Q & A: 3 reasons to update home before selling

Q: I'm thinking of selling my home, and know my carpet and tile need updating. Is it best to do it now or give an allowance on the selling price for these upgrades? The same with appliances?

A: Ahh, the age-old, existential question faced by buyers and sellers since time eternal: update or credit? There are dozens of ways to weigh the pros and cons of this dilemma. Some would have you do some complicated mathematical analyses to calculate whether the return on the investment it would cost you to update these items is worth it, compared to the assumed incremental marketing power of offering your home at a lower price.

I, for one, think that addressing these sorts of questions mathematically is impossible to do without taking on a boatload of error-prone assumptions. That's because what does and doesn't work with buyers is not necessarily logical or calculable, nor are some of the other factors you should account for as you make this decision. My vote is that you should at least consider replacing them now, but only after you get input from an expert local real estate agent or stager on your color, material and aesthetic choices.

Here are the three primary factors underlying my recommendation:

1. If you're not yet 100 percent sure you're selling, replacing them now allows you to enjoy the upgrades. So many sellers, and I include my younger self, tend to make the upgrades and updates they've long dreamed of only when they're planning to move, missing out on the ability to enjoy the home in its best shape. And that's a shame. For that matter, it is not at all uncommon for home sellers to see their spruced-and-staged property and wonder why they decided to move in the first place!

In the interest of maximizing the enjoyment you get out of your home and your life now, you should at least consider updating these items if you can afford to, and enjoying them as long as you can before you do decide to sell the place, taking extra special care to live lightly on them in the interim.

2. Replacing them now might boost your home's chance of selling more than a price discount. I do not exaggerate when I say that in many areas, today's market is better for sellers than it has been for years. That said, there are still loads of short sales and foreclosures on the market that are priced aggressively low, many of which also need updating, and those are your competition. You might not be able to price your home enough lower than these homes to make the discount for updating obvious to homebuyers who see your home and also visit the competition.

Additionally, when a home is in need of the updates you mention, it may -- simply put -- show poorly. And buyers simply like homes that look move-in-ready. Some won't even consider fixers, and I've even seen some die-hard amateur handypersons be tempted with the allure of a polished, freshly updated home (and the work-free weekends it promises).

If a few thousand dollars in basic updates and appliances makes the difference between your home showing like a fixer-upper and showing like a showplace, doing the updates before you list the place can be the difference between it selling or not -- period.

3. Replacing them yourself might be more cost-effective. Buyers almost always overestimate what things like carpet, paint and appliances will cost, so they might scoff at whatever you offer as too little, and request a bigger credit or discount than you had planned On the other hand, if you have the items replaced yourself, you can be as aggressive as you want to be in terms of shopping around, getting deals, doing the painting yourself, hitting up the appliance outlets or calling in favors with any vendors or contractors you or your agent might know.

If the work is done well and the outcome is beautiful, depending on your local market dynamics, putting a well-prepared, updated home on the market may even position you to get more than one offer (and a better price, to boot).

There's no one right answer to this question for every homeowner. Some may not have the money, or may be in a hot enough market that buyers bite on every listing. But my experience has led me to generally prefer putting a polished property on the market over a discounted cosmetic fixer every time.

Mortgage rates resume search for bottom

By Inman News
Inman News®

Mortgage rates hit new lows this week, still searching for a bottom after pausing last week from six consecutive weeks of declines.

Rates on 30-year fixed-rate mortgages (FRM) averaged 3.66 percent with an average 0.7 point for the week ending June 21, down from 3.71 percent last week and 4.50 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. That's a new low in Freddie Mac records dating to 1971.

For  15-year fixed-rate mortgages, rates averaged 2.95 percent with an average 0.6 point, down from 2.98 percent last week and 3.69 percent a year ago. Rates for 15-year loans -- a popular refinancing option -- hit an all-time low in records dating to 1991 of 2.94 percent the week ending June 7.

Rates on 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.77 percent with an average 0.6 point, down from 2.80 percent last week and 3.25 percent a year ago. That's a new low in records dating to 2005.

