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No, this was not the parting sentiment from seller to buyer at a happy closing. It was wistfully painted above the front door, surrounded by an artistic vine of leaves and flowers, of a bank-owned property I showed to some first-time buyers. We didn't notice it until we were leaving, where it stopped us dead in our tracks. No one spoke for a long time as we resumed our places in the car for the ride to the next potential home.

Every day we Realtors are faced with the dregs of lives gone sadly wrong. Abandoned bedrooms gaily decorated with pink walls and frilly curtains, or perhaps sports-themed trim and a left behind poster of some kid's hero. Lines carefully marked inside a closet as a family's children grew. A forgotten toy left in the rush to vacate as the sheriff drove up the street. Wet, molding, laundry forgotten in the washing machine when the residents come home to discover the locks changed. People peering fearfully out as the REO agent comes to the door to offer cash for keys.

We (and by "we" I mean "I") spend a lot of time arguing the nuances of the "real estate crisis"...whose fault it was, who the winners and losers were, all the minutia of the hows, whys, wherefores of what happened. So much easier and less painful to deal with numbers and abstractions. But at the end of the day, it is the human story that is compelling. Yes, many of those folks likely made poor decisions. Yes, people should be responsible for their debts and promises. Yes, many who invested in those peoples' home loans (including financial institutions) have suffered at least as much; lost jobs, lost savings, huge losses in the value of the companies they work for.

But some days I just feel like coming home and crying.

Photo Credit: Left Behind by Michael | Ruiz from Flickr via Creative Commons License

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Copyright © 2012 Linda S. Humphrey, all rights reserved

 

 

 

 

 

 

 

 

 

Linda S. Humphrey, M.D., CDPE, e-PRO, EcoBroker, GREEN

Broker/Owner - Humphrey Home Connections Realty, LLC

cell: 775-287-4665

office: 775-232-8515

www.HumphreyHomeConnections.com

This is a story that is being repeated all over the country.  Boomers want to downsize.  This is hardly a surprise.   The surprise or even shock is that it is going to cost them money to live in less space.  To some, it is so appalling that they have decided to stay in their current home.  

Boomers own their home in the suburbs.  Most are mortgage free.  The home has four bedrooms, three baths, a family room, a rec room in the basement, two or three car garage and a huge yard full of trees and shrubs and maybe a pool.  Okay, there may be variations of this but the essence is - the boomers own family friendly property.  Now......  The kids have finished school and left the nest.  The Boomers are rattling around a big house and find that they live in the kitchen - family room space and their bedroom.  It seems that it is time to move to something smaller.

Here is the rub.  The new home or condo may cost more than the proceeds from the sale of the big home in the suburbs. What?  

1. The market has reacted to the demand for large condos and retirement homes by placing a premium on the sales price.  Remember, the Boomers are a tidal wave moving through demographic data.  If you, a Boomer, are thinking of downsizing then so are millions of your fellow 1946-1964 birthday buddies. Simple supply and demand economics at work.
2. Your lovely home is a wee bit tired.  Forty plus years of the same kitchen, with the wrought iron railings, pink carpet, parquet flooring and paneled rec room is telling the story.  Although you have house size you have a house waiting for updating and renovations.  Your home is not competitive.  It is not giving Buyers what they want in updates.
3. You want to move but you are certainly not going to settle for apples to apples.  Your tastes are now refined and you want granite and a bungalow backing on a golf course with grounds keepers or the whole top floor of a condo in the downtown area.  You are selling a MacIntosh apple to buy an organically grown Star Fruit.   Would you be happy buying the little bungalow down the block from your current home with the need for the same updates as your current home?  Would you be happy with the location?   No?  

After finding out that their home is not the gold mine that they hoped for, many potential Boomer Sellers make the decision to stay in their current home. In some cases, the Boomer will update the family home, adjust the buying expectations and make the move at a later time.  

Photo Credit:  UK Baby Boom and Bust by David Willets

 

Valerie Zinger  

valeriezinger@gmail.com 

613-859-7759

  

In Mike Coopers post on the 'Short Sale of Convenience' he touches on what I believe to be an important but controversial subject, strategic default (ending in either short sale or foreclosure).  I was most surprised by the vast majority of comments concluding that anyone that can afford their mortgage payment on an underwater home should 'do the right thing', stay in the home and honor the commitment.  Perhaps my views are in the minority, but the arguments against strategic default are based on perceptions of the legal, moral and ethical issues of what still appears to be a poorly understood subject.

Is it OK to 'Walk Away'?

Is it ok to walk away (short sale or foreclosure)? ie; deliberately default on an underwater home without a financial hardship?  While some would argue that owning a grossly underwater home is a hardship, and I would agree, I am referring to an owner/borrowers that can afford the home at the existing mortgage payment.

