Archive for October, 2007
A Christmas Carol
October 31st, 2007 Categories: Events
| December 4, 2007 7:00 pm | to | December 12, 2007 7:00 pm |
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You do NOT want to miss this! Ira David Wood’s production of this timeless classic is a Raleigh tradition. Now in its 33rd year this show just keeps getting better and better.
If you are new to the area, come get a taste of the extraordinary talent we are blessed with on the local performing arts scene. And if you are a local and have never seen this Raleigh favorite, you owe it to yourself to enjoy a night on the town with this amazing cast of entertainers.
Performances will be held at the Progress Energy Center for Performing Art’s Memorial Auditorium located in Downtown Raleigh.
Performance Dates/Times:
Dec 4-8 & 10-12 at 7:00 pm
Dec 8 & at 2:00 pm
For more information please visit Theatre In The Park
| Discussion: No Comments »
4 Reasons Why You Really Need a Buyer Agent When Buying a New Construction Home
October 29th, 2007 Categories: Buying a Home, New Construction Homes
I work with all types of buyers in my Raleigh real estate business. First time buyers. Buyers moving up or downsizing. Relocation buyers… lots of relocation buyers. Regardless of what category my client fits into, many of you choose new home construction.
Over 35% of my clients have purchased new construction this year. That’s pretty consistent with our market which is currently about 39% new construction listings. Many of my clients understand how important it is that they be represented by a buyer’s agent regardless of the type of home they are buying. Occasionally, however, I run into a prospective client who asks the question: “Why would I need someone to represent me when I am buying a new home?” That’s a fair question. Here’s my take on the advantages of having an agent working for you when purchasing a new home.
#1 – The On-Site Agent Works For The builder
Remember who benefits from pleasing who. The nice on-site agent in the model home works for the builder, so naturally they will be working to protect their employer and look out for their best interests.
Real estate transactions are complicated and it is just a good practice to have someone who is with you every step of the way making sure you are aware of all the conditions and potential risks of the large purchase you are about to make.
#2 – The Builder’s Contract Favors The Builder
This is a really big one. Builders typically do not use the standard NC Offer to Purchase and Contract. This standard Realtor contract was created jointly by the NC Association of Realtors and the NC Bar Association and includes lots of NC real estate law in a way that protects buyers and sellers from harm.
The builder, on the other hand, usually has their own contract created by their own lawyers. Who do you think this contract favors? You need someone who can at least explain the risks involved with the builder contract and possibly negotiate with the builder to add some additional protection for you. A good buyer’s agent will do this for his clients.
#3 – Knowing The Sales History Can Get You A Lower Price
It is very important to know what the builder has been doing with regards to discounting and what he is faced with regarding market conditions. If you are coming from a market in another part of the country where deep discounts are common due to market conditions, that may or may not be the situation here in the Raleigh market. In either case, you are in a better position to get the home of your dreams if you know exactly which set of conditions apply.
A good buyer’s agent can do several things to help you here. First, many builders put their sales in MLS. A good buyer’s agent will look at this and the tax records to try to get an idea of the discounts that have been given to other buyers.
The other thing a good buyer’s agent should do is to apply current market conditions to any offer you choose to make. If inventory is building and sales are flat or slowing, that is a good sign the builder may be willing to negotiate. On the other hand, if the builder has inventory, but it is selling very close to completion dates and has not been discounting, you could loose the home you really want by haggling over a few thousand dollars.
This is actually rather complicated to figure out. There is wisdom in knowing when to negotiate and when to offer full price. There is a time for both. It is practically impossible for an unrepresented buyer to interpret on their own the sometimes subtle market signs that could signal potential savings.
#4 – New Homes Sometimes Need The Most Repairs
This is going to sound a bit strange to some of you, but my experience is that many times brand new homes need more repairs than a resale home. This is typically due to miscommunication with subcontractors.
I have seen things like propane gas water heaters installed on a natural gas system, a huge fire hazard. Tub drains that leak when filled and then emptied by the inspector. This one would not be noticed in normal usage unless you crawl under the house right after taking a shower or bath. The result over time could be thousands of dollars in damage to the floor system.
