Why Experts Urge The “5-Year Rule”

Even some veteran renters are looking at today’s housing market and wondering whether it’s time to start a home search. With prices and mortgage rates as low as they are while rents continue to move higher, the numbers point to home ownership as an ever more obvious choice.

But that’s just the quick, back-of the envelope budget equation: monthly rent vs. mortgage payment less tax savings. If this June finds you at the start of your own Savannah home search, many financial advisors recommend that you also consider another rule of thumb – you should plan to stay in your new home for at least five years.

Transaction costs are only one consideration that makes this a good idea. Here are some of the others why it’s prudent to think about the 5-year planning horizon as you conduct your home search:

Financial Safety - Homeowners need to have at least some extra liquidity: funds set aside as an emergency resource in the event of unforeseen loss of income. Affording a home and its maintenance costs should never jeopardize the financial health of your household.  Liz Weston of MSN.com recently asked several experts for their calculations regarding home repairs. Their answer? Plan to spend at least an additional 1% of a homes’ value on maintenance each year.

Resale Value - The significant overhang in distressed homes will likely continue to exert at least some pressure on home values for the near future. If you need to sell your home two or three years down the road, you may come up short when all the moving, transaction, and other expenses are considered. It may be at least that long before the familiar growth in residential real estate value resumes. 

Sanity – Studies have shown that moving is one of the top stresses in life (up there with death, divorce and illness). Personally, I think a well-planned move is a little less dire, but it is true that a happy homeowner is a settled homeowner.  When you’re starting your home search, consider the changes coming to your family in the coming years: New baby?  Child to college?  If you know a move is eminent in the near future, consider finding a home with long-term rental value.  Buy a home that can grow with you and you’ll find yourself much more financially secure…and sane!

The current low prices and 30-year fixed mortgage interest rates aren’t likely to last forever, and that old adage remains true: buy low, sell high.  If you’re looking for a reason to start your home search in Savannah now, call for a serious look at this June’s market.  

Survey Nails Outdoor Living Trends

Those of us who focus professionally on our Savannah real estate trends can vouch for it: outdoor living sells! And depending on what life phase their family is in, homebuyers’ choices tend to follow similar lines.

The 2012 Residential Landscape Architecture Trends Survey confirms again how important those backyard grills and dining areas are when it comes to what most people have at the top of their minds when they think about buying homes.

When potential homebuyers come to us, some of the features highest on their “must have” list virtually always have something to do with outdoor space.   Young families buying homes, for example, are usually pleased to find a grassy area off the kitchen where their toddlers can toddle.  High-profile clients often seek out impressive spaces with great foot-traffic flow for indoor/outdoor entertaining.  Empty-nesters buying homes often come to us seeking the opposite -- less yard with easy- or no-maintenance landscaping.   The point is, no matter what the age or demographic of the buyer, in today’s market, outdoor space sells.

So -- what is hot for those buying homes in 2012? The survey cited earlier is one conducted every year by the American Society of Landscape Architects. This year they came up with some clear winners. According to the survey, top popularity goes to BBQ grill space (97.4%), followed by low-maintenance landscapes (96.6 percent), fireplaces/fire pits (95.8 percent), and dining areas (95.7 percent). 

Not so obvious winners were decorative water elements such as ornamental pools, splash pools, waterfalls, grottos, water runnels or bubblers, and pergolas. Not as popular as they once were? Turf lawns at 50.9%, gazebos at 49.1%, and hammocks at 27.4%.  Go figure!

If you are considering an outdoor remodel before selling your own home, be sure to design with Savannah buyers in mind. Contact us any time for a stop-in -- we’ll be happy to go over the features most clients look for when buying homes today.

Short Sales Rising, Foreclosures Falling

For quite a while now, bargain hunters have been able to take their time combing through Savannah foreclosure listings.  They’ve been looking for the kind of terrific real estate bargains that the last few years have provided -- and there have been plenty. But recent signs show that it may be time for them to step up their efforts.

According to ReatyTrac, the outfit that reports on current real estate activity of all kinds, banks are increasingly leaning toward short sales as a way to handle defaulted properties. There are good reasons why they would prefer short sales over the foreclosure track. You would expect that if that trend is for real, we should see a decline in the number of foreclosure-related notices being issued. In April, that is exactly what happened.

In April, fewer than 190,000 of the notices were reported. That makes it the lowest monthly total in 5 years (and a decline of 5% from March). In other words, although it takes some time for a foreclosure to occur, the writing seems to be on the wall: the high water mark in foreclosures may well have been passed.

Another sign: the average price of completed foreclosures rose from the year’s average of $226,953 to $256,027. Lower supply, higher prices -- if the early trend continues, Savannah foreclosure bargain hunters may soon find themselves having to hunt a bit harder.