I used to feel that borrowers had the legal and ethical responsibility to honor the debt.  It was your choice to buy a home and borrow the money, you made the commitment to others, you received the benefit and therefore you have the legal, moral and ethical responsibility to repay.  Actually, I still feel this way under normal circumstances.  I believe there are moral and ethical implications of a promise to repay a debt.

That said, however, I believe that the circumstances of the current mortgage crisis were not legal, moral or ethical to begin with.  After a great deal of research about the causes of the mortgage meltdown, I have come to the conclusion that qualified borrowers that purchased during the boom were victims of massive abuses by investment banks in the mortgage and real estate markets.  Trillions of dollars were lent to unqualified borrowers because the debt could be packaged and sold as a triple A security to investors worldwide.  The reason lending standards were lowered so drastically was to create more debt.  It didn't have to be repaid, just last long enough so it could be quickly packaged and sold to unsuspecting investors.  In fact, some of these same investment banks would then purchase Credit Default Swaps from AIG FP and profit again upon the failure of the security they had just sold as the ultimate in safety.  Pension and retirement funds, as well as private investors around the world having faith in the US ratings agencies and stability of the US mortgage and housing markets, purchased trillions of dollars in subprime Mortgage Backed Securities and Collateralized Debt Obligations (CDO's).  They were lead to believe that these were investment grade securities backed by the relatively stable US housing market.  With T-Bills paying 1%, investors were desperately searching for investments with higher yields that could outpace inflation.  

Wall St. Magic: Turning Subprime Loans into a Triple A Security

Wall St. had discovered a modern alchemy by putting a veil around subprime loans and getting them rated Triple A.  Lead could truly be sold as gold.  However, they needed more lead, so the bar to qualify for a loan was lowered drastically.  As a result of these 'fog a mirror' lending standards, genuine, qualified borrowers were forced to compete for homes with borrowers that would never be able to repay loans.  With an abundance of money in the mortgage market and a mushrooming population of artificial homebuyers, prices naturally skyrocketed.  It was a false and unsustainable housing economy.

The more conservative among us would argue that Federal policies on affordable housing pressured banks into making bad loans as the source of the problem.  There were clearly pressures and expectations by bank regulators to promote certain, more speculative categories of loans.  In my opinion, while this compounded the problem, it was more of a plausible distraction to the greater abuse by investment banks.  The governments involvement made the increased availability of mortgage credit less suspicious and the rapid expansion of the housing market a credible event.

Regardless of whether you prefer to blame Wall St. or Washington for lending to people that could never repay, the housing collapse was not a result of responsible borrowers that simply bought a home at the wrong time.  It was deliberate fraud and reckless abuse of a treasured American institution.  Our industry, and in fact our entire economy, will take many years to recover from the damage that has been created.  Many, homeowners will not recover financially in their lifetimes.  The SEC complaint for Fraud against former Fannie Mae and Freddie Mac executives is hopefully just the beginning.  I believe there should and will be more civil complaints as well as criminal indictments.

So, what should we expect as legally, morally and ethically appropriate from a homeowner that purchased a home under legally, morally and ethically corrupt circumstances?

Sacramento has thousands of families still trying to do the 'right thing' in homes that are $100k to $200k underwater.  In my opinion, these owners need to do the math and really understand the financial impact of their decision to stay or leave.  It is a decision with serious consequences... a choice between bad and worse.

For instance, an Elk Grove homeowner that bought a home in 2006 for $500,000 that is now worth less than $300,000 and still owes about $450,000 will be financially worse off by about $400k to $500k over a twenty year horizon if they choose to 'do the right thing' by traditional standards.  This amount of money will change the character of their lives, their children’s education and their retirement.  Is it reasonable to expect millions of Americans to sacrifice to this degree when the creation of the debt was under questionable circumstances?  I think it's time to reevaluate what 'the right thing' to do is.

It's Time To Examine What Really Happened

I'm surprised so many in the real estate and financial services industries are so indignant about homeowners walking away.  How much remorse and contrition should we expect from a homeowner that has been robbed because they had faith in the American Dream of home ownership and the financial and government institutions that make it possible?  We played a role in this fiasco.  I think we owe the clients we serve a better understanding of what happened and help them face a bitter financial reality.    In my opinion, this wasn't done by the homeowner; rather this was done TO the homeowner... and the taxpayer, and millions of investors all of whom simply had too much faith in the system.

For anyone unfamiliar with the underlying causes of the mortgage and housing situation, I would recommend "All The Devils Are Here", "The End of Wall St.", "The Big Short" and the documentary "Inside Job".