The builder, and their agents, certainly will not recommend that you have a home inspection. Most builder contracts do not even mention a home inspection and provide no language to determine what, if anything, to do about items discovered in the inspection process that need repair.
Also, I do not ever recall a builder’s contract giving the buyer the right to have a radon test done and promising to mitigate this deadly gas if high levels are found. Radon is the leading cause of lung cancer among non-smokers. A simple test can tell if the home you are about to buy puts you at risk.
In North Carolina the only valid real estate contracts are the ones that are in writing. If you wish to have a contract that gives you adequate protection in case something goes wrong, choose a good buyer’s agent who can help you navigate your way to a fair, written contract that gives the builder what they want and gives you what you want.
PS – Check out this related article by fellow blogger Mary De Luca over at BeltwayRamblings.com
| Discussion: 2 Comments »
Attention Renters - You Are Wasting Your Money
October 25th, 2007 Categories: Buying a Home, Morrisville
If you rent, you are always paying too much for housing. I recently sold a really nice townhome in Morrisville. I represented the buyer. The neighborhood was Hamlet in The Park. The sell price was $162,000 for a 1360 square foot end unit with a first floor master and no garage. As I do for all my buyer clients, I did a market analysis of the neighborhood to check the price and make sure my clients were getting a good deal. I was very impressed with what I discovered and once again found myself wondering why in the world anyone would want to rent rather than own a home.
So how much would a three bedroom, 1360 square foot end unit apartment cost in such a convenient location as Morrisville? A quick Google search pulled up results ranging in price from $950–1200. I also ran a mortgage calculation for the townhome I sold. Financing the full purchase price at a 6% rate for 30 years gives you a monthly principle and interest (PI) payment of $971.27. Does this sound interesting so far? It gets better!
Mortgage interest is typically 100% deductible. Assuming that about $900 of the PI would be interest for the first year, let’s take a look at the tax implications. You simply reduce your income by the amount of interest paid and avoid taxes on that amount. If you are single and earn $40K per year your federal tax is about $546.46 per month. If I did my math right, the interest deduction would reduce your federal tax bill by $147 per month.
I’m pretty sure your state tax would be reduced too, but let’s be conservative and only consider the federal tax savings. By deducting the $147 tax savings from the $971.27 PI payment we get $824.27. This is what your mortgage payment (PI) would be, in our hypothetical scenario, after considering only the federal tax savings benefit from owning your own home.
So far, you would save between $126–376 per month by owning vs renting. Let’s look at other expenses you will be responsible for in order to become a homeowner rather than a renter. You will have to pay property tax and homeowner’s insurance on your new townhome. The exact monthly figure for both of these items for the home I sold was $147.60. Hmmm, you had to give back the amount you saved on federal tax. So, you are somewhere around break even to possibly saving $229 per month if your compare owning a home at Hamlet in The Park to renting the $1,200 apartment. Is renting still worth it?
The real benefits of owning a home come in the form of value appreciation. I saved the best part for last. As part of the market analysis I did for my client I looked at the average sell price in the neighborhood from 2003 to 2007. The average price actually increased 33% during four years! Assuming this trend continues, you could own this $162,000 home for four years and potentially sell it for $215,460.
That’s a profit of $53,460 in four years! And how hard is that? You had to live somewhere, right? Even if after all the smoke clears away you end up paying about the same amount to own as you would to rent. You could make over $53,000 just because you were smart enough to buy a home rather than rent. Isn’t this a great country? 
If you are renting, or know someone who is, give me a call at 919–602–7000 or send me an email and I’ll be glad to help you analyze your individual situation. My experience has taught me that in almost every single case my clients are much better off owing a piece of the American dream rather that paying for their landlord’s dream.
| Discussion: 4 Comments »
Option ARM Loans - If You Have One You Need to Read This
October 24th, 2007 Categories: Buying a Home, Mortgage and Finance, Real Estate Tips
I’ll have to say that in all my years of selling homes in the Raleigh area, I do not remember any client using an Option ARM to finance their purchase here locally. I guess I must deal with a more conservative group of home buyers. So what is an Option ARM and what should you do if you have one?
