for faster rolling of interior surfaces.

With this or any other type of airless sprayer, NEVER point it at anyone. The high-pressure pumps used with airless sprayers are capable of pushing paint through a person's skin, so be sure you read and understand all of the safety precautions.

Don't wait until selling to make repairs

2008-11-04T16:51:00.000-08:00

By Dian Hymer

Home maintenance ranks low on many homeowners' priority lists. When the washing machine breaks, you might fix it to keep from having to go to the Laundromat. But, if there's no pressing need, home maintenance chores are often put off.

In the current soft real estate market, homeowners may be less inclined to pay money to make repairs around the house. However, the key to preserving the value of your home is keeping it in good condition.

Home maintenance is a necessary part of home ownership. The cost varies depending on the age of the home, its overall condition when you buy it and the climate. For example, in coastal California the alternation between fog and blistering sun takes its toll on exterior paint. Houses with a western exposure may need painting more often than those that face east.

Homeowners can have a hard time coming to terms with the fact that they can't recoup the cost of home maintenance when they sell. Home maintenance is a cost of ownership, as are property taxes, homeowners insurance and mortgage expenses.

Even though you can't tally your home maintenance expenses and expect a buyer to reimburse you, you do benefit when you sell by keeping your home well maintained. Buyers tend to pay more for homes that are in top condition, particularly in a buyer's market.

Also, if you don't take care of deferred maintenance, buyers are likely to adjust the price they'll pay for your home accordingly. The burden of making the repairs will be on them, so they will factor this into the cost of the house.

You can cut down on home maintenance by buying a condominium or townhouse in a planned-unit development where the homeowners association dues cover some of these costs. If you rent, your landlord is usually responsible for making repairs.

HOUSE HUNTING TIP: As a homeowner, you can keep your home maintenance costs down by staying on top of correcting minor problems before they become major. For instance, if a threshold is cracked and showing signs of wear, it's best to have it replaced before it causes water damage to the framing underneath. With the escalating cost of lumber, it would be a lot cheaper to replace the threshold now than to repair major water damage later.

Summer is an ideal time to take a serious look at your home in terms of getting it ready for the winter months. Track down leaks in windows, doors, roofs, foundations, drainage systems and basements. Have these and any related damage repaired.

Water is a homeowner's biggest headache. Too much in the wrong place can lead to dry rot, fungus and mold problems that can be very expensive to repair. Ideally, your home should be dry inside underneath the house during the rainy season.

Some homeowners can make repairs themselves. Others have little or no experience, and can't even spot a problem when they see one. If you fall into the latter category, plan to hire a home inspector, contractor or handyman to inspect your home annually for defects that need to be repaired. Many small repairs like installing weather-stripping, sealing French doors or windows, or caulking sinks and tubs can be done by a handyman.

Ask your inspector to prioritize the needed repair items. If you're short of funds, at least take care of the most important items.

Set a schedule for taking care of home maintenance items like having the furnace and fireplace checked, trimming trees and clearing drains.

THE CLOSING: Keep copies of invoices for work performed on your home. It will serve as a good reference for you and for the next owner of your home.

Sellers use disclosure to their advantage

2008-10-02T16:43:00.000-07:00

By Dian Hymer
Forty years ago, seller disclosures weren't part of the home-buying process. The rule of the game was buyer beware. Now most states have seller disclosure requirements, although they vary from one state to the next. Consult with a Realtor, the Department of Real Estate, or a real estate attorney in the area where you're buying or selling if you have questions about what a seller is required to disclose.

Seller disclosures came into being in order to protect home buyers. However, seller disclosures can also protect sellers. For example, a seller of an older home in the hills of Oakland, Calif., disclosed in writing that the basement flooded during heavy rains.

A few months after the sale closed, the listing agent received a call from the buyer. He was upset that there was water in the basement following an overnight rain storm. He insisted that no one had informed him of this situation before he purchased the property.

The listing agent reviewed the transaction file. The sellers had disclosed in writing that the basement flooded during heavy rains. The buyer had signed to confirm receipt of this information before he removed his inspection contingency from the contract.

