If you are among the tens of thousands of people struggling to pay your mortgage you may be wondering if a Short Sale is the answer to your problem. There is no general answer that applies to every situation but if you are aware of what a Short Sale is and its benefits and consequences you will be able to make a more informed decision for yourself.

Short Sales sometimes occur

• When it is financially impossible to pay-off your mortgage and selling it will not raise enough money to pay it off
• When a drastic change in lifestyle requires that you sell your home and/or relocate.
• When a death in the family or catastrophic illness changes your household income significantly
• When the terms of your mortgage change (interest rate increase or balloon payment comes due) and you are unable to abide by the new terms.

Steps before considering a Short Sale

• Contact your bank to see if there is a possibility of restructuring the loan to make it more affordable for you.
• Contact the local Housing Resources organization to find out if there are financial remedies that you may be eligible for.

Once you have exhausted the possibilities for alternatives to Short Sale it is time to contact a Realtor and put your house on the market. Make sure you find out if your Realtor uses a negotiator - the negotiator makes the transaction much smoother and is most suitable to negotiate on your behalf. The commission for the sale and the payment for the negotiator will come out of the proceeds from the sale.

Once an offer comes in on your property and you accept it, the offer along with a packet of your information is submitted to the bank. The packet will include such things as

• Your last two years of W2s
• Your last several bank statements for any accounts you hold
• Proof of other obligations (child support orders, judgements, other loans, etc.)
• A financial report (laying out your monthly expenses vs income)
• A Hardship Letter (a letter explaining why you are unable to meet your obligation and why the bank should release you from your mortgage obligation).
• The offer (usually on a Purchase and Sale contract).
• Proof of the buyer’s ability to finance the purchase

The longest wait follows the submission of all the above paperwork but EVENTUALLY the lender will either accept the offer, counter the offer or refuse the offer. The important issue for you as the seller is how they will handle the balance of the loan. Will they release you from it entirely? Will they seek a reimbursement of part or all of it? Talk to your Realtor about making the sale contingent on you being released from all outstanding debt with the note holder.

 The closing will take place as it would with a traditional transaction and you will be required to transfer your ownership to the buyers.

Once the Short Sale is completed it will be reflected in your credit history and may affect future funding availability. It is important that you know that. The impact is not nearly as severe as it would have been if the bank foreclosed on the property rather than participating in a Short Sale but it is reflected as a debt that will not be satisfied.

If, after reading this article, you think a Short Sale might help you out of your situation contact me or another Realtor to talk about specifics. If you are outside of Rhode Island I still may be able to find a Realtor who can assist you and who has experience with short sales.

If you have been paying attention to the real estate market lately you have read and heard a lot about Short Sales. A Short Sale occurs when a home-owner can no longer manage the mortgage and upkeep of the house but can not make enough money selling it. The home-owner’s real estate agent helps the home-owner set up the Short Sale.

From a buyer’s point of view a Short Sale can present an opportunity for a bargain but before you charge headlong into it, there are some things you need to keep in mind.

• Red-tape Can Make You Blue- In order to submit an offer on a Short Sale, most banks want a Purchase and Sales contract rather than an offer (a difference of 3 or more pages). They also want proof of funds or at the very least a pre-approval.
• The Waiting is the Hardest Part - Once you get the home-owner’s agreement on price your offer is forwarded to the bank for a required approval. This step can take an exceptionally long time. I have waited up to six weeks for a response (not unusual). So if you have a fairly firm time-line for buying then Short Sale transactions may not be for you.
• What You See is What You Get- While you are provided disclosures with a Short Sale (in most cases) and you have an opportunity to have inspections performed on the property, the bank is not in the business of re-negotiating after inspection unless there is a SERIOUS impact to value or safety. When you make your offer, take into consideration all things that cause you concern. If an inspection shows deficient conditions that you dont want to correct and the bank will not re-negotiate (or you don’t have the required time to re-negotiate before closing) you can ask to be released from the contract.
• Fees Required - Keep cash on hand or fold it into your mortgage (when feasible and allowable) because the bank will not pick up closing costs and neither will the seller in most instances.

So to sum it up, to get a great deal on a Short Sale Transaction you need good financing, closing costs, and patience.

There are other concerns you may have based on your unique situation so it is always beneficial to work with a Realtor who has experience working through Short Sales. In Rhode Island you can call me - Kirsten!

Have you ever prodded on wood with a finger nail or hard object and had the wood give way? The first thought for many is wood boring insects (which it may very well be) but there is an alternative danger that you may need to minimize - dry rot.