The “what is it” part of that question is more difficult to answer than the “what should you do if you have one” part. Let’s talk about what it is first. It is a very creative loan product that allows the borrower to choose from multiple payment options including an option to pay zero principle and only a portion of the interest. This payment option, called negative amortization, actually allows the loan balance to increase as payments are made. Sounds a bit scary to the more financially conservative among us, doesn’t it?
No need to discuss any of the other payment “options” because they are all totally boring, like paying interest AND principle which will reduce your loan balance. So why in the world would someone want to choose a loan payment option that results in increasing the balance owed? The obvious answer is to have a lower monthly payment. How much lower? I’ve seen examples where the payment could be cut in half! How would you like to only pay $1,200 for your $2,400 mortgage? Tempting, huh?
This might make sense if you were in a market where the value of the home is increasing at a much greater rate than the negative amortization is increasing your loan balance. If that scenario is sustainable, and you plan to sell the home in a few years, I guess you could come out ahead in terms of cash flow. The problem is this idea of the value of the home increasing is not sustainable. Just ask some of my clients in California and Florida.
According to an article in the Wall Street Journal, Countrywide is about to face yet another crisis; this time it involves Option ARM loans. The best estimates are that the default rate has more than doubled for these types of loans which made up $93 billion, or 19% of their volume for the year 2005. Keep in mind that these borrowers were not classified as subprime.
What should you do if you have one of these loans? If you live in an area where your home has not decreased in value, refinancing might be a pretty good choice. You see, the value of your home is important even if you do not plan to sell. If you need to refinance, and your home has decreased in value while the loan balance has stayed the same or actually increased, you might not be able to qualify for the new loan.
If you want the name of a good lender to talk to about your situation, give me a call and I will connect you with someone who is trustworthy.
Always remember, especially when it comes to financing something as large as a home purchase, if it sounds too good to be true, it usually is. And also remember you simply cannot detach the financing process from the home buying process and expect to get the best possible results. Every single one of my consultations with home buyers in the Raleigh area includes a thorough analysis of financing options with one of my lending partners. Finding your dream home and messing up the financing can quickly turn your dream into a nightmare. Get all the facts, look at all your options, and seek wise counsel.
| Discussion: 5 Comments »
North Carolina Home Inspection Reports Are About to Change
October 19th, 2007 Categories: Buying a Home, Real Estate Tips, Selling a Home
You may not be aware but a controversial issue is being decided by the NC Home Inspector Licensure Board that could affect how the inspection report on the next home you buy is structured. The issue is whether or not recommendations by the inspector on upgrades that could possibly enhance the function, efficiency or safety of the home can be included in the summary section of the report. Right now there is no standard and it is left to the inspector’s discretion as to whether or not these items are included in the summary.
The key thing to remember is this debate is over where these “non-repair” items will be mentioned in an inspection report, not if they will be allowed in the report. Currently an inspector is free to put anything he feels is worth noting in the summary regardless of whether it is in need of repair. The new rule would only allow items in the summary that do not function as intended and are in need of immediate repair, or warrant further investigation.
Under the new rule any item that is not eligible for repair consideration that an inspector wishes to mention for enhanced function, efficiency, or safety can be included in the appropriate section in the body of the report. It just will not be allowed in the summary. It seems that those opposed to the changes fear that buyers will not read the whole report and might miss some of the inspector’s recommendations for non-repair types of improvements.
Any recommendations for future enhancements to the home that an inspector wishes to provide will be right there in the body of the report. Hey, give the buyer some credit. Don’t you think they will have at least a little interest in reading beyond the summary section of a report for which they just paid hundreds of dollars? Especially when it contains important information regarding the condition of a home they are paying hundreds of thousands of dollars for!
From my perspective, I think this is a good idea. With the new rule the summary section will serve as a place in the report where items can be listed that more closely match the real estate contract’s definition of repairable items. The NC Offer to Purchase and Contract says that all of the major systems of the house, such as plumbing, electrical, HVAC, etc, “shall be performing the function for which intended and not be in need of immediate repair.” Previously the summary section of an inspection report could be cluttered with items that did not meet this repair standard.
