6 Things You Think Add Value to Your Home -- But Really Don't
By Jean Folger | Investopedia – Sun, Oct 3, 2010 3:00 AM EDT
Every homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home's value. Certain projects, such as adding a well thought-out family room -- or other functional space -- can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it's time to sell.
More from Investopedia: • Home Renovations That Don't Pay
Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don't:
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1. Swimming Pools
Swimming pools are one of those things that may be nice to enjoy at your friend's or neighbor's house, but that can be a hassle to have at your own home. Many potential homebuyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen. Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer's offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.
An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That's a significant amount of money that might never be recouped if and when the house is sold.
2. Overbuilding for the Neighborhood
Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighborhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighborhood of small, one-story homes. (Overbuilding might be anticipating your neighborhood's next move.)In general, homebuyers do not want to pay $250,000 for a house that sits in a neighborhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighborhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighborhood follow suit.
3. Extensive Landscaping
Homebuyers may appreciate well-maintained or mature landscaping, but don't expect the home's value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.[Most Expensive Zip Codes in the U.S.]
4. High-End Upgrades
Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the '60s. Upgrades should be consistent to maintain a similar style and quality throughout the home. A home that has a beautifully remodeled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential homebuyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.
5. Wall-to-Wall Carpeting
While real estate listings may still boast "new carpeting throughout" as a selling point, potential homebuyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and color that you thought was absolutely perfect might not be what someone else had in mind.Because of these hurdles, wall-to-wall carpet is something on which it's difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.
6. Invisible Improvements
Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice -- or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don't expect it to recover these costs when it comes time to sell. Many homebuyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home's value.The Bottom Line
It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home's value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don't really add value to a home.
Tuesday, October 23, 2012
6 Things You Think Add Value to Your Home -- But Really Don't - Yahoo! Finance
Monday, October 22, 2012
Flipping houses is booming business again
Flipping houses is once again a booming business
Not long ago, John Irvin was selling women’s shoes in the Nordstrom at the Pentagon City mall, pulling down about $20 an hour.
Now he flips houses in Northern Virginia — scooping up short sales, rehabbing them and aiming for a quick sell. He has sold three homes and says he netted more than $30,000 in profit each time.
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“If I do one house every quarter, I’m making $125,000 a year — at 25 years old,” Irvin said. “All my other friends, they have a 9-to-5 job. They make probably half of what I’m making right now. It’s kind of like hitting the lottery.”
Flipping earned a bad reputation during the housing boom thanks to speculators who bought and sold millions of homes in search of easy profits. But the practice is gaining popularity again as the nation’s real estate market shows signs of life. The number of flips rose 25 percent during the first half of 2012 from the same period a year earlier, according to research firm RealtyTrac, and the gross profit on each property averaged $29,342.
RealtyTrac Vice President Daren Blomquist said the resurgence in flipping offers another indication that, in many parts of the country, housing prices have finally stopped falling.
“There are flippers in any market, but a market where home prices are appreciating is much more forgiving for flippers than a market where prices are depreciating,” Blomquist said. “We have turned that corner in a lot of places in the last six months, so that’s going to attract flippers.”
Areas of the country that were hit particularly hard by the housing crash have seen the most pronounced boom in flipping, as investors gobble up foreclosures and short sales — properties sold for less than the owners owe on the mortgage — and resell them to buyers eager to take advantage of record-low interest rates.
The Phoenix area leads the country with nearly 10,000 flipped properties during the first half of this year. Las Vegas, Los Angeles, Miami and Atlanta also are high on the list.
Maryland and Virginia also have seen an increase in the number of flips during the past year, according to RealtyTrac. The District saw a sharp increase starting two years ago though the percentage in the last year is down slightly.
“Loan applications have tripled in the past few months,” said Justin Konz, an executive at Chantilly-based Restoration Capital, a “hard money” lender that provides fast, short-term financing to flippers. Konz said the firm funds everyone from weekend warriors flipping a house or two a year to professionals turning around dozens of houses a month.
“We thought it would slow down in the colder months,” Konz said. Instead, he said, business has picked up heading into the fall, with few signs of slowing.
With numerous investors and home buyers vying for a small list of available properties in the District and close-in suburbs of Maryland and Virginia, bidding wars and outsized offers have become a routine part of the landscape. The average gross profit for flipping a home in Maryland and Virginia is about $55,000, and it’s even higher in the District, according to RealtyTrac.
Monday, October 1, 2012
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By Kerri Ann Panchuk• October 1, 2012 • 8:03am
Tuesday, September 25, 2012
Six Reasons Why Real Estate Trumps Investing in Stocks and Mutual Funds
I experienced a drug induced hallucination when I was 10. Laughing gas from my dentist caused me to visualize colorful puzzle pieces crawling all over the ceiling of the exam room. Hopefully, you have never endured this “wacky awake dreamlike state” but take my word for it, you feel out of control.
To this day, I still feel a lack of control when I’m in the dental chair. Someone else is put in charge of my mouth and calls all the shots. I just sit there trying to “open wider.”