Dry rot is caused by a fungus that enters wet wood. As the wood dries the fungus continues to consume and grow until the wood loses its integrity. The bad news is, once the rot is significant it can not be remedied and must be replaced. The good news is that you can prevent dry rot and when it is caught early enough it can be stopped and repaired.

First let’s talk prevention. The wood that is most at risk is that which is unprotected. If you have exposed wood - shingles, eaves, facia boards, attic roofing and flooring, etc. make sure it is treated - seal it, paint it, etc. When your house paint starts to chip off make sure you keep an eye on exposed areas and seal them if they do not repel water.

Okay, you have done the prevention but there are a few questionable areas - water seems to be absorbed quickly, the wood is softer than usual, the wood is darker than usual or has a white chalkiness to it. It is now time to call a contractor evaluate the situation and provide remedy.

It is important to check exposed areas on a regular basis. Once each season is best but twice a year is imperative. If you have an attic that you regularly use or a free standing garage where the roof is exposed make a point to check those areas.

As with all home maintenance issues inspection and maintenance are critical to the longevity and successful return on your investment.

In my last post I broke that bad news that in this market you don’t get 100% back on your home improvement. Further, expectations that you will make a profit are hardly ever realized. But there is good news in some cases and today’s post will illuminate a few of them.

Two is Better Than One

The most obvious case is the second bath. If you own a home with more than one bedroom and only one bath you will benefit from adding a half-bath (commode and sink) or a full bath (this can be commode/sink/shower if you have space limitations).

There is a very desirable community that I work in where I realized this fundamental value. Two similar houses situated in similar environs sold within two weeks of each other. The one bath home sold for $18,000 less than the two bath home. That is about a 6% difference.

I have clients who are incredulous about this improvement. “When you have two bedrooms, why do you need two baths,” they ask. The answer is two-fold. You will be glad you have that 2nd bath when you entertain but much more significant - the people who are in today’s market (and tomorrow’s market) expect to have more than one bath. Given the option they will spend 4-6% more for a second bath, slightly less for an additional half-bath.

Scaling Back

The numbers are less concrete for adaptations to small cottages and capes. In  homes that have small rooms that are not easily opened up the design and decor of those rooms is critical to perceived value.

The first step to increasing value is downsizing furniture and appliances. Subtle lighting, strong vertical lines, and height of accessories are the easiest and least expensive improvements. Short heavy furniture, stocky tables and bookshelves, oversized entertainment centers, overstuffed couches and chairs are all harmful to the flow of a small home. If you can not part with your furniture then just store it and replace it while your home is on the market.

Now to the construction. Before you begin contacting builders and buying appliances bring in professionals to make recommendations for creating space. Have a kitchen and cabinet store professional create plans for layout and build-out. Talk to painters or paint stores about color tricks to increase perceived space. Most furniture stores have designers who can help you plan for appliances and furniture that are more vertical than horizontal and look like they are still substantial. Open window areas by using  minimal treatments.

So to recap, choose paint, furniture, cabinets, traffic patterns, appliances, accessories, and decor with an eye toward vertical expanse and small footprints.

Building Out

Another remedy for smaller living spaces is the outdoor room or outdoor living space. This works best in more moderate climates but is almost always a welcome addition. Most often outdoor living space is designed on a deck or patio by using traditional interior-design techniques with exterior quality fabrics and furniture. First set your budget. The budget rule is guided by the value of your home and the impact the extra space will have on value. Once you have a budget, it is time to create a concept of what you want the space to look like - will it be an entertainment zone (think grill and bar) or a conversation zone (think circular movement, comfy seating, center feature (fire pit, coffee table, etc.). If you choose you can add propane heaters for extending the season but that step is completely optional. It is critical that you stay within your budget. The more you overspend your budget the less you are likely to recapture the expense by increasing the market value of your home.

Coming Up Next

In the next post I will address kitchens and miscellaneous upgrades. Stay tuned!

I was struggling to come up with a relevant topic that would appeal to home buyers, home sellers, seniors, investors, and/or home owners who prize their home as an investment and let me tell you it is getting more and more difficult! But I came across a topic that I use when teaching and decided it could form the basis for a very helpful article relevant for the current housing market. I hope you think so too!

Getting Started on Home Improvements - The Necessary Stuff

This article does not address the necessities of home ownership. The number one rule of making the most of your real estate investment (the home that you live in) is Maintenance Deferred is Maintenance Multiplied. In other words, you can pay now or you can really pay later. When your house has a leak, fix it immediately. When your exterior is compromised - it needs paint, you see cracks in the foundation, you see rotting wood or what you suspect is evidence of wood boring insects - you need to fix it as soon as possible (or sooner). When you need a new roof, get it. Okay, you get the picture. Now on to optional home improvements and how much they will contribute to your home’s overall value.