What could have been a nasty lawsuit disappeared immediately.

During times when it's difficult to sell, sellers may be tempted to conceal negative information about their homes for fear that it will keep the home from selling. Sellers should resist this temptation. Concealing a material fact can have severe consequences.

Another seller stated in his seller disclosures that he had never had any water problems at the house. He had also remodeled the basement and presented it as a usable family room. Not long after the buyers moved in, bad weather set in. So much water ran into the basement that the cozy family room was uninhabitable. The buyers sued the seller and recovered a hefty sum.

HOUSE HUNTING TIP: Think of disclosure as damage control. Although this may seem counterintuitive, you want any negative information affecting the property to be revealed before, not after, the home sale. If buyers know that the roof is at the end of its life, they can make a determination before buying about how much they can pay for the house, or if they can even afford to buy it without help from the sellers. Problems arise when sellers withhold this sort of information.

A less-than-candid seller was sued successfully by the buyer when the roof leaked soon after closing. The seller's disclosure statement mentioned no problems with the roof. The new owner became friendly with his next-door neighbor who told him that the seller had talked to several roofers and was planning to re-roof the house before the rainy season. What you choose to conceal could be disclosed for you by a neighbor.

The goal in selling your home is to sell for the best price and on the best terms possible. You defeat the purpose if you end up having to pay back part or the entire sale proceeds to settle a lawsuit.

It's not always clear if a fact is material. For example, the sellers of a home in the trendy Rockridge neighborhood in Oakland knew that a cleaning person who worked for the past owner had been raped in the house. The seller, who was an attorney, decided to disclose this fact. This caused a nervous single woman to decide against buying the house. But, it made no difference to the ultimate buyer.

THE CLOSING: And, the disclosure had no negative impact on the selling price.

Backyard deck a perfect DIY project

2008-10-02T16:40:00.000-07:00

By Paul Bianchina
Building a deck remains one of those perennial favorite projects. A well-built deck definitely adds to the enjoyment of your home, while also adding resale value. With a few carpentry skills and tools, the construction of a basic -- or even not so basic -- deck is something that's well within the reach of most do-it-yourselfers. And there's something about that combination of fresh air and fresh sawdust that's irresistible!

Every deck, no matter the size, style or complexity, consists of two basic components -- the underframing (including the foundation) and the decking. If the deck sits up off the ground very much, you can add two additional components as well -- a railing and a set of stairs.

As with any home improvement project, construction begins on paper. Whether you do the design yourself or enlist the aid of a designer, lumberyard or home center, the design needs to incorporate all of the structural elements such as the size and layout of the support piers and framing lumber. If your deck will have stairs and a railing, that design should be included as well.

FOUNDATION AND UNDERFRAMING This is the structure that supports and braces the load of the deck and its occupants, and while it's rarely seen, it's actually the most important part of the entire structure. Due to its location, where it's in close proximity to the ground and also subject to water runoff from the deck above, pressure-treated lumber is typically the best choice for this part of the project.

Typically, construction of the deck begins with the layout, digging, and pouring of the concrete piers or footings that will support the deck. Smaller decks can often utilize precast pier blocks, while larger decks may require piers that are sunk into the ground to a depth below the frost line. Galvanized steel brackets imbedded in the concrete provide a convenient and stable attachment point for the transition from the concrete to the faming lumber.

If the deck is attached to the house, the next step is installation of the ledger. The ledger provides an attachment to the house, and serves as the starting point for the deck framing. A ledger is typically made of the same size and type of material as the deck framing, and it's important that it be securely bolted to the house's structural framing.

It's also important that the ledger be level and at the correct height, depending on where the finished deck will be in relation to the house. For example, if you will be stepping out a door and directly onto the deck, the ledger should be located at a distance below the door that is equal to the thickness of the decking material you'll be using.

Using the ledger as a reference point, the rest of the framing takes off from there. Using string lines, a laser level or other means to establish their location in relation to the ledger, the support girders are installed next. The girders are supported by posts attached to the piers, and are installed perpendicular to the direction of the joists.