The new rule for the summary section will make it much easier for buyers, sellers and their agents to focus on repair negotiations that are covered in the contract as agreed to by both parties. The only items that a buyer and their agent have any authority to request action on is these repair items. Why add more drama to the negotiations with discussions regarding items that the seller is under no obligation to address? The primary purpose of the home inspection is to discover any of the items listed in the real estate contract that need repair. It makes sense to me to have a clean list of those items that can be the topic of repair negotiations between the buyer, seller and their agents.
| Discussion: 2 Comments »
3 Reasons Why Everyone Needs a Radon Test
October 18th, 2007 Categories: Buying a Home, Real Estate Tips, Selling a Home
Buying a home is a complicated process. There are lots of moving parts. There are many things that buyers need to be aware of. I write about many of these potential pitfalls on this blog and today want to let you know about one that could threaten your very life!
There are a series of optional inspections that I always consult with my buyer clients about before we look at the first home. One of these inspections is a radon test. This is, in my opinion, the most important test anyone could have done on their home. Amazingly, as important as this is, over half of my clients do not even know what radon is, or the potential health risks of breathing high levels for extended periods of time.
Radon is a colorless, odorless, tasteless gas that occurs naturally. It is actually a mildly radioactive gas that is released from rocks in the soil of the earth. Granite is one of the biggest contributors, but there are many rocks that emit this carcinogenic gas. As it escapes from the soil it can pass through the floor of your home and become trapped inside, leading to elevated levels that the EPA has determined are hazardous to human health.
Reason #1: Radon Can Kill You
As you may have gathered already, radon gas can be deadly. The EPA says that radon gas is the number one cause of lung cancer among non-smokers. Over 21,000 people die every year from radon caused lung cancer. Everyone talks about second hand smoke, but only about 1,000 people who have never smoked contract lung cancer from this source. Radon causes 21 times more lung cancer deaths every year than second hand smoke.
Reason #2: The Standard Real Estate Contract Requires the Seller to Correct High Radon Levels
The standard NC Offer to Purchase and Contract contains language that gives buyers the right to have a radon test performed and requires the seller to take corrective action if elevated levels are found. If the seller refuses, earnest money is returned to the buyer and the contract is voided because of the seller’s breach.
The correction procedure is to have a ventilation system installed in the foundation to evacuate the gas before it can enter the home and create elevated levels. This procedure can, in most cases, permanently eliminate the risk of elevated levels of radon in the home.
Reason #3: Not Testing Now Could Cost You When You Sell Later
Just because you choose not to have a radon test done does not mean the person who offers to buy your home in the future will not want to test. What a mess this could be. For the sake of saving $150 or so you could expose yourself and your family to deadly gases over time and be faced with the cost of installing a radon mitigation system yourself to make your home salable in the future. That’s called lose-lose and it’s not very smart either.
What should you do if your home has never been tested?
If you are reading this article and are realizing your home has never been tested, there are a few things you might want to do.
First, have a test done immediately. Email me, or give me a call and I can recommend a good home inspection company that can administer a highly accurate test that will answer the radon question once and for all.
And don’t go to the hardware store and buy a do-it-yourself kit. There are canisters available that you can set in your home and then mail off to have them analyzed. Don’t be a penny pincher with your life. If these canisters tests are not administered correctly, or if the lab makes an error, you may have an invalid test and never know it.
The other thing you might want to do is consider having a buyer agent represent you on your next home purchase. I always ask my sellers if they had a radon test done when they purchased their home, so that I will have some idea if there could be the potential for a problem with radon. Whenever someone tells me they did not have a test done when they purchased, it is always someone who bought directly from the builder, or direct from the listing agent. In both cases these people were unrepresented when they purchased and had no one to advise them of the risks you have read about here today.
| Discussion: 1 Comment »
Future of the Raleigh Real Estate Market
October 15th, 2007 Categories: Buying a Home, Real Estate Market Trends, Selling a Home
What is the future of the real estate market in the Raleigh area? Will home values go up or down? Will buyers be able to get a good deal? Is buying a home in the Raleigh area a smart move? The answers to these questions vary quite a bit, depending on where you get your information and who you believe.
Usually every Monday morning here at Raleigh Real Estate Talk I give you a nice chart with the weekly stats for the local real estate market. I’m going to skip that today and try to answer some of the questions I get in my email on a regular basis. The buying and selling public seems to be uncertain about the future of real estate markets across the country. In some areas uncertainty is understandable. I don’t believe you have to live with that uncertainty here.
