Buying and Selling Real Estate in RI

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?

During these very short winter days you may be counting the days until winter vacation. While you are shopping and packing so that you are prepared, take some time to prepare your home for your absence as well.

The first things potential burgulars notice:

• Mail - Either stop your mail or make arrangements for someone to get it daily
• Newspaper - Stop delivery or make arrangements for someone to get it daily
• Sidewalks & drive - Contact a service or neighborhood entrepreneur to shovel/clean after significant snow or ice accumulations
• Set timers on lights in your house to mimick your usual pattern (downstairs/main living area lights in the evening and upstairs/bedroom lights later at night).
• Other considerations - talk to your neighbors:
  • invite them to have visitors park in your drive if your car is gone;
  • ask them to keep an eye out for strangers, unusual behavior, unexpected visitors;
  • give them a key in case there is an emergency need for access.

Maintenance Issues:

• Warm enough for safekeeping - if you have a programmable thermostat you can fine tune how you heat while you are gone. If not you can set your thermostat to a lower temperature but be mindful that your house needs a minimum heat so your pipes dont burst. Not sure of that minimum temperature, call your utility company.
• If you have pipes that have frozen in the past, consider wrapping them with insulation and/or if there are in an enclosed area (like the cupboard under the sink) open the cupboard doors so that the area receives more heat.
• The living things you leave behind - I am going to assume that you have made provisions for pets so I am talking now about plants.
  • Many tropical plants, vining florals like bougainvillea and camelia, african violets, citrus, etc. require a warmer climate so when you are programming your thermostat remember those tropicals.
  • If you have tropical forest plants, those that need humidity you can mist the leaves lightly and slip a plastic bag loosely over the plant or you can set the pot atop a saucer of rocks that has been filled with water (the pot itself should not be at all submerged).
  • If you will be gone for a prolonged period it is best to have someone come in and water for you. If not you can use many tricks to sustain moisture in your more sensitive plants.
  • A word of caution: the most deadly source for houseplants is overwatering so if you will be gone a week or so you may not need to take any extra watering precautions.

Last minute checklist:

• Check the stove, oven, coffee pot, toaster oven to make sure they are turned off.
• Unplug hair dryers, curling irons, other small appliances (it will save you energy and ensure that they are turned off)
• Make sure the lights that are on timers are set to ON or the timers wont work.
• Check windows and storm doors to make sure they are closed and latched.
• Take out the garbage.
• Check all constantly running appliances (fridge, freezer, sump pump) to make sure they are working correctly - my sister-in-law had unplugged the freezer temporarily to use the outlet for something else, forgot to plug it back in and came home to a smelly mess!
• If you have a pet door, latch & seal it.

What are your tricks and tips to prepare for a winter vacation? I would love to hear about them and share them with other readers!

Is this the year that your Adjustable Rate Mortgage interest rate goes up? Are you struggling trying to pay your bills, perform maintenance on your house and make your  mortgage payments? Have your property taxes and insurance gone up throwing your budget into free-fall? I have some tools and tactics that may help you out of your quagmire.

I know that being house poor can feel so overwhelming that you just want to run away from the whole situation. Maybe you think that declaring bankruptcy is the quick and easy solution. I assure you that bankruptcy is neither quick nor easy and will follow you for years. You might be considering walking away and  abandoning your home and mortgage (professionals call this the “friendly foreclosure”). Unfortunately you can walk away from your home but your debt and obligations will follow you down the road.

You are not powerless!

You can’t make your problems disappear but with a little effort you can get yourself in a better situation. The first options will help you to stay in your home but will give you some financial relief and if those efforts are not sufficient for your situation I have also given you a road map for selling your home for less than your mortgage amount (we call that a Short Sale). Each of these efforts requires a little effort on your part but you can definitely do it! If you have any questions as you are reading, drop me an email or post a comment and I will be happy to address your questions.

Your Mortgage Payment is too high because of an interest rate increase

The President recently passed mortgage relief legislation that freezes interest rates. Both chambers of congress have passed legislation to move adjustable rate mortgage (ARMs) to fixed rate mortgages. To see how this can impact you, contact your federal legislative officials’ offices (your Senators or Congressman), the Federal Housing Administration, or if you have a community/regional housing authority they may be able to point you in the direction of local efforts.

In New England there is collaborate relief fund spearheaded by The Federal Reserve Bank of Boston and the five leading banks in New England. The banks have established a Web site at www.MortgageReliefFund.com. At that web site you can get details about the program and find out if you might be eligible. The site also includes phone numbers to call if you want to speak to a professional about your unique your situation.

You are unable to keep up with home-ownership costs

The first and best solution in most cases is to talk to your lender. If you can no longer make your payments for whatever reason you may be able to restructure your loan and achieve a lower interest rate. Your lender is going to want some specific data from you so before you call you may want to get together your last W2, your last few paycheck stubs, a letter detailing your situation, a current bank statement or two and your mortgage document(s). The reason lenders will often work with you or approve a Short Sale (see below) is that it will be far less costly for them than having to foreclose and resell the property.

If your lender is not able to restructure your loan it may be time to get a Realtor involved. The Realtor can work with your lender to set up what is called a Short Sale. In a short sale the lender agrees to allow the sale of the property for less than the debt. For example, if your mortgage is $250,000 but you can only get a $200,000 offer on your property, the lender can approve the sale and can write off the remainder of the debt. The lender will review the purchase and sales agreement, the financing of the offeror, and the conditions of the sale and will either approve the sale or counter-offer.

When all else fails you can ask your lender to approve a voluntary or friendly foreclosure whereby you voluntarily give up ownership of your home to satisfy your mortgage debt.

Find an Ally

Finally, know that you are not alone. Find an ally who has been down this road before. There are many sources for your ally, as you are making the contacts recommended above you may find one naturally. If you do not, call on a Realtor. If you live in Rhode Island, call or email me. If you are in another part of the country I may be able to refer a Realtor to you or you can ask those around you. Find a Realtor whose primary intent is to help you to find your optimum solution. If you want to stay in your house your Realtor should be able to advise you and advocate for you if necessary. Realtors can do more for you than sell your home!