The final underframing step is the installation of the joists. These are installed perpendicular to the direction that the decking boards will run, and rest on top of the girders. They are also attached to the ledger at one end. Since the decking is typically installed parallel to the house, that means that the joists would be perpendicular to the house, intersecting the ledger at a 90-degree angle. Galvanized steel joist hangers are the most common method for attachment and support of the ends of the joists where they meet the ledger. Depending on the size of the deck, blocking and/or bracing may be required as well.

If your deck is freestanding and is not attached to the house, the overall construction process is pretty much the same. However, since a freestanding deck lacks the rigidity of the house to anchor one side, it often requires some additional bracing to stabilize the framing.

DECKING With the basic framing complete, you can now move on to the installation of the deck boards, which are laid perpendicular to the joists. The most common attachment method is to screw down through the board into the joist below -- don't use nails, which have more of a tendency to work loose as the framing dries out. If you would prefer not to see the screw heads, there are several different methods of concealed fastener installation -- check with your designer or a local lumberyard for options that will work best for your particular deck design.

For the best appearance, use the longest boards possible so that you can eliminate some of the end-to-end joints. For example, on a 16-foot deck it's preferable to use 16-foot boards instead of two 8-foot boards. If the deck is large enough that joints are required, stagger them between successive rows by a minimum of two joists. For example, a 24-foot deck might start with a row of two 12-foot boards, followed by a row made up of three 8-foot boards. This will look better and be a little more stable than a row with one 10-foot and one 14-foot board.

What makes food “organic”?

2008-10-02T16:36:00.000-07:00

By Charly Papp

Organic food is hot and with good reason—current research shows that it does indeed live up to the hype. Recent studies at UC Davis and the Danish Institute for Agricultural Research have detected higher levels of antioxidants, vitamins, and minerals in organically farmed foods than in their conventionally produced counterparts. While this news makes their often-higher price tag easier to swallow, navigating the organic options at Whole Foods can be anything but simple.

Here, a run-down of the terms so you’re ready to face the aisles:

Organic – farmed without the use of chemical pesticides, fertilizers, sewage sludge, and—in the case of livestock—antibiotics and growth hormones. While the jury’s still out on whether these things are actually harmful to your health, it sure makes non-organic foods a lot less appetizing. When the term is used on packaged food labels, it ensures that at least 95 percent of the ingredients are USDA-approved organic. Those labeled made with organic ingredients must contain at least 70 percent organic components. For more information on USDA’s certification system, visit their website: http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?template=TemplateA&navID=NationalOrganicProgram&leftNav=NationalOrganicProgram&page=NOPNationalOrganicProgramHome&acct=AMSPW.

Conventional – foods not otherwise distinguished as organic. These foods may or may not be farmed with the use of chemicals, antibiotics, and hormones.

Natural – a distinction used for foods that have been minimally processed and contain no preservatives. However, the definition is not a legal one, so watch out for imposters. And remember—just because a food is natural doesn’t necessarily mean it’s healthy. Super-premium ice cream that is made with all-natural ingredients still packs a whopping 240 percent of your daily saturated fat intake per pint!

Sustainable Agriculture – farming that favors more natural practices to harvest a crop, which in turn creates a system wherein food can be produced indefinitely. Transitional – food produced by a farmer that is transitioning from conventional to organic—a process that takes at least three chemical-free years to certify.

Fair Trade – farmed by workers who receive a living wage and work under safe conditions. To learn more about fair trade, visit the International Federation for Alternative Trade’s website: www.ifat.org.

Recombinant Bovine Growth Hormone (rbST or rBGH) – a genetically engineered hormone given to cows to boost milk production. Many claim that consumption of this hormone—which is banned in Canada and Europe—contributes to elevated cancer risk, though clinical studies have yielded somewhat conflicting results.