Inventory is rising, but being absorbed
I just checked active listings for Wake County. There are 8,389 homes listed for sale. Last year this time there were 6,537. That’s a 28% increase. Is that good or bad? To answer that question you need context.
The correct context for this question is found by considering the absorption rate. The absorption rate is the number of months that it would take to sell all listed homes if no more were placed on the market and the volume of sales remained steady. That rate is currently 4.9 months. Last year it was 3.7 months.
Last year I was having trouble finding the right home for some of my buyers. When I did, many times we found ourselves in a bidding situation. Now, there seems to be a lot more choices for buyers.
Sellers may have to wait another 30–60 days to sell their home if it is not adequately prepared. If it is prepared as I have suggested in a past article, the home could sell in a few weeks.
The National Association of Realtors (NAR) and most economists will tell you that over 6 months of inventory is a buyer’s market. We’re not there yet, but we’ve moved in that direction.
Sales have slowed
Sales are down 32% from last year. Sounds alarming doesn’t it? Just remember the absorption rate. At 4.9 months we’re doing okay. In September 1,204 homes sold in Wake County.
This number is more like a healthy January or February number, so sales are definitely off the mark. I’m sticking to my theory about relocation clients not being able to buy here because they cannot sell their homes in other markets. I think this has had a huge impact.
Again, for buyers there is more selection and less chance of getting in a bidding situation. For sellers you need better preparation and targeted marketing more so than last year.
Prices are appreciating nicely
August average sell prices are up 4% year-over-year. The Raleigh area market has maintained a healthy 3–5% appreciation for a long time. Looks like we’re right on track, doesn’t it? Economists will tell you that residential real estate prices should track just ahead of inflation and that’s what we consistently do.
By the way, later this week I’m going to a presentation by Stacy Anfindsen, publisher of the TARR Report. Stacy is a very well respected local expert on market trends and the TARR Report is the premier publication that the local Realtors use to help understand those trends. Stacy will be speaking at an annual market trends conference at our local Board of Realtors this week. I’ll be sure to let you know what he shares with us, especially regarding appreciation.
Price must be based on the competition
Putting a sign in the yard and listing on the MLS doesn’t cut it these days. Inventory levels are up and if you want to sell your home quickly, in addition to preparation and staging, pricing it to beat the competition is critical.
When sales are down and inventory is up, the line to be the next to sell can be a long one, if you are not well prepared. If you want to move to the front of this line, it’s possible, and easier than you might think. Check out this article I wrote about how to do just that.
Sellers have to be smart and buyers have choices
You see, I think this is a great market. Selling homes, in a reasonable time frame, has become more of a challenge. I love challenges and this give me a chance to really shine with my market and pricing skills. I can add more value for sellers now and quite frankly, that’s a very rewarding feeling.
Buyers want a great home. I get to use my knowledge of neighborhoods and communities to put you in the best possible home. A good amount of inventory really helps make this possible. This also makes me feel good about what I do.
| Discussion: 2 Comments »
Raleigh and Cary Mayors Favor Slowdown in Growth
October 13th, 2007 Categories: Real Estate Market Trends, Real Estate News
We held local elections in Wake County this week and the two largest cities, Raleigh and Cary, both elected mayors who have publicly made it known they think growth needs to be slowed down. Incumbent Raleigh Mayor Charles Meeker and Cary’s new Mayor Harold Weinbrecht each ran on platforms that would seek to limit building and impose more stringent and expensive impact fees on developers home buyers.
If they get their way, home prices will be subjected to a great amount of upward price pressure in the days ahead. It’s foolish to think that any business, home builders and developers included, will simply pay for new fees and restrictions out of their profits. Look for home prices to rise, especially in new construction, if the changes are as punitive as these outspoken politicians lead us to believe they could be.
In addition to higher home prices from fees that are passed through to consumers, what about an artificially dampened supply due to restrictions and limits placed on building permits? Do you think such outspoken anti-growth mayors might try to reduce the number of permits issued?