There are many online resources that provide foreclosure lists: properties that are in good shape as well as distressed foreclosure properties, pre-foreclosure properties, REO foreclosures and foreclosure auctions. Anyone thinking about taking advantage of the bargains that are still out there (and they ARE still out there) should consider consulting an experienced Savannah agent to help with the process.

First and foremost, we can provide you with a current and accurate foreclosure list. There are many web sites out there that claim to list foreclosed properties, but most of them charge fees for their listings, and sometimes contain little or no contact information for accessing a property (or worse, are inaccurate).  Licensed real estate agents have the resources to obtain an accurate, timely list, as well as the experience in targeting the correct contact people.

Your agent can also be a guide through the sometimes tricky process of purchasing a foreclosed house. Many properties on the foreclosure list have not been well maintained; the lender may try to get more for the house than it is actually worth. If you intend to improve a property through your own sweat equity, our first-hand knowledge of Savannah market values can help you project a property’s future value, too…either as an income-producing rental or to sell for profit.

To get the most bang for your buck, make sure to put your search in the hands of a professional.  

Staging When Stagers Aren’t Around

Deciding to put your house on the market? Recruiting an experienced Savannah listing agent will give you a leg up on the competition.  He or she will know where you need to spend money, and where you don’t. 

A good example is dealing with staging – the ‘show biz’ of the real estate world.  Complete staging is expensive and sometimes just is not practical.  A great listing agent will help you decide whether staging is imperative for your home – and if it is not, will offer some basic fixes to help you work with what you have. 

1. The first stage to set? The front yard. If the street view is untidy or the yard overgrown, you can lose your audience before the performance even begins. Of course, you will keep the lawn cut and fix the fences and gates – but also think creatively. People’s eyes are drawn to color, so adding a few cheerful annuals in pots and hanging baskets and placing them strategically can do wonders. If the front or garage doors are even a little bit chipped or flaking, sand and paint them. If trees or bushes are blocking sunlight from the front windows, take the trimming shears to them. All of this should take no longer than a weekend (and cost less than $150).

2. Buyers are not really just an audience: you want them to be participants. You want them to be able to visualize their furnishings in your space. Professional stagers have a simple arithmetic rule:

Subtracting Furniture = Adding Space

 You add space by removing bulky, old or mismatched furniture. Our listing agents can help you walk through the house and decide what should stay and what should go into storage. Moving them can take about a weekend; cost will be the price of storage (or half of your garage – the next best option).

3. Have you ever walked into an expertly staged home and seen dirty socks hanging out in the bedroom?  Didn’t think so.  Nothing is quite as off-putting as evidence of personal hygiene.  Kitchens, bedrooms and bathrooms need special hospital-clean sparkle. Do laundry frequently, and why not use a stagers’ extra? Light candles, set air fresheners -- and open windows wherever you can.

The market has begun to show signs of new activity, but even so, similar homes are still competing for the same group of buyers. That’s why it is vital that you present your home as favorably as possible.  Staging decisions are a good example of how we, as listing agents with comprehensive knowledge of our Savannah market, help you maximize your home's potential. It is one of the ways we work hard for you - - just part of the complete service we are proud to offer. If you are considering listing a home in the Savannah area, call anytime for a consultation!

Savannah Owner Financing: Good Deal or Not?

 

Bear with me on these numbers: they are meaningful to Savannah home buyers and sellers alike. One of the most meaningful calculations The National Association of Realtors® makes is the Housing Affordability Index. An Index value of 100 means that the average (actually, ‘median’) family’s income is exactly the right amount to qualify for a typical 20% down mortgage on a median-priced home. It would be tight, but doable.

That’s what a “100” means. In the latest report this spring, the Index across the whole country was higher than 200! … 204.3, to be precise. Up there in “never-before” territory. And it’s been there since January!

Yet banks are still not lining up to approve mortgages – for the number of reasons we’ve talked about before. It’s why some buyers and sellers have started to look for alternative ways to sell and buy a home; and begun to look in the “for sale by owner” (“FSBO”) realm.

Savannah homes for sale by owner aren't being sold through a licensed agent, forcing a potential buyer or his agent to deal with the seller directly. If the home has sat on the market for an extended period and the homeowner does not have a mortgage to pay off, a buyer can sometimes interest the seller in owner self-financing. In such a deal, the buyer gives his or her down payment and installment payments directly to the seller. As anyone would guess, this approach has its own special Pros and Cons.

The biggest Pro for the buyer is, obviously, easier financing. The biggest Pro for a seller is the potential to make a sale where none was possible before. As can be inferred from the Affordability Index, many people can afford a mortgage, but cannot find a traditional lender. 

But speaking of problems, there are some ‘Cons’ to consider. If the buyer stops making payments, the seller must evict and foreclose on the property -- both time-consuming and costly procedures. A For Sale by Owner financing deal gone sour is especially problematic if the seller is dependent on the income from the home. And buyers need to pay attention, too. When dealing with a For Sale by Owner transaction, there are a variety of potential legal loopholes and title issues that traditional sale and mortgage disclosures and contracts are specifically set up to avoid. In all cases, it is wise to consult a trusted financial professional and attorney before signing anything.  

