Home Renovations:  Think Smart

The thought of renovating your home to improve the price it will bring on the real estate market is an appealing one.  The question any home owners should be asking themselves is "what does my home NEED in order to obtain a higher selling price?"  Many home owners overlook obvious things their home needs in favor of cosmetic fixes or upgrades that magazines and TV say will increase their asking price.  The thing they forget is, without the basics the home will not impress people on a base level.  Sure it may have some impressive features but without the daily necessities, what's the point?

Before you start adding un-necessary extras to a home, take the time to make sure the everyday things are taken care of.  These can be simple things like working fixtures and faucets, updated appliances and clean floors.  The interior workings of the home should be checked and fixed if they are in need of repair.  There isn't much sense in a home having a brand new solarium and hot tub if the plumbing system is in disrepair and there is mold growing in and around the pipes.

Every homeowner should go over their home with a fine tooth comb and find those little everyday things needing an upgrade or a fix before jumping into major renovations.  You may find yourself making renovations only to have to go back at the end to repair something that should have been fixed before the building started.

Once the home is in tip-top condition and everything works as it should, then its time to consider making those price generating improvements.  Buyers will feel much better looking at a home with an updated electrical system, a current plumbing system and a new roof than a home with a few nifty extras and a host of possible problems.

Credit Cards Before the Mortgage?

In another symptom of the subprime mortgage meltdown, stressed-out borrowers may be taking care of their credit card bills before making their mortgage payments.

According to a report from consumer credit reporting agency Experian, borrowers with credit scores of 620 or below are 30 days late more often with mortgage payments than with payments on bank-card debt.

The survey noted that historically, consumers have prioritized mortgage debt over credit card debt as they "traditionally view their home as their most valuable asset which should be protected at all costs."

But the current housing slump, in a very fundamental way, has changed the math that governs the way subprime borrowers deal with debt. 

Consumers who have dealt with phone calls, letters and wage garnishees from credit card collectors in the past may want to avoid repeating the experience.  Since home loans usually have a much lower interest rate than credit cards, most credit counselors will tell borrowers who are in over their heads to pay down their credit card debt first above all else.

Builders Getting Creative with Incentives

The "incentives" long familiar to new-car buyers — bonuses or rebates thrown in to sweeten a sale — are becoming more common in the new-home market as sales slow and credit continues to dry up.

Some of the best incentives are free upgrades, when the builder offers to include appliances, landscaping, a swimming pool, or features like hardwood floors instead of basic carpeting. These upgrades, which can save you thousands of dollars, often represent genuine value — a true discount, rather than a gimmick being paid for via an inflated home price. But watch out for "the catch." Sometimes these upgrades are only available if you accept (expensive) features you might not want or need, or if you finance through the homebuilder.

Just like car manufacturers, homebuilders have discovered that offering financing to their buyers can smooth the sales process while adding a significant revenue stream to their businesses. And just as with car-buying, sometimes the "factory financing" is a good deal and sometimes it isn't, especially if it's combined with other incentives. A $10,000 "cash back" promotion that requires you to use a builder's lender and pay above-market rates or fees may be no bargain. But as the market continues to soften, more genuine bargains are surfacing as builders with too much inventory turn to "blow-out financing," offering mortgages with below-market rates and reduced costs to buyers who suddenly have a lot more choices.

There are great deals out there, but not all deals are as good as they look.  If you're offered a complex package of incentives that includes a supposedly favorable mortgage, read everything carefully and look for the catch.  If you don't understand what you're reading, paying a real estate attorney to spend an hour or two reviewing the offer could be money well spent.

Lastly, never let a homebuilder tell you that you "have" to use their lender.  That's illegal: Federal law guarantees your right to seek financing and related services from independent providers, and a builder who tries to restrict your options is probably pulling a fast one.

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Existing Home Sales Down Slightly

According to the National Association of Realtors, the pace of existing home sales in the United States was off slightly in May to a 5.99 million-unit annual rate.

The inventory of homes for sale rose 5.0 percent to 4.43 million units at the end of May which represents 8.9 months' supply at the current sales pace.  That is the highest months' supply since June 1992, although the 1992 figure only includes single-family homes while the current data also includes condos.

May saw the 10th straight month in which prices dropped from year-ago levels, with the national median price down 2.1 percent to $223,700.

Homes sales were mixed across the regions with the Northeast seeing a 5.8 percent increase for the month while the Midwest saw a 0.7 percent rise. The West and South reported a drop-off in sales with 0.8 and 3.4 percent declines respectively.

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Fix-ups That Can Speed Your Home Sale

 

You don't have to spend a fortune renovating your house to ensure a quick sale at the best price. Some of the most effective fix-ups are also the cheapest.

 

Spending just $400 to $500 on fresh landscaping, for example, can boost your home's value by $1,600 to $1,800, according to a survey of real estate agents conducted by HomeGain, an Internet real estate service. Spend another $300 on cleaning and de-cluttering your home, the survey found, and you could add another $2,000 or more to the sale price.

 

To pinpoint the projects that make the most sense, start by touring your property with fresh eyes, as if you were a prospective buyer. Drive or walk up to your house and see how it appears from the street. Walk through the front door and take a look around. You might ask a trusted friend to help you spot problems, clutter and weird smells that you've long since stopped noticing. Keep a pen and pad handy to list the projects that need to be done.

 

Here are some more tips to watch for and think about…

 

 

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