If you haven’t guessed, I like to be in control. I like choice and I like to feel responsible for my own mistakes. With real estate, you can be more in control than when investing in stocks, bonds or mutual funds. Below are a few reasons I choose real estate over securities every time.
Six Reasons Why I Prefer to Invest in Real Estate Over Stocks and Mutual Funds
1 – Control Freak
Let’s look at rentals. Say you have a unit that is not renting quickly. You have direct control. You can decrease the rent. You can market more creatively. You can offer incentives to potential renters.
With stocks, you are at the mercy of a board of directors, portfolio managers and corporate executives. You can’t even distribute your own funds. Does that P&G Stock take your personal financial situation into account whenever they make decisions? Do they know that you pay extra property tax in February so it might be good to distribute more in the month of January. In a worst case scenario, what do you think the Enron folks could have done?
2 – Options upon Options
With a real estate purchase, you have a ton of options. For me, I take a three-prong approach. I like to find property that is cheap enough to wholesale. If I can’t wholesale immediately, I can rehab it for a flip. If the flip takes too long, I can put a renter in the unit. With stocks, well, I guess I can buy or sell or well, sell or buy. But in either case, I don’t even control the daily price.
3 – It’s Not All Greek to Me
The economy in Greece is not going to affect my rent rates here. Worldwide or even U.S. collective emotional shock is just not going to affect my little building that brings in cash flow every month. Granted national issues might affect my property values long-term, but only more localized trends that I can anticipate will affect my monthly bottom lines. My rental incomes have leases attached to them that don’t change overnight because China test fired some weaponry in the Taiwan Strait. If I buy right, I don’t have to worry about “malaise,” market “hysteria,” or even another 911.
4 – Pass the Coke
If you own stock in Coca Cola, how can you better your stock’s price? Drink cases of the soda every day? With real estate, you can up your appraisal values and equity by changing the flooring, adding a garage, buying & updating more houses in the area or even convincing other investors to consider your investment neighborhood. You aren’t guaranteed to inflate your property value, but you can certainly help your chances much more than anything you can do to increase any stock prices.
5 – A Rock Solid Building
Let’s say I wanted to invest in stocks for ‘Trust Me Company.’ To get a feel for Trust Me Company, I’d visit the Trust Me headquarters, manufacturing centers and office buildings. I’d meet Trust Me owners, board members and managing staff. How difficult would it be to do my due diligence on Trust Me Company? If I invest in real estate, however, due diligence is simple. The asset is tangible; I can actually touch it. I can go check out the building in one location or area. I can touch the foundation, drive around the neighborhood, double check area crime records, do a rent analysis and bring in a professional inspector. In a handful of hours, I can get an excellent feel for the viability of a rental property.
6 – Managing the Managers
I can opt to have a property manager handle a lot of the day to day stuff with my rentals. But even with a property manager, I still have control. I can make decisions and even fire the property manager. How do I fire the CEO of my stock? Can I renegotiate terms with the managing members of my mutual fund? How much weight does my little proxy vote have for my bond fund?
Real estate brings investors a sense of control. With that control, you can be creative and have fun with your investment. When I invested in securities, I did like updating my portfolio but I didn’t get to do anything other than buy and sell. I know some people like to have others control their destiny and of course real estate is probably not for you. But for those who want control of their finances, real estate tops stocks hands down.
Saturday, September 8, 2012
Foreclosure-Focused Reality TV Show to Debut in October
It’s a short jump from “realty” to “reality.”
Next 1 Interactive, Inc., a media company focused on travel and real estate, announced Tuesday that the pilot episode of a new home improvement reality show focused on foreclosure renovation saw some success in a test market in New York.
The show, titled “Foreclosure 2 Fabulous,” follows host Patrick Colville and his family and friends as they help participants buy, renovate, and refurnish foreclosed vacation properties within a five-day period. The program is designed to show participants and viewers how they can “own and enjoy their own little piece of paradise.”
The pilot episode was aired as a test in the New York area to a potential viewing audience of 700,000 over the last two weeks. As a result of the airings, Next 1 reports receiving hundreds of inquiries from people wanting to purchase foreclosed properties.
The first 13-episode season of “Foreclosure 2 Fabulous” is set to launch in October, with a broadcasting audience of approximately 100 million households across the country. The show’s website will also feature live streaming episodes.
Next 1 Realty, a subsidiary of Next 1 Interactive, is the real estate agent of record and will handle all leads for real estate and foreclosure transactions and referrals stemming from the show’s airings. Viewers will be able to access a list of home inventory through a section of Next 1 Realty’s website.
Bill Kerby, CEO of Next 1 Interactive, said he expects the “Foreclosure 2 Fabulous” will motivate viewers to participant in the recovering market, especially in the hard-hit states where Colville plans to focus his efforts.
“‘Foreclosure 2 Fabulous’ provides the entertainment value desired by viewers that can cause the necessary interest in real estate transactions. The possibilities continue to expand as Next 1 Realty advances in exposing video on demand to viewers in unique ways,” Kerby said.