For 1-year Treasury-indexed ARM loans, rates averaged 2.74 percent with an average 0.5 point, down from 2.78 percent last week and 2.99 percent a year ago.  Rates on one-year ARMs hit an all-time low in records dating to 1984 of 2.72 percent during the week ending March 1.

Treasury bond yields eased somewhat this week on some worsening economic indicators bringing mortgage rates back into record low territory, Freddie Mac Chief Economist Frank Nothaft said in a statement.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans fell a seasonally adjusted 9 percent during the week ending June 15 compared to a week earlier. Demand for purchase loans was down 2 percent from the same time a year ago.

The weekly decline in purchase loan applications was likely "a recalibration following the Memorial Day holiday, as the level of activity remains within the narrow band seen for the past three years," said Michael Fratantoni, the MBA's top economist.

California for-sale inventory at 2005 levels

Inventories of homes for sale in California continued to shrink in May, as the highest pace of sales since February 2009 reduced the supply of available homes to just 3.5 months -- down from 4.2 months in April and 5.7 months at the same time a year ago.

Many housing analysts view a six-month supply of homes as a good balance of supply and demand -- anything less means there are not enough homes to meet demand.

"Low housing inventory continues to be the critical issue in the California market," said California Association of REALTORS® Chief Economist Leslie Appleton-Young in a statement accompanying the release of the latest numbers. "Inventory levels have not been this low since December 2005, when the supply matched the current level."

Sales of existing, single-family detached homes were up 3.4 percent from April, to a seasonally adjusted annual rate of 572,260 in May, CAR said. That's the fastest pace of sales since February 2009, when homes were selling at a seasonally adjusted rate of 598,770 per year.

The San Francisco Bay Area had the greatest shortage of homes for sale, with inventory levels in the two- to three-month range for Santa Clara, San Mateo, Alameda and Contra Costa counties, Appleton-Young said. A seven-month supply is normal, CAR said in releasing data from more than 90 REALTOR® associations and multiple listing services.

The inventory figures could provide ammunition to critics of plans to allow bulk sales of Fannie Mae and Freddie Mac real estate owned (REO) properties. The National Association of REALTORS® has urged that such programs be "implemented on a strictly limited, as-needed basis," citing estimates by analysts at Barclays Capital that private investors are converting 800,000 homes a year into rentals.

Fannie and Freddie's federal regulator, the Federal Housing Finance Authority (FHFA), has said it will approve bulk sales only in markets where there's a glut of properties on the market.

The first "REO to rental" sale of 2,490 Fannie Mae "real estate owned" (REO) properties will be limited to eight markets: Atlanta (572 properties); Los Angeles-Riverside, Calif. (484 properties); Phoenix (341 properties); Las Vegas (219 properties); Chicago (99 properties); Southeast Florida (418 properties); Central and Northeast Florida (190 properties); and Western Florida (167 properties).

But last month, California REALTORS® got behind a bill introduced by Rep. Gary Miller, R-Brea, that would prohibit bulk sales of Fannie Mae REO homes in the state.