Making the Most of My Home Improvement Budget

True confession time - Designed To Sell is one of my favorite shows! I just love to see people able to do the things that I dream of doing at my clients’ houses. Having said that I have to debunk a myth that you might believe from watching the show - In general in this market you will not recoup the costs you spend on improvements…..there are exceptions in specific cases (adding a second bath to a one bath house for example) and we will discuss those in the next post. Until then, lets talk about what you can expect.

The Basics

There are some not-so-glamorous updates that will increase your home value by more than 50% of what you spend in most cases (in other words you will get between 50 and 70 percent  of what you spent on average back in value). Those updates include Furnace and HVAC updates (in most parts of the country) window replacements for single pane or wood casement windows installed prior to 1978. Roofing, gutters, downspouts and fascia boards where the current condition is deteriorating or noticeably aging is a good improvement as is paving a stone or dirt driveway/parking pad.

The Biggest Bang for Your Buck

Adding Space

Now on to the visible quality of life stuff. In land where lot size is a premium (populous areas of the country) building a second story can add significant value a second - less valuable increase in the same areas is finishing a walk-out basement. Note: bumping out dormers does not count. With regard to finishing the basement note that it needs to be a walk-out basement to minimize the fact that it is a basement. Creating more space by finishing a basement that is not walk-out will elevate your value by virtue of the additional space.

Adding Character

If your home does not have a master suite then creating one can be rewarding. This presumes that the suite will include a bath (a half-bath at the very least). Walk-in closets or his-and-hers closets are also expected in master suites.

Creating solariums or 3-season rooms can also be of some value.

The big showy change is of course updating your kitchen. If you have a dated kitchen then an update is a great idea. But if you simply change the character of a sufficient kitchen you will get very little of your money back.

Entertaining

A deck is a great addition to a house, a second option is a patio with a grill station. Both of these options belong to a category called outdoor rooms or outdoor living spaces. In more temperate climes these improvements can net an even better portion of the return.

Necessity and Beauty

Bathroom updates can be rewarding. If your bath is large then updating the cupboards, lighting, vanity, flooring and fixtures (including a larger tub or Jacuzzi) is what is called for. If you have a closet-like bath then move toward expansion or at the very least creating a sense of more space.

Other Improvements

Under specific circumstances there are other considerations for improvement. Adding a home office, finishing an attic, creating or enlarging a family room, or one of several other improvements can be useful to value as well. We will discuss those in the next post.

The Bottom Line

Whether you are preparing your house for a quicker sale or planning on living there several more years there are some basic rules of thumb that can guide how you do improvements and whether to do them. First, do as much of the work yourself as you can - a great deal of cost goes into labor and that is never accounted for on improvement shows like the previously mentioned Design to Sell.

Make sure that if you splurge you splurge on things that others will find valuable and desirable. Find ways to cut costs wherever possible. Do price comparisons. Go to a builder’s warehouse to see if they have similar materials at lower prices. Set a budget and stick to it. Details are VERY important. A crooked cabinet door that you think no one will notice can have a major impact. If you, like me, are good with the big stuff & horrible at the precision stuff you need to leave the precision stuff to someone who can carry it out!

In my last post I created a simple budget form for you to use. If you fill it in you will probably end up with a surplus and wonder to yourself where that surplus is at the end of the month. That’s why most people will need to track expenses for about six weeks to check your calculations. While you are tracking try to stay within budget while not deviating from your usual activities.

Don’t analyze your spending until the end of the six weeks. When you get to the end of tracking place each expense into its budget category but keep your original tracking nearby.

Where you can you should try to pare down expenses. In any category where you underbudgeted you must do one of two things - transfer money from an over-budgeted category  or cut down on the spending you are doing in the underbudgeted category.

What to Watch For

The first flag in your spending is the “Latte Factor” - I wish I could claim that name but I think I got it from Suze Orman. The Latte Factor accounts for the daily luxuries that you afford yourself (like a daily latte). One at a time they seem to make a very small dent in your budget but over the year they can add up to a mortgage payment!

What are your Latte factors? Soda pop? Coffee? Cigaretts?

The next step is to look at your repetitive spending of non-essentials - CDs, clothing, comics, videos, etc. Non-essentials are often, but not always, impulse buys. How can you regulate your spending habits in the non-essentials by breaking the impulse to shop/consume?

In the next budget article we will discuss interests, goals, and implementation!