Genetically-Modified Foods (GMOs) – crops that have been scientifically manipulated to enhance some trait, be it longevity or nutrition. Critics attest that their use is altering our environment in a host of unhealthful ways and add that their effect on humans is not yet known. For a fair look at the issue, see http://www.csa.com/discoveryguides/gmfood/overview.php

You can safely assume that a food labeled “organic” is certified so—the fine for false claims can reach upwards of $10,000—but beware of the greenwash that is lending its ghoulish hue to many a not-so-virtuous product. Due to the monumental success of organic foods, many manufactures are jumping onto the green bandwagon if for nothing else than packaging, favoring designs that present a more wholesome image to the consumer. This means you’ll see more earth-toned exteriors, rustic fonts, fruits and vegetables figuring prominently… don’t be fooled.

Look for key words like organic or no GMOs and check the ingredients and nutrition facts for the stats.

Though the range of organic products is ever evolving and expanding, with a little bit of knowledge, you and your family can grow with the trend—without the use of chemical fertilizers and pesticides.

Pest repairs are turnoff for buyers

2008-10-02T16:31:00.000-07:00

By Dian Hymer

In a perfect world, houses wouldn't deteriorate over time. In reality, the wear begins as soon as a house is built. Older houses tend to have more maintenance issues. But even new homes can develop problems within a few years if they were poorly constructed.

Most homes are inspected for damage caused by wood pests -- such as dry rot, termites, fungus, decay and wood-boring beetles -- before they are sold. Who pays to correct the damage -- buyer or seller -- is often subject to negotiation.

In a hot seller's market with a high percentage of multiple offers, buyers frequently buy "as is" regarding known defects to better their chances. This was common several years ago when home prices were rising rapidly. At that time, owning a home was more important than the condition of the property.

One problem with buying "as is" with respect to pest work is that it's easy to overlook the fact that the work needs to be done. Many buyers who bought "as is" in recent years have not taken care of the pest repairs.

These buyers who are trying to sell in today's market may find they have less equity than they thought they had. Not only have home prices declined in many areas recently, but today's home buyers are unlikely to buy "as is" regarding a large pest bill that was passed on from the previous owner.

HOUSE HUNTING TIP: In soft markets, buyers are more prone to factor in the cost of curing deferred maintenance into their price. Ideally, sellers should have pest work done before they put their homes on the market. This removes the need for negotiation over pest repairs. Plus, the houses in the best condition that are priced right for the market are the ones that sell.
It's not always possible for sellers to have pest work done before marketing their homes, either due to shortage of time or funds. In this case, make sure that you have presale inspection reports done before you market the property and price it to take into account the cost of the repair work.

Also, you should make every effort to have the house looking as good as possible. In a soft market, sellers have a lot of competition from other sellers. Even if you can't replace a shower or a rotted mudsill before you market the property, at least have it showing at its best. This will get buyers interested in the property, particularly if the list price reflects the work that needs to be done.

There is nothing wrong with buying a property in its "as is" condition as long as you have complete knowledge of the work that needs to be done. But, it is essential that you factor in the cost of the necessary work and ongoing maintenance. Many buyers overlook this and later discover that they can't afford to continue to own their home.

It's rare that every item on a pest report needs to be done immediately. But, at some point the deferred maintenance needs to be corrected.

Ask your inspector to prioritize the items on the report in terms of urgency level. A deck that's rotted to the point that it's unsafe should be replaced as soon as possible. However, if the bathroom floor needs replacing, but poses no danger, you might want to hold off having this work done until you remodel the entire bathroom, if that is in your game plan.

THE CLOSING: In fact, in this case, replacing the floor would be a waste of money.

Recycling codes: What they mean

2008-09-08T16:24:00.000-07:00

By Michelle D. Alderson

According to the Environmental Protection Agency (EPA) (http://www.epa.gov), in 2006, the U.S. produced more than 251 million tons of garbage -- approximately 4.6 pounds of waste per person per day. Of that, recycling diverted 82 million tons of material away from disposal. In short, Americans are putting plastics into their recycling bins. Many of us recycle without knowing if something is actually recyclable.

Have you ever wondered what those numbers mean on plastic bottles? Below we explain what the seven different codes found on plastics mean and what they are recycled into. Check to see which plastics are accepted in your city; every city has different curbside recycling programs.

