Getting ready for sale

Before a seller puts their home up for sale it’s a good idea to spruce-up around the house. A study funded by the Home Improvement Research Institute tells us what sellers are doing to put their house in order.
The vast majority of work -- 61 percent of it -- is being done before the property goes on the market, and an increasing amount of it in the 30 days before it is listed. Still, 12 percent of the work is being done after an offer has been made, twice that of the 2004 survey and probably reflecting that sellers are more willing to do some or all of the buyer’s requested repairs after the home inspection.
Almost 25 percent of this work involves replacing flooring, primarily carpet. Painting accounts for 22 percent of the work done to get the house ready for market. Most real estate agents suggest painting and carpet as a relatively inexpensive way to freshen up rooms.
Electrical work and landscaping are each at 9 percent, and exterior structural changes -- windows and siding -- accounted for 12 percent. Most people who responded to the survey said these projects improve the value of their houses.
Why spend the money at the last minute?
Almost one-third of those responding to the survey replied, "To make a good impression." Curb appeal sells almost 50 percent of houses generally, according to survey after survey by the National Association of Realtors, but in a slowing market, your house has to look better than the five others for sale on your street to get someone out of the car and up to your front door.
The renewed importance of curb appeal likely accounts for the increase in landscaping work, since, together with painting, it's a relatively inexpensive way to spruce up a home's exterior.
Most suggestions for change came from real estate agents (78 percent). Almost 15 percent of the sample said that the work was recommended in the home inspection report.
Twenty-two percent spent money to repair unsightly areas, while 17 percent did it to "fix something not working," 8 percent to pass inspection and 7 percent to neutralize decor. In a slowing market in which people are concerned about selling quickly with a chance of selling for more, fixing things and passing inspection are becoming more important considerations.
There has been a slight shift from sellers doing the work themselves to using a professional. The possible reason for the shift has less to do with the unwillingness of homeowners to do their own work and more with getting it done quickly so the house can get on the market faster and ahead of the competition. Only 53 percent of sellers were doing the work themselves in 2006, compared with 59 percent in 2004.

Hot Markets

Monday, the National Association of Realtors reported that the states with the highest appreciation rates last year are being hit the hardest with decreasing sales this year.
Existing home sales in the five hottest markets in 2005 are way down this year and wouldn’t you know, some states that didn’t get any recognition in the past are making real estate news this year as the most active.

Housing sales have dropped 22 percent in Arizona this year. California is off by 19 percent, Nevada is down 15 percent and the District of Columbia is down 15 percent from last year. So guess what states are seeing a sales boom?

The hot markets are New Mexico, Louisiana, Montana and Mississippi all with a 15 percent increase in the number of existing home sales.

Price continues to climb, albeit, less than 2005. The median home price appreciation in all 149 major metropolitan areas is showing a 10 percent increase. Phoenix had the highest year-over-year home-price gains at 38 percent down from the 48 percent increases between 2004 and 2005.

If it weren’t for air conditioning do you think that dry west or humid south would be so attractive to so many?

The F Word

Creative financing, rising interest rates and a sluggish real estate market may be creating a financial hardship for some over-leveraged homeowners. Mortgage delinquencies are increasing for the first time in years. Lenders are carefully reviewing their loan portfolios to determine the risk of potential mortgage defaults and federal loan guidelines are becoming more restrictive. So what’s up with that?

Foreclosure is a legal process whereby the lender receives title to the home if the mortgage payments are not made as agreed. The process will usually take four to six months. The first indication of a potential foreclosure is when the lender doesn’t receive the monthly payment from a borrower. One missed payment usually doesn’t warrant much attention but when a lender doesn’t receive the second month’s payment, a process is activated that could eventually lead to a homeowner loosing the family home.

Every large mortgage lender will at any given time have a few delinquent loans and foreclosures in progress. The percentage, however, is low (usually under 5 percent) and in the last four years foreclosures have been nearly non-existent. The real estate market has been so good that nearly all borrowers who run into extreme financial difficulty have been able to sell their home quickly. Lenders and their federal regulators carefully monitor the percentage of delinquent loans. An increase of only a few percentage points could be a warning signal for a troubled housing market. Having one or two foreclosures in a neighborhood has a negligible effect but several can destabilize a community and lower property values.

DataQuick Information Systems reported a disturbing number of homeowners have recently gone delinquent on their mortgage payments. During the first quarter of this year, Sacramento County had a 49 percent increase in “default notices” sent to borrowers, Placer County had a 90 percent year over year increase during the same time period and California registered a 29 percent increase in first quarter mortgage defaults with 18,668 registered filings.

The most common personal/financial reasons provided to lenders by delinquent homeowners are: job loss, divorce and severe illness of a family member. Nobody tells a lender that they spent their monthly house payment on a vacation in Cabo San Lucas. Once a homeowner becomes 2 months delinquent, it becomes increasingly more difficult for them to “catch up” their back payments from their own financial resources. A delinquent homeowner usually must find a quick infusion of cash to bring the delinquency current or attempt to sell the property and salvage any remaining equity.

While most defaults are the result of personal tragedies, an increased number of homeowners are experiencing a hangover from that all too attractive, adjustable-rate mortgage (ARM). ARMs have been the loan of choice for more than two-thirds of all area homebuyers financing their purchase. The initial low interest “start” or “teaser” rates are beginning to expire. Interest rates on home equity loans have also jumped from the 5 percent range to over 9.


First time homeowners are five times more susceptible to getting behind on their mortgage. Many stretched themselves financially to buy their first home, they have limited cash reserves and they are unaccustomed to managing household expenses.

Despite occasional financial uncertainly, ninety-five percent of all homeowners make their monthly payments on time. A few will find themselves faced with over-whelming financial hardship and regretting their decision to purchase a home. It is best, when that happens, to act quickly. If the financial problem is temporary a “work-out” might be structured with the lender. If the problem is permeate it is best to call your trusted agent and discuss selling the home.

Most situations in life are easier getting into than out of. Homebuyers inherently know the benefits of owning a home but occasionally minimize the long-term financial responsibility and the consequences of not living up to the obligation. With a more balanced real estate market, I believe today’s buyers will give more thought to both.