This is the yearly budget

Today I took advantage of a balmy January day to cut forsythia boughs. I submerge them in water in the house and within a couple weeks the boughs will be covered with yellow blooms. I did the same with Keria Japonica. Forcing flowering bushes (as this is called) is one of the ways that I bring Spring into my home. I also bring out my Amaryllis bulbs right after Christmas so that they will bloom in February (it takes about 6 weeks).

I am interested in what other people do to create the promise of Spring in their homes; so how about you? What do you do? Submit a comment and I will post it with this article.

September

• Make sure your leaf blower, leaf eater, or other fall equipment is in good working order.
• Order/purchase your spring flowering bulbs and bulb food (ask a reputable nursery what is best for you soil and climate).
• Stop deadheading your flowers so they will know to prepare for winter.
• Replace your furnace filter.
• Last chance for landscape changes (great time to plant bushes & trees).
• Examine exterior window sills and frames and make any repairs that need to be made. Re-caulk/Re-glaze where needed.
• Clean and seal the deck (Early before the leaves start falling).
• Make sure your chimney flue opens and closes as it should

October

• Last chance for exterior painting - examine exterior for touch-up and repair needs.
• Complete annual maintenance on your winter equipment (snow blower, snow plow, pellet stove, etc.)
• Have an energy audit and complete the recommended improvements.
• Test your smoke and carbon monoxide detectors and make sure they are in good working order. (I hope you are already change the batteries every time you change the clocks!)
• Clean gutters and downspouts.
• Clean out your garage and make sure there are no hidden defects that need your attention.

November

• Store patio furniture and remove leaves and debris from decks, patios, and stoops.
• Spray expandable foam in any separations between the foundation and frame of your home (a huge heat drain).
• Change out screens for storm windows and doors.
• Check the efficiency of your bathroom vents (a winter’s worth of moisture from your shower can wreak havoc on your home).
• Clean your dryer vent and the vent cover it is attached to.
• Clean out window wells and cover them with domes, plexiglass or plastic.

December

• Excercise caution when putting up holiday lights.
• Get someone to spot for you
• While you are up there, check your gutters and fascias for debris, deterioration, etc.
• Stay warm!

I gave up making resolutions a long time ago. I assume I don’t have to explain why. So I see this post as more of a to-do list - you know, all the things that you should do as a home owner but some how you never get around to doing it. Call it a Resolution to Care for Your Home or a Year-Long To Do List but make a commitment to keep it over the next year.

January - February

• Now is the time to start planning your landscape efforts for the coming season. Walk around your yard, make a map of what you want to do and when you want to do it.
• Since you are stuck inside most of the time, use this time to get your deep cleaning and drudgery work out of the way:
• Clean out your cupboards - and set some things aside for the food bank - wash them and reorganize.
• Clean out your junk drawer.
• Wash all your window treatments so that you can make the most of the little sunshine we get this time of year. If you need to/want to replace any of your linens, this is the time to do it! White sales are everywhere from mid-January to mid-February!
• Check windows, sills, doors and frames for areas that need to be re-caulked or re-sealed.
• Treat your wood floors to a deep clean and polish - there are a few great products on the market that will help you do it over a series of 2-3 days.
• Dust ducts, ceiling fans, the vents in your bath and above your stove.

March

• Need an excuse to open your windows and let in the little hints of spring? Paint a room or two.
• Keep an eye on your gutters to make sure they are not backing up. There are parts of the country (including New England) where the freeze-thaw pattern can wreak havoc on your roof and fascia boards.
• Clean out your garden for the coming season (I leave flower and grass stalks, seed heads, etc. for winter interest and animal benefits)
• De-thatch and Seed your lawn

April

• Fix leaking faucets
• Clean gutters and downspouts (if you didn’t have to do it March).
• Check for signs of termites and carpenter ants (pay particular attention to anywhere that fencing or other exterior wood sits against the frame of your house).
• Do a maintenance check of your heating, gas, electric, water heater
• Have your chimney cleaned and inspected
• Wash your windows

May

• Check trees for damaged or diseased branches and those that are too close to the roof, wires, etc. and have them removed
• Reseal driveway
• Plant summer-blooming bulbs (lily, gladiolus, etc.)
• Add compost and mulch to your gardens
• Check your windows and screens for minor repair and maintenance needs and do them.

June-August

• Keep mulch away from the foundation of the house and the base of trees to prevent insect damage.
• Keeping your lawn de-thatched is a great natural grub deterrent - they feed on the thatch.
• Get your furnace serviced

See tomorrow’s blog for September - December Resolutions - I have to keep you coming back don’t I?