Months' supply of housing, May 2012

State/region/county	May 2012	April 2012	May 2011
California: single-family	3.5	4.2	5.7
California: condo/townhomes	3.6	4	6
L.A. metropolitan area	3.6	4.5	6
Inland Empire	3.3	4.4	5.2
San Francisco Bay Area	2.9	3.3	5
San Francisco Bay Area
Alameda	2.5	2.8	4.8
Contra Costa (Central County)	2.5	2.8	4.9
Marin	4.4	4.1	6.5
Napa	5.2	6.5	7.3
San Francisco	3.7	4	5.2
San Mateo	2.3	2.5	3.9
Santa Clara	2	2.3	3.8
Solano	3.6	4.4	5.5
Sonoma	4.3	4.6	7.4
Southern California
Los Angeles	3.6	4.4	6
Orange County	4.3	4.8	7.1
Riverside County	3.1	4.5	4.9
San Bernardino	3.6	4.3	5.5
San Diego	4.2	4.8	6.8
Ventura	4.4	5.1	7.5
Central Coast
Monterey	3.4	4.1	5.4
San Luis Obispo	3.6	4.7	6.8
Santa Barbara	3.7	4.9	7
Santa Cruz	3.3	4.5	6.6
Central Valley
Fresno	4.1	4.3	4.7
Kern (Bakersfield)	2	3.4	3.9
Kings County	3.6	3.4	5.3
Madera	3.8	3.5	4.9
Merced	2.7	3	4.1
Placer County	3.5	4.2	NA
Sacramento	3.1	4	4.7
San Benito	2.1	2.4	3.8
Tulare	3.7	3.9	4.6
Other Counties in California
Amador	6.5	6.4	8
Butte County	4.3	3.9	8.2
Humboldt	6.7	7.1	12.2
Lake County	4.3	6.2	7.7
Tuolumne	6.4	9	10.7
Mendocino	7.8	6.9	12.6
Shasta	4.6	4.8	6.1
Siskiyou County	10.3	12.6	16.8
Tehama	5.1	6.4	7.9

5 rules for home improvement safety

By Bill and Kevin Burnett
Inman News®

Kevin had a doctor's appointment last week. He's been a patient of Rodde Cox since 2005, so they know each other pretty well. Usually, the medical stuff is dispatched fairly quickly, and then the discussion gets into some friendly banter. The appointment is usually the last one of the day, so after the medical treatment, the time is spent "swatting flies and telling lies."

This time, Dr. Cox asked if we're still writing our Sweat Equity column. When Kevin said "yes," the conversation veered off into dumb things we'd done with tools.

We always preach safety first, but we don't always practice what we preach. We're passing along some tips to avoid doing the dumb things we've done, in hopes that the lessons we learned will save our readers a trip to the emergency room.

1. Use a push block to control wood when near the saw blade or router bit. Dr. Cox is an avid woodworker. He was working with a router mounted in a table when he tried to push a piece past the moving bit with his hand. He got a fingernail caught in a spinning bit. Fortunately for him, it just ripped the fingernail off. It was painful, but the nail grew back, in time. Given his profession, this could have been a career changer.

Kevin wasn't so lucky. Years ago, he was ripping some fence pickets on his radial arm saw. Tedium got the best of him and he began gathering wool. He reached around the blade and opened up a gash between his thumb and index finger. Luckily, he didn't sever a tendon.

2. Turn off the breaker when working with electricity. Both of us have gotten a little cocky around electricity. Bill was working on one of his Alameda, Calif., houses doing some rewiring. He was under the house, lying on his back on damp ground, when he grabbed a live wire in a junction box. It took him a while to break free. No permanent harm, but it sure shook him up, and no more work was done that day.

Kevin was working on a garbage disposal and, being overconfident and lazy, he didn't want to drag himself from under the sink to turn off the power. Sure enough, a misplaced hand got him bit.

3. Unplug saws, routers and other tools when changing blades and bits. Dr. Cox has a Shopsmith, a large, multipurpose tool that can be configured to do just about anything with wood, from cutting to sanding to shaping to boring holes. He was adjusting the tool when a faulty switch caused it to start. Again, no damage was done, but it was a close call.

4. When working with power drills and saws, push the blade or bit away from you. Kevin learned this one the hard way. We were replacing the brick foundation under Bill's house; the house was properly braced with temporary supports. Kevin was cutting out the cripple studs to remove the mudsill. In a moment of brilliance, he decided to pull the reciprocating saw toward him; the blade bound, jumped out of the cut and plunged into his leg. There wasn't any blood to speak of, but the muscle was cut, and he carries a lump and a scar to this day.

5. Take extra care when working with nail guns. Bill was framing a soffit during a kitchen remodel, holding the wood in place with his left hand and firing the nail gun with his right. The gun recoiled, sending a 16d nail three inches into his hand. This little misadventure required a trip to the emergency room, where the doctor removed the offending object with a common pair of pliers. The job stopped. Bill couldn't use his left hand for a week.