While a home listed For Sale by Owner with attractive terms (like owner financing) can be attractive, having a licensed real estate professional on your side can make all the difference. If you are considering buying or selling in Savannah, we are always here to be your real estate resource!

It’s 9 O’Clock: Do You Know Where Your Listing Is?

In an age where technology is king, the concept of free and widespread listing syndication at first sounded promising to agents and consumers alike. “Listing Syndication” is the term used when third parties – including big Internet outfits like Zillow and Trulia -- take real estate agents’ listings and put them up on their humongous national websites.

Most Savannah real estate agents thought to themselves ‘Great! – now everyone in the country can see my clients’ home listing; we will get the word out nationally.’ And they were right about that, up to a point. But now some serious scrapping has broken out, and the details are something I think readers will find useful to think about. They affect what happens whenever you look for a real estate property, or put your own up for sale.

For Savannah house-hunters, the biggest issue with syndicators is information that is either out of date or inaccurate. To any would-be homebuyer, sites like Zillow or Trulia hit them first: they’re always smack dab at the top of the Google or Bing pages when you look on the web. What isn’t apparent is that such websites don’t always offer all of the homes or data that might be available through a local real estate agent.

Rather than using feeds that offer each viewer the freshest information possible, syndicators lead those searching for a new home through a dizzy trail of listings. Moreover, if you have ever used them, you probably know that some of those have usually expired. In addition, syndicators are real search engine hogs; real estate agents have to battle against their Google-engineered pages to get a top spot. As a result, house-hunters may be unable to find what the very local housing market and its most active agents have to offer.

As well as failing to deliver accuracy to consumers, syndicators may lead consumers in the wrong direction when they do find a house that interests them. If a listing agent is not willing to pay Zillow a monthly fee for the privilege of having listings accurately placed at the top of the search results, a consumer may find a different agent's contact information displayed. It’s easy to see why some agents are fuming about this, but more importantly, it may do damage to the client’s experience. Just because an agent is at the top of a search result does not mean that he or she can answer important questions a buyer may have about that listing. 

Finally, it is not uncommon for consumers to experience confusion when it comes to listing prices. Syndication has in the past led to inaccurate information about prices to be published online, even duplicates with different prices. Yikes. 

However, those slowly evolving issues don’t totally cancel the early promise of wide syndication. Personally, I love the wealth of information syndication provides consumers.  Technology and free access to information are boons to us all.  However, when it comes to buying a house in the Savannah area, sometimes there’s no replacement for the human touch.  Call us anytime for the personal service only a local real estate agent can give you!

Buying a House in Today’s Mortgage Market

Anyone interested in buying a house in the Savannah area today has heard that they should expect to find tougher mortgage lending requirements. Sometimes that can seem arbitrary -- or just plain unfair. But unfair or not, the new lending reality is probably here to stay for a while, and the causes are understandable.

The mortgage industry learned a powerful lesson from the past, when it pretty much gave anyone who applied a generous loan – sometimes with practically no questions asked. But this “generosity” created financial problems for both the banking industry and the country as a whole. It's not hard to understand why lending guidelines are stricter.

Reducing Loan Defaults

The overriding reason for tougher lending policies is to reduce the number of loan defaults. In order to qualify for a mortgage, borrowers are finding that lenders now look more closely, may require a higher annual income, better credit score, or a larger down payment. Their high-priority goal is preventing any foreclosure situation where the bank owns a property it has to sell or rent itself.

Questioning Future Value 

For many years, homebuyers never questioned the investment value that seemed to automatically accompany any piece of real estate. Buying a house was like investing in a blue chip stock: certain to rise. The advent of a shrinking Dow Jones Average preceded the phenomenon of ‘upside down’ homeowner equity. But in both cases, long gone is the idea that everyone should expect to find no-brainer investment opportunities. When buying a house can mean exposing the lender to a future where more is owed than a house is worth, they naturally seek a safer place for their money.  Since a smaller loan or larger down payment achieves that goal, that’s what lenders tend to offer.

Lowering Consumer Debt

During 2010, the nation’s ten largest mortgage lenders turned down about 26% of all applications (according to the Wall Street Journal).  In many cases, that could be attributed to lowered credit scores – due in turn to increased debts from credit cards or unpaid student loans. In fact, those heavy debt loads are part of what got homeowners into financial trouble and helped to fuel the housing market crisis.

In the short term, homebuyers denied a loan can’t help but be keenly disappointed. But it can ultimately provide time to let them raise their credit scores, increase their savings, and get their financial affairs onto firm ground. The ultimate effect should be to put the whole housing market there, too.

If you’re considering buying a house in Savannah, we’d like to help you get pre-qualified under the current mortgage guidelines. Once you see what real values are out there and available to you, we think you’ll be glad you called!