While I am not trying to release anyone from their role in the housing collapse, including Realtors, Mortgage Brokers and the homeowner, I would say any homeowner that has stuck it out this long, overpaying for housing this many years, has demonstrated a more than reasonable commitment to honor the debt.  In the final analysis, it’s time for us all to look deeper into the root cause and hold the real culprits accountable.

 

Bill Joyce

Broker

DRE #01419060

www.SacramentoBill.com

www.Sacramento-Home-Search.com

www.BetterHomeLessMoney.com

 

 

 

 

One of the most frequent questions I get from homeowners who are selling their home is "What types of flooring will have the best return on investment."  I also have many real estate agents and home stagers asking me this question, so I know it's an important issue, especially if you intend to sell your home now or in the next 2-3 yrs. I work with a lot of new homeowners right after they close on a home, so I see all the changes they make + I work with a lot of customers and stagers who are putting their homes on the market.

Also, I'm seeing a trend toward fixing up the home 2-3 years before homeowners intend to sell. I think this is really smart as you get to enjoy the improvements you make + sell at a higher value. It also helps you balance out your expenses over a longer time period.

Disclaimer:  Of course everything needs to be evaluated in the context of the condition of the home and its neighborhood. The "standards" are different based on what you are comparing against, but here are some general guidelines.

 

1. Sanding and refinishing existing hardwood floors is almost always your best investment. If you have hardwood floors, you are in good shape - hardwood sells and it helps define the value of your home. If you have hardwood floors, and they are beaten up, your first consideration should be to refinish the floors. Most real estate agents anecdotally tell me that you will get your investment back three fold on this...and, it makes sense.

First, refinishing your hardwood floor is not that expensive...and usually costs less than people think. It is amazing how much better your home will look if you refinish the floors. You have the option of changing the color or leaving the same color. Lighter colors make the space look larger and more airy and informal; darker colors are more dramatic and give the home a more formal and sophisticated look. Satin finish is usually the preferred sheen (90-95% of my customers choose this) and it tends to show the scratches less than a semi gloss finish.

Second, if you have pet stains in the hardwood, they can usually be fixed by replacing these sections and weaving the hardwood in, and after they are refinished, you will never even notice the new pieces (assuming you hire a professional).

Third, if you have hardwood underneath your carpet, by all means, rip up those carpets and refinish the hardwood...you have just found a gold mine. Hardwood sells; very few customers want carpet...not to mention that your carpets are probably dirty and may include your smell...and the buyer will want to rip those out anyway. And, believe it or not, it is almost always less expensive to refinish your hardwood than to recarpet. A potential buyer who sees carpet is wondering "how much will it cost to rip out the carpet and add hardwood." This factors into whether or not they even make an offer not to mention how much that offer is for. So, if you have hardwood under the carpets, show it off...and you will automatically improve the value of your home and how many people are willing to make an offer. It is usually a no brainer.

Fourth, if your floors are beaten up and you don't refinish them, many will assume that you don't take good care of your home, and that they are likely to find other hidden issues during the inspection.  

 

2. Add hardwood flooring to key rooms, if you can afford it. Most homeowners in Westchester NY strongly prefer hardwood for the main living space or common areas such as living room, dining room and family room. Many prefer hardwood for the master bedroom, too. If you have hardwood in those areas, you are set, if you don't, you may want to consider investing in hardwood for those areas - provided you have the budget to do so. You will definitely get back that return on investment - probably at least two fold. I understand that many selling their home do not have this luxury, but if you can afford it, by all means invest in the hardwood flooring (rather than carpeting) for those areas.  

 

3. If your carpets are dirty and/or smelly, it's usually best to replace them. Please note that trading up to hardwood, will usually get you a great return on your investment (unless of course you live in an area where hardwood is not the norm), but replacing the carpeting will not improve your selling value. Rather, it will allow you to capture the potential selling price of your home in good condition. It will probably also enable you to sell your house sooner as it will appeal to more buyers...or said another way, prevent buyers from being turned off by your home. My guess is that you will get back this investment and just break even. (But, if you don't do it, you will likely need to lower the price of your home and it may stay on the market longer resulting in another price reduction). Always select a neutral color for carpets as that will appeal to the largest set of potential buyers, and generally lighter is better as it will make the space look larger and cheerier, and it gives you a sense that the home is clean.  