These cautionary tales were close calls with little damage done. Not so for the final one. A patient of Dr. Cox's managed to push his hand through a table saw. Knowing he did some damage and being a bit squeamish, he wrapped the hand up without looking at it and headed to the emergency room. The ER doc undid the makeshift dressing and noticed that the patient was missing two fingers. Apparently he left them on the shop floor.

His wife called the next-door neighbor and asked him to grab the severed digits for possible reattachment. A little later the neighbor called and said, "I've got some good news and bad news. The bad news is I can't find the fingers. The good news is your dog cleaned up the mess." Dr. Cox swears this is a true story.

The bottom line is that overconfidence and complacency are your enemy. Pay attention and practice sound safety procedures.

Choosing the right adhesive for your project

By Paul Bianchina
Inman News®

If you've wandering the aisles at a home center or hardware store looking for "glue," you probably found that that once-simple word isn't quite so simple any more.

Modern technology has given the do-it-yourselfer an amazing selection of adhesives for just about any material and application you can think of. That makes getting good results on your next home project that much easier, providing you select the right one.

So here's a guide to some of the more common adhesives you're likely to encounter, and where they're best used:

White glue: One of the most common and safest glues, it is often referred to by one of its most common trade names: Elmer's Glue. It bonds to wood, paper, cardboard, cloth, and a wide variety of other porous and semiporous materials. It's easy to use and clean up, with a long working time, and is ideal for light-duty, interior repairs.

Yellow glue: This is the common name for aliphatic resin (AR) adhesive. AR adhesives have a thick, rather creamy consistency, and are an ideal choice for woodworking projects. There are both interior and exterior varieties; use the exterior if your work will be exposed to sheltered moisture conditions outside, or high humidity conditions inside, such as building a bathroom cabinet. However, exterior yellow glue is not completely waterproof, so it's not for projects in full outside weather exposure. In addition to wood, AR adhesives can be used on paper, cloth and a variety of other porous surfaces.

Polyurethane: This is a waterproof adhesive that's great for outdoor projects, including things like outdoor furniture, planter boxes and many exterior repairs. It bonds to wood, metal, ceramics, plastic, stone and a wide variety of other materials. It's thick, with a long working time. On the downside, it's more expensive than some of the other adhesives, and has a relatively short shelf life after it's opened, so you might want to buy it in small quantities.

Epoxy: Epoxies come in two parts, a catalyst and a hardener, which are mixed together in equal parts before use. Epoxy forms a very strong bond, and sticks to just about anything. It fills gaps very well, and can be found in both liquid and solid (putty-like) formulations. The working time after mixing varies with the brand, but is usually around five to 10 minutes. Epoxy is expensive, but typically has a longer shelf life than polyurethane. You can also get epoxy in a syringe; as you squeeze the plunger, the two parts of the formula are mixed in a chamber in equal parts and dispensed.

Cyanoacrylate: Cyanoacrylate (CA), also called instant glue or, after one of its most common brand names, Super Glue, is one of the most popular of the household and shop adhesives. CA adhesives dry very quickly, and they work well on a wide variety of both porous and nonporous materials. CA adhesives are available in different thicknesses, and each one will have different gap-filling capabilities. You can also purchase an accelerator, which will dry the glue almost instantly, and solvents, which are highly recommended for ungluing stuck fingers.

Contact cement: Contact cement is applied to both of the surfaces being joined, and then is left to dry. The two glued surfaces are then brought into contact with each other, and the bond is instant and very strong. Contact adhesive is one of the best materials for gluing large flat surfaces such as plywood, plastic laminate, particleboard and other similar materials. Contact cement is somewhat sticky and messy to apply, and some types have a fairly strong odor and must be used with adequate ventilation. Both surfaces must fit well and be ready to be glued; once the two glued-up pieces contact each other, there's no turning back.

Construction adhesive: Sold in tubes that fit in standard caulking guns, construction adhesive is used to bond a wide variety of common construction materials, including wood, masonry, metal, ceramics, foam insulation and drywall. The material is thick and sticky, and fills gaps well. There are different formulations for different materials, as well as for interior and exterior use, so be sure you're getting the correct one.