1. Polyethylene Terephtalate (PET, PETE): PET is a clear plastic found in soft drinks, water, juice, sports drinks, and condiments bottles; food jars for such products as peanut butter and jelly; and in frozen food packaging. PET is recycled into fiber for carpets, clothing, and tote bags. It can also be re-used for food and beverage bottles. PET is the most common-used plastic due to its inexpensive and easy-to-recycle features, and is widely accepted by most curbside recycling programs.

2. High Density Polyethylene (HDPE): HDPE is resistant to most solvents and is used for food products with a shorter shelf life such as bottled milk. Because it's more chemical-resistant than PET, it's also used for household cleaners including laundry detergent, shampoo, and plastic grocery bags. HDPE is recycled into bottling for non-food items, such as motor oil and antifreeze, plastic lumber, flowerpots, and recycling bins. It's accepted by most curbside recycling programs.

3. Polyvinyl Chloride (PVC, Vinyl): You won't find this recycling symbol on household items. PVC is chemical-resistant so it's used to make packaging products, shrink-wrap, window frames, fencing, and decking. PVC is recycled into pipes, fencing, decking, floor tiles, traffic cones, garden hoses, and packaging products. It's not commonly accepted by curbside recycling programs.

4. Low Density Polyethylene (LDPE): A tougher and more flexible plastic, LDPE is used for dry cleaning bags, newspapers, breads, frozen food, shrink-wrap, container lids for hot and cold beverages, and toys. It's most common use is for plastic shopping bags. LDPE is recycled into envelopes, garbage can liners, trashcans, paneling, and floor tile. LPDE is not commonly accepted by curbside recycling programs, but plastic bags are now readily accepted at supermarkets.

5. Polypropylene (PP): PP is also strong and chemical-resistant, which is good for hot-fill liquids. It's used for takeout food, yogurts, margarine, and bottle caps. PP is recycled into automobile parts, such as turn signal lights; brooms; bicycle racks; and trays. Some recycling curbside recycling programs accept PP.

6. Polystyrene (PS): PS is more versatile than the other plastics and is used in many food items such as cutlery, plates, cups, and containers. It's also used for those pesky packing peanuts, as well as foam packaging for electronics and furniture. PS is recycled into mouldings, thermometers, and license plate frames. Some recycling curbside recycling programs accept PS.

7. Other: An item with this marking means that it is made with a different resin other than the six listed above. These items can include oven-baking bags, some juice and ketchup bottles, and packaging materials. It's recycled into bottles and plastic lumber and is not commonly accepted by curbside recycling programs.

For more info: http://www.americanchemistrycouncil.com

Home sellers who understand market prosper

2008-09-08T16:21:00.000-07:00

By Dian Hymer

Buyers aren't the only ones holding back in today's housing market. Many sellers are postponing putting their homes on the market because they are convinced that now is not a good time to sell. They would prefer to wait for a better market.Waiting could be risky if you need to make a move within the next year or so. Most areas of the country are mired in a slow market where sellers are finding it difficult to sell, at least at a price they'd be willing to accept. There's no guarantee that if you wait to sell that the market will be any better than it is now, at least in the short term.However, the market isn't slow everywhere.

Some areas, like San Francisco, Palo Alto (Calif.) and parts of the East San Francisco Bay Area are still suffering from a lack of inventory. Or, lack of the right kind of inventory. Recently, there were six offers on a hot new listing in Piedmont, Calif., a city adjacent to Oakland. Multiple offers are commonplace in Palo Alto and San Francisco. What these areas have in common are a coveted location and very low inventory of homes of sale.Negative press about the real estate market is keeping sellers who could do quite well selling now from doing so. If you'd like to sell, but have been scared off by bad news, don't make a decision until you find out more about what kind of homes are selling in your local market.

HOUSE HUNTING TIP: Supply and demand set the pace of any real estate market. When there are more homes for sale than there are buyers willing to buy, it takes longer to sell and prices are often soft. When there is a shortage of homes for sale and plenty of buyers wanting to buy, good homes sell quickly and there is often an upward pressure on prices. Even though the overall market might be soft, there can be pockets that are hot. The hot spots needn't necessarily be a specific location. They can be a certain type of house within a location.