 

4. Kitchens are tricky and it's best to consult your agent and/or a stager for opinions. We have all heard that kitchens and bathrooms sell...and this seems to be very true. But, usually kitchens are the most expensive area of the home and a full kitchen remodel will not give you a full return on investment. I've read many reports on this, and most claim that you get 70% return on your investment. And, this is why it's usually better to invest in your kitchen if you are just moving in or planning to stay put for a while. However, if your kitchen is rather out of date, and the agent is seeing this as a hindrance to the sale, you should consider your options. Sometimes, the agent will recommend that it is not worth it to do anything because they believe the next homeowner will completely gut and redo the whole kitchen (so why invest more money if it's like putting lipstick on a pig?). Other times, it is worth it to make some minor enhancements to either eliminate an eye sore or bring it up to an acceptable level. For example:

- If the there is vinyl flooring and it's coming up, consider adding laminate on top...or potentially hardwood (tile flooring can work too, but it is more expensive and hence usually a lower return on investment).

 

 

- Add a simple subway tile backsplash - if there is no backsplash...or if your backsplash is very taste specific

- Add granite countertops, if you have laminate countertops and they are falling apart.

- Add new up to date energy efficient appliances

Most likely, you will break even on these minor upgrades...but more importantly, you will have a much more sellable asset, as you've been able to eliminate major eye sores that scream money money money to the buyer. You want the buyer to feel that they can live with the kitchen as it is for a few years. But, as I mentioned, kitchens are tricky business, and there is no one size fits all since there is a whole array of how the kitchen can look and this all needs to be in the context of the neighborhood. Your real estate agent is the best judge of what is needed and what will sell. If you do make changes, make sure that they a neutral and not taste specific...remember, you are trying to appeal to the widest audience.

These are my top recommendations on flooring improvements if you are selling your home soon...or in 2-3 years.  Every situation is different, but these tend to be the items that usually tend to provide the best return on investment.  Please consult your real estate agent for advice here as they know your area and the other comparables on the market best.

Feel free to call The Flooring Girl, if you have any questions about Flooring in Westchester County NY 914-937-2950.

Hardwood Flooring - Carpet - Tile/Natural Stone - Laminate - Refinish Hardwood - Backsplashes

Debbie Gartner, President and Owner

"The Flooring Girl"

Floor Coverings International: Westchester NY/Stamford CT

You can download our free flooring guide.  Or, visit our flooring selector - 2,000 options for hardwood flooring, carpet, tile. Call us for a free estimate 914-937-2950. 

"We bring the store to your door."

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Late Tuesday after, CNBC reported that the National Association Of Realtors released a statement acknowledging that their home sales reports have been OVER-COUNTED since January of 2007. That means everybody who relies on REALTOR reports for the US housing markets now knows that things are worse than they previously thought. Who would have thought such a thing could occur? [insert dripping sarcasm tone]

All the sales and inventory data that have been reported since January 2007 are being downwardly revised. Sales were weaker than people thought -NAR spokesman Walter Malony

Basically, the NAR does not cull all of the home sales data that is readily available from the MLS systems nationwide and report from these figures, they gather a sampling and then have a benchmarking algorithm that supposedly provides a fair interpretation of the overall market. This was a great system to have in 1950, when all MLS's were paper-based, but perhaps they should consider something a little more current.

Can We Really Trust NAR?

Long-time readers of the Tallahassee Real Estate Blog know that I report the NAR spin each month that Lawrence Yun produces in order to tell the public why the most recent set of housing market data is good news. While I understand they are the lobby for the REALTOR organization, I do not think an organization (My Organization!) should put themselves in a position to purposely misguide its 1+ million members who need to have an awareness of the market so as to council their clients.

For readers who do not really follow regular housing reports, each month it goes something like this:

On Board The NAR Titanic

Ship Hand: Captain, Icebergs ahead!

Lawrence Yun: It's a sunny afternoon, it's a great day to be cruising the Atlantic!

Ship Hand: Captain, contact imminent!

Lawrence Yun: Actually, icebergs exist all through this area, it's a great day to be cruising the Atlantic!

Ship Hand: Captain, we've struck an iceberg. We're taking on water!

Lawrence Yun: All ships get wet, it's a great day to be cruising the Atlantic!

Ship Hand: Sir, we've run out of life boats ...

Lawrence Yun: The Titanic is un-sinkable, it's a great day to be cruising the Atlantic!

OK, perhaps a bit over-stated (pardon the pun), but I gave up trusting NAR long ago. I know that the Tallahassee real estate market is a relatively small market (when compared to NYC, Chicago, etc.), but we have been a fair bellweather for the rest of the housing markets and I will trust what I can measure. I not only look at data from the Tallahassee MLS, but I also compare it to the Tax records which records all of the property transfers in our housing market. This means that the reports I pull are as accurate as can be prepared.

Our pledge at the Tallahassee Real Estate Blog is to provide charts, graphs, and analysis of the housing market, without the spin. You can always leave comments below each blog post, and we make certain to follow-up with any questions. If you are in a position to be selling a home or buying a home, we can help you apply this market knowledge to your tactical advantage when it comes time to "making the best deal possible."