Read the labels carefully

With any of these products, you really need to read the labels carefully if want to achieve good results. Each manufacturer will provide specific instructions on what materials the adhesive will bond to; what surface preparation is necessary; what the conditions should be during the application and drying period; what clamping is needed and for how long; what safety and cleanup precautions to take; and much more. If you have any questions, request a Material Safety Data Sheet (MSDS) from the retailer or online store where you're buying the product, or contact the manufacturer directly.

Overseas buyers snatching up pricey homes

Though U.S. home sales to foreign buyers declined slightly in the year through March 2012, a preference for more expensive homes pushed the total sales volume of international sales up by 24 percent, according to an annual report from the National Association of Realtors.

NAR's 2012 Profile of International Home Buying Activity includes results from 1,745 member respondents surveyed in April 2012. The survey covered purchases of U.S. residential real estate by international clients in the 12 months through March 2012. International clients were divided into two groups: foreign buyers with permanent residences outside the U.S., and buyers who are recent immigrants of less than two years or temporary visa holders residing in the U.S. for more than six months.

In the year through March 2012, each group accounted for an equal number of international sales, a total of 206,192, or 4.7 percent of overall home sales in that year. That total is down 2.2 percent from 2011, when international sales made up nearly 4.9 percent of overall sales.

At the same time, however, the median sales price of homes preferred by global buyers rose to $400,000, compared with $315,000 the year before. By contrast, the median sales price for home sales overall -- both international and domestic buyers -- declined 2.6 percent to $212,183 in the 2012 report.

That increase in the median price of foreign purchases resulted in a 24.2 percent rise in total sales dollar volume for international sales, to $82.5 billion, up from $66.4 billion in the year through March 2011. That $66.4 billion figure has been revised downward from the $82 billion originally reported last year as a result of adjusted home sales figures.

In December, NAR "rebenchmarked" its sales statistics going back to 2007, correcting assumptions that had led the trade group to overestimate home sales by 14 percent.

International sales figures for 2010 were also adjusted as a result. Sales volume for international sales in the year through March 2010 was $53.4 billion, NAR told Inman News. That means sales dollar volume in 2011 rose by about as much as in 2012: 24.3 percent.

"Today's advantageous market conditions have drawn more and more foreign buyers to the U.S. in recent years, signaling how desirable and profitable owning property in this country can be," said NAR President Moe Veissi in a statement.

"Low housing prices, a good inventory condition and increased buying power with today's exchange rates help attract international clients."

In the 2012 report, 27 percent of REALTORS® reported working with international clients, about the same as last year. Of those REALTORS®, nearly nine in 10 reported working with five or fewer international clients.

Four states accounted for 51 percent of international purchases in the U.S.: Florida (26 percent), California (11 percent), Arizona and Texas (7 percent each).

Source: NAR 2012 Profile of International Home Buying Activity.

At the local level, a recent Inman News report, "10 Hot Spots for Global Homebuyers," highlighted the 10 most popular areas in the U.S. for foreign buyers based on public records between May 2011 and January 2012. Six were in Florida, and the remaining markets were in Arizona, New York, Hawaii and Nevada.

Five countries accounted for 55 percent of international transactions in the 2012 report: Canada (24 percent of international sales), China (11 percent), Mexico (8 percent), India and the United Kingdom (6 percent each).

Source: NAR 2012 Profile of International Home Buying Activity. 

"Proximity to the home country, the presence of relatives, friends and associates, the convenience of air transportation, and climate and location appear to be important considerations to prospective buyers," the report said.

Just over half of respondents with international clients, 55 percent, reported their global buyers were referred from friends and previous clients as well as other foreign and domestic sources. About a fifth obtained their international clients via websites and online listings.

Fifty-one percent of international clients said the most important factor influencing their purchase was their view that U.S. real estate was a "profitable" or "secure" investment. Forty percent said "desirable location" influenced their purchase the most.

"Foreign buyers recognize that owning a home in the U.S. has many benefits, both financial and social," Veissi said.