For example, the Piedmont listing mentioned above took 13 days to sell. It would have sold more quickly except that the sellers decided to expose the property to the market before entertaining offers. The home was a good size and had broad-based appeal. It had eight rooms, a two-car attached garage, a level-out backyard, and it had been completely remodeled with high-end finishes. It was priced competitively.

Contrast this with another Piedmont listing that did not sell in the three months it was on the market. It was a smaller six-room house with no garage and without a level-out backyard. It had limited appeal in comparison to the listing that sold quickly. And, it was significantly overpriced for the market.The current market is extremely price-sensitive. An Oakland, Calif., listing was on the market earlier in the year priced approximately $100,000 above what the market would bear. The listing was removed from the market and listed several months later at a realistic price. It sold then with three offers for over the asking price.

Selling in this market is not easy. But, sellers who understand the market can do well selling today. They must be realistic about what they need to do to prepare their home for sale. Property condition is more important to buyers today than it was several years ago. Sellers also must be committed to the process. There is no margin for error when it comes to pricing.

THE CLOSING: If you can't bring yourself to price to sell, you're not a committed home seller.

Is buying a home to live in a good investment?

2008-09-08T15:07:00.000-07:00

By Dian Hymer

Anecdotal evidence suggests that in some markets investors are buying foreclosure properties at bargain prices. These properties are located in areas that appear to have good growth potential, and they generate enough rental income to at least offset the holding and maintenance costs. The deal needs to make sense financially regardless of whether there is a big run up in appreciation.

The plan is to hold the property for the long term.There was a time not long ago when investors bought condos and houses even if they didn't produce enough cash flow to cover the carrying costs. Prices were rising so quickly, they could afford a little negative cash flow.

The holding period was short and the appreciation payoff was big. According to Standard & Poor's/Case-Shiller 20-city home-price index, prices increased almost 75 percent between February 2000 and February 2008. In most housing markets, it's not possible to count on appreciation now. The market could be bottoming out in some places, according to some economists. Or prices could move lower before leveling off. It could be years before significant appreciation is again part of the housing picture.

With this in mind, is buying a home to live in still a good investment?Just as the lenders are moving back to basics in terms of qualifying borrowers for mortgages, home buyers should examine the fundamentals of home ownership to determine if they are good candidates.

HOUSE HUNTING TIP: The equity in your personal residence shouldn't be used to pay for vacations, education, new cars and credit-card debt. Many homeowners who participated in serial refinancing when rates were low and money was easy found they had no equity left when the credit crunch hit in August 2007. A good portion of these repeat refinancers now owe more than the current value of their home.Along the same lines, it's risky to look at your home as a retirement account.

It's not a good idea to rob your pension plans in order to purchase a home. This money should be kept for retirement.

Some financial advisors suggest that you don't consider the equity in your home as part of your financial portfolio. After all, you will always need to live somewhere. Most people will always need to budget part of their net worth for housing. Buying a residence hoping for appreciation to increase your net worth is dicey. You may earn appreciation. Nationally, home prices have tended to rise over the long term. But, this doesn't mean that your home will appreciate during the time period you own it. However, there are plenty of good reasons to buy your own home, if you can afford it.

The government subsidizes the cost of home ownership by permitting taxpayers who itemize deductions to write off some or all of the mortgage interest and property taxes they pay. Restrictions do apply. So, check with your tax advisor before making a purchase.

Owning your own home gives you a sense of security. You can choose the community in which you live. You're not at the mercy of a landlord who might issue an eviction notice. If you buy with a fixed-rate mortgage, you know how much you'll be paying over time. Rents, in most places, are subject to increases. It doesn't make sense to spend money fixing up someone else's house so that it feels like yours. And, most landlords will have a say in what you can and can't do -- even down to paint colors.

THE CLOSING: But, if you own it, you can redecorate to your taste.