Friday, September 7, 2012
U.S. home prices make biggest jump in 6 years
Nationwide home prices shot up 3.8% in July, making their largest year-over-year leap since 2006, according to real estate data provider CoreLogic.
The gain marks the fifth straight rise in the gauge, part of a positive swing following a year and a half of slumps. The last time prices rose so much was in August 2006, when they jumped 4.1%.
Prices in California bounded up 4.4%. Without distressed sales – including foreclosures and short sales – national prices were up 4.3% compared with last July.
The report, coming as a glut of house-hunters clamor after a shrinking inventory, suggests that the real estate market is “clearly seeing the light at the end of a very long tunnel,” said CoreLogic Chief Executive Anand Nallathambi in a statement.
Compared with June, prices got a 1.3% boost in July, according to Santa Ana-based CoreLogic. The company forecasts at least an additional 0.6% monthly improvement in August, or what would be a 4.6% increase compared with 2011.
Monday, July 2, 2012
May pending and distressed sales
California pending home sales rise on annual basis, post double-digit year-over-year gains in last nine of 10 months
LOS ANGELES (June 22) – Pending home sales in California were flat from April but posted double-digit gains from the previous year for the fourth straight month, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. Additionally, the share of distressed sales continued to decline from year-ago levels, signaling a return of non-investors to the housing market.
Pending home sales:
C.A.R.’s Pending Home Sales Index (PHSI)* was unchanged in May from a revised 128.8 in April, based on signed contracts. The index was up from the 115.8 index recorded in May 2011. May marked the thirteenth straight month that pending sales were higher than the previous year. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“Despite a slowdown in economic growth in recent months, sales in California remain strong as record low mortgage rates and favorable home prices continue to fuel demand in the housing market,” said C.A.R. President LeFrancis Arnold. “The strong results in pending sales – double-digit year-over-year gains in the last nine out of 10 months – suggest solid housing market performance for the state in the upcoming months.”
Distressed housing market data:
• The share of equity sales – or non-distressed property sales – compared with total sales improved further in May. The share of equity sales rose to 59.3 percent in May, up from 55.8 percent in April. Equity sales made up 51 percent of all sales in May 2011.
• Likewise, shares of REOs and short sales sold statewide decreased in May, with the share of REO sales dropping the most markedly from a year ago. The combined share of all distressed property sales fell to 40.7 percent in May, down from April’s 44.2 percent and from 49 percent in May 2011.
• The share of short sales declined in May to 19.4 percent, down from 20.6 percent in April and from 20.3 percent a year ago.
• Of the distressed properties, the share of REO sales declined further in May to 21 percent, down from 23.2 percent in April and 28.4 percent in May 2011.
• The available supply of REOs for sale continued to tighten in May, with the Unsold Inventory Index declining from a 2-month supply in April 2012 to 1.5 months in May 2012.
Multimedia and charts:
• View a video of C.A.R. Chief Economist Leslie Appleton-Young discussing highlights of the May existing home sales and price report, which was released June 15.
• View a chart of closed housing sales in May by sales type (equity, distressed).
• View a chart of pending sales compared with closed sales.
• View a chart of the historical trend in the share of equity sales compared with distressed sales.
• View a chart of housing supply for REOs, short sales, and equity sales in May.
Share of Distressed Sales to Total Sales
(Single-family)
Type of Sale
May 2011
April 2012
May 2012
Equity Sales
51.0%
55.8%
59.3%
Total Distressed Sales
49.0%
44.2%
40.7%
REOs
28.4%
23.2%
21.0%
Short Sales
20.3%
20.6%
19.4%
Other Distressed Sales (Not Specified)
0.3%
0.4%
0.3%
All Sales
100.0%
100.0%
100.0%
Single-family Distressed Home Sales by Select Counties
(Percent of total sales)
County
May 2011
April 2012
May 2012
Amador
61%
41%
50%
Butte
44%
44%
37%
Fresno
63%
62%
57%
Humboldt
17%
36%
34%
Kern
66%
54%
NA
Lake
80%
64%
70%
Los Angeles
45%
44%
41%
Madera
85%
67%
79%
Marin
28%
29%
21%
Mendocino
51%
67%
44%
Merced
59%
58%
54%
Monterey
59%
55%
52%
Napa
43%
41%
44%
Orange
36%
33%
33%
Riverside
65%
56%
54%
Sacramento
65%
61%
58%
San Benito
66%
56%
59%
San Bernardino
69%
57%
59%
San Diego
29%
23%
23%
San Luis Obispo
40%
44%
35%
San Mateo
23%
24%
21%
Santa Clara
34%
27%
28%
Santa Cruz
41%
49%
33%
Siskiyou
82%
62%
54%
Solano
71%
69%
70%
Sonoma
48%
44%
45%
Tehama
62%
58%
65%
Tuolumne
NA
61%
46%
California
49%
44%
41%
**Note: C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state. Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market. A sale is listed as pending after a seller has accepted a sales contract on a property. The majority of pending home sales usually becomes closed sales transactions one to two months later. The year 2008 was used as the benchmark for the Pending Homes Sales Index. An index of 100 is equal to the average level of contract activity during 2008.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
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