As I’ve mentioned to you repeatedly on this blog over the past few weeks, inventory has risen to over 8,300 listings and the market still continues to absorb the increase with the absorption rate sitting at 4.9 months. Folks that’s a 26% increase in inventory and prices continue to rise with the average sell price up 8.4% from a year ago.
Government controls on supply cannot help but have a negative impact on what you will pay for your next home. It’s economics 101. Constriction in supply with strong demand will result in increased prices. And for all the wrong reasons.
The answer to congested roads and over crowded schools is not to wreck the local economy with government imposed sanctions on growth that is being demanded by the market. How about if we require accountability from our elected officials for the capital they already have in the coffers? We certainly don’t need to spend millions and millions on proposed public transportation systems that the federal government twice told Triangle Transit Authority was not feasible.
It just seems odd to me that as more people relocate to the Raleigh area and bring their tax dollars here with them that our leaders cannot structure a budget that allocates that money to the places it is needed. What do you think?
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National Association of Realtors Says Future Looks Bright for Selling a Home in Raleigh
October 12th, 2007 Categories: Real Estate Market Trends
The National Association of Realtors (NAR) just released its monthly market forecast and Raleigh home sales are given special mention for outperforming the rest of the country. According to NAR Senior Economist Lawrence Yun, “markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year.”
As I’ve written here before, our local numbers confirm this. The average sell price is up 8.4% for closed sales in September compared with same period in 2006. The average sell price for a home in Wake County, which includes Raleigh, Cary and Wake Forest, was $277,451 in September compared with $255,963 in 2006.
Now before we start to jump for joy and declare that we are in a total seller’s market, consider the decline in showing activity and closed sales in recent months. Real estate markets are driven by supply and demand and we cannot ignore the drop off in demand.
So what difference is the lower demand making? The immediate impact is that supply has been pushed up to over 8,300 listings in Wake County which is a 26% increase over the same period last year. The good news is the market is still absorbing the increase with current inventory at 4.9 months. And as we can see from the NAR forecast and our own local numbers, prices are up by a healthy amount.
I still believe that the slowdown in people wanting to relocate to the Raleigh area, due to the difficulties sellers in other markets are having selling their homes, is what is responsible for the reduced demand. So far sellers are okay waiting another 30 days or so to sell their homes and therefore the pressure on price has not materialized.
Accurate pricing, proper preparation, and targeted marketing are more important that ever for Raleigh home sellers. If you want to get full price without having to wait an extended period of time to find a buyer, make sure your Realtor knows how to create the right mix of these things.
If you are planning to sell your home and want to know how to use the current market conditions to your advantage, give me a call at 919–602–7000, or send me an email and I’ll be happy to discuss this with you.
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How to Move Before Selling Your Home and Not Break the Bank
October 9th, 2007 Categories: Real Estate Tips, Selling a Home
I’ve written before about how various markets around the country are affecting home sales in the Raleigh real estate market. Several of my relocation clients in major markets are having great difficulty selling their homes so that they can move to the Raleigh area. Some of these other markets have more than a year of inventory. Ouch! There is an alternative that is becoming popular and, if you are in this situation, it might just be the answer you are looking for.
About a month ago one of my clients from the west cost asked me what I thought of the idea of a lease to purchase for the home they were trying to sell in the Washington state area.
The way the deal would work is that someone would have a lease on the property for two years. During that time the tenant would pay enough to cover the mortgage, some profit for my client, and some money that would be applied towards the tenant’s equity, or forfeited as additional profit for my client if the purchase option was not exercised at the end of the term. This is a great idea!
The market where my client is trying to sell their home is really bad right now and you just have to believe that it will be better in two years. The lease to purchase allows them to move forward with their plans to relocate to Raleigh without stretching their budget too thin. If the purchase option is used at the end of the term, great… problem permanently solved. If not, they have a nice profit for their troubles and they can put the home back on the market at a time that should be more conducive to selling in a reasonable amount of time.
In challenging times it pays to think outside the box. Sometimes it pays big. Give me a call, or email me if you would like to discuss this in more detail. I can also connect you with an expert in your area who can help you find a tenant/buyer and negotiate a good lease to purchase agreement for your home.
| Discussion: 1 Comment »