"Many purchase property as an investment, vacation home, or to diversify their portfolio. In addition, many recent immigrants view homeownership as an important accomplishment. They believe that being a homeowner is one of many ways they become established in the U.S. and attain stability, security and a sense of community."

Just under half, 45 percent, of international buyers purchased homes for $250,000 or less. That's down from 54 percent in 2011 and seems to indicate a trend toward higher price ranges. Percentage-wise, international sales of homes valued at more than $1 million jumped the most, to 10 percent, from 5 percent in 2011.

Source: NAR 2012 Profile of International Home Buying Activity. 

"The international client is typically wealthier than the domestic buyer and is looking for a property in a specialized niche, for example, a larger property suitable for multigenerational living, or a property that establishes the individual's presence and standing in the community," NAR said.

Nearly a third of REALTORS® with international clients reported those clients did not complete a sale. The reason cited by nearly half of respondents was the cost, taxes and insurance related to purchasing a U.S. property. Nearly four in 10 said their clients "could not find a house." Obtaining financing was a problem in just over a quarter of cases. The majority of foreign buyers, 62 percent, paid in cash, unchanged from 2011.

4 ways buyers can compete in today's market

By Dian Hymer
Inman News®

Inventories of homes for sale are dropping in areas where they've recently been high like in Oakland, Calif., Phoenix and Miami. Interest rates are approximately 0.75 percent lower than they were a year ago. It seems like a good time to get off the fence and into the action if you can find a house that reasonably matches your wish list and you don't find yourself bucking other buyers who have the same idea.

Months' supply of inventory is an estimate of how long it would take to sell all of the homes in a given market at the current sales pace. A six-month supply of unsold inventory is thought to represent a balanced market.

In California, there was a 4.2-month supply of inventory in April 2012, down from 5.6 months a year ago. When buyer demand increases, the unsold inventory drops, and multiple offers often enter the picture -- sometimes in a big way.

In the hills above Berkeley, Calif., buyers are chasing too few homes for sale. But not all homes are coveted. The best homes that are priced right for the market are drawing attention. The multiple-offer activity can be fierce. Recently, a home that was perhaps underpriced for the market was bid up significantly with 17 offers. Four of the top offers included no contingencies.

The first step to successfully compete in a sizzling market is to know the inventory. Pricing low to generate multiple offers is a strategy commonly used in a low-inventory, high-demand market. You need to be familiar with how much listings in your area are selling for in order to determine if a listing is priced at, above or below market value.

HOUSE HUNTING TIP: You might have only one opportunity to grab the sellers' attention, which means that your first offer may need to be your best. You need to feel confident that the price you're offering -- particularly if it's significantly over the list price -- is reasonable in terms of your long-term housing needs and in light of the fact that the current uptick in many segments of the market may not be a sustained recovery.

Before writing an offer, find out how many offers the agent anticipates. If you can barely afford the asking price and there are seven offers, you might reconsider and wait for an opportunity that will allow you to move up in price, if necessary.

It's hard to compete with an all-cash offer if you need to qualify for a mortgage. Make sure to get preapproved for the financing you need. Some sellers will accept an offer with a loan contingency from a well-qualified buyer over a cash offer if the price is higher. A large cash down payment makes your offer more attractive.

Make the cleanest offer you can without taking on too much risk. Offers made contingent on the sale of the buyers' home have little chance of being accepted. In the example above, four buyers were willing to make offers without any contingencies. That's as clean as it gets.

In this case, the buyers preinspected the property. In 2005 and 2006, buyers waived inspection contingencies to compete. Sometime negative consequences such as drainage or foundation problems were discovered after closing.

But if you're willing to pay to inspect a home before the sellers have accepted your offer, you can gain the information about the property's condition before moving forward. Be sure to ask for the sellers' permission before preinspecting their home.

It's always a good idea to find out as much as possible about the sellers' situation. This may allow you to offer a perk that could swing the deal your way. Recently, buyers of a Piedmont, Calif., home offered the seller 30 days to rent back at no cost.

THE CLOSING: This clinched the deal.