In this Issue:*   6 Tips For Buying a Home in a Down Market The Real Value of Home Maintenance Buying a Home? Don’t Be Too Picky (Please leave us a comment at the bottom of the newsletter.)

6 Tips For Buying a Home In a Down Market

Prospective buyers have an edge in a down market, but this doesn’t mean they are guaranteed to make money on the properties they buy. When real estate sales are slow and there is a glut of homes for sale, buyers have an opportunity to pick up a house at unheard of prices.

The operative word here is “opportunity”. There are times when you should pounce and times when you should show restraint and avoid an impulse buy. Knowing the difference could save you thousands of dollars.

Tip No.1: Do Your Homework
Buyers generally have the advantage in a down market, but this doesn’t mean you should walk into a transaction blindly. Prospective buyers should search the Internet for listings, inquire with a real estate agent and check the local newspapers to gain insight on a particular area. Many national and local real estate agents make their listings available on the Internet. The objective of this research is to get to know the price range for the area. You want to get a sense of what a low price would be for your desired area.

Tip No.2: Get Your Ducks in a Row
To make sure you’re able to pounce on a deal at a moment’s notice, it makes sense to get pre-approved for a mortgage and to have an attorney on retainer to handle the closing paperwork, unless your agent or broker is qualified to handle everything for you. It also makes sense to line up a home inspector and an insurance agent. These professionals can provide valuable information to the buyer about what parts of the home might need repairs and what it will cost to insure.

Tip No.3: Watch For Motivated Sellers
Motivated sellers provide additional bargaining power for potential buyers. If the home has been on the market for several months, has undergone several price reductions, and/or is vacant, this suggests the seller is looking to sell as soon as possible. In situations like this, it makes sense to ask whether the seller will throw in any furniture or fixtures you like. You can also ask the seller to cover closing costs, whether in full or in part. Of course, the listing price is always negotiable as well.

Tip No.4: Make Sure You Have Clear Title
During trying economic times, sellers may be looking to unload their homes because they are in over their heads. In some cases, the property may be encumbered by a lien from a contractor, service provider, bank or other lending institution. For this reason, it always makes sense to use a title insurance company and have a lawyer perform a title search to make sure there are no liens and the property can be transferred. The last thing you want is to have to absorb any of those liabilities.

Although lenders typically require title insurance and a title search if a mortgage is going to be taken out on the home, cash buyers should use these services as well.

Tip No.5: Avoid a Bidding War
When you are shopping in a down market the last thing you want to do is let your emotions get the best of you. A bidding war is almost always an unnecessary waste of time and, in the end, a waste of money. Down markets are all about getting a really good deal, so to fritter away that possibility on an ego-driven desire to win is foolish.

The best advice for avoiding a bidding war is to set a price limit and stick to it. Remember, there are plenty of homes out there and other deals to be had.

Tip No.6: Don’t Be Afraid To Walk Away
Real estate prices usually drop as inventory increases. In a down market, there are always many choices available. If you are not getting the deal you and your real estate agent feel you deserve, do not be afraid to walk away, and look at the next home on your list. Remember, in a down market, it is you – the buyer – that has the power. Some sellers refuse to understand that the market is down, and will not accept any offers less than what they feel their home is worth.

Stick to the price you had initially decided the home was worth; if you cannot make the deal, try again next time.

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.T

The Real Value of Home Maintenance

If you think home maintenance is an unavoidable series of weekend-eating chores, remember the age-old advice of Ben Franklin: “An ounce of prevention is worth a pound of cure.” The fact is, proactive maintenance is essential to preserving the value of your home. Without it, your home could lose 10% of its value. Regular, routine maintenance enhances curb appeal, ensures safety, and prevents neglected upkeep from turning into costly major repairs.

The little things are what tend to trip up people up. Some cracked caulk around the windows, or perhaps a furnace filter that hasn’t been changed in a long time. These may seem like little things, but behind that caulk, water could leak into your home causing mold, mildew and rot. Same for the heating unit if the air filter isn’t changed regularly. Before you know it, you’re looking at a $5,000 (or more) repair that could have been prevented with a $5 tube of caulk, or a $4 air filter, and a little of your time.

Maintenance affects property value
Outright damage to your house is just one of the consequences of neglected maintenance. Without regular upkeep, overall property values are affected.

If a house is in worn condition and shows a lack of preventative maintenance, the property could easily lose 10% of its appraised value. That could translate into a $15,000 or $20,000 adjustment.

In addition, a house with chipped, fading paint, sagging gutters, and worn carpeting faces an uphill battle when it comes time to sell. Not only is it at a disadvantage in comparison with other similar homes that might be for sale in the neighborhood, but a shaggy appearance is bound to turn off prospective buyers and depress the selling price.

It’s simple marketing principles. First impressions mean a lot to price support.

Estimating the value of maintenance
Although professional appraisers don’t assign a positive value to home maintenance, there are indications that maintenance is not just about preventing little problems from becoming larger. A study by researchers at the University of Connecticut and Syracuse University suggests that maintenance actually increases the value of a house by about 1% each year, meaning that getting off the couch and heading outside with a caulking gun is more than simply a chore—it, actually makes money.

It’s like going to the gym. You have to put in the effort to see the results. In that respect, people and houses are somewhat similar—the older (they are), the more work is needed.

The 1% gain in valuation usually is offset by the ongoing cost of maintenance. Simply put, maintenance costs money, so it’s probably best to say that the net effect of regular maintenance is to slow the rate of depreciation.

How much does maintenance cost?
How much money is required for annual maintenance varies. Some years, routine tasks, such as cleaning gutters and changing furnace filters, are all that’s needed, and your total expenditures may be a few hundred dollars or less. Other years may include major replacements, such as a new roof, at a cost of $10,000 or more.

Over time, annual maintenance costs average more than $3,300, according to data from the U.S. Census. Various lending institutions, such as Directors Credit Union and LendingTree.com, agree, placing maintenance costs at 1% to 3% of initial house price. That means owners of a $200,000 house should plan to budget $2,000 to $6,000 per year for ongoing upkeep and replacements.

Play offense, not defense.
Proactive maintenance is key to preventing small problems from becoming big issues. Take the initiative with regular inspections. Create and faithfully follow a maintenance schedule. If you’re unsure of what needs to be done, a $200 to $300 visit from a professional home inspector can be invaluable in pointing out quick fixes and potential problems.

Keep track.
Having a notebook of all your maintenance and upgrades, along with receipts, is a powerful tool when it comes to sell your home. It gets rid of any doubts for the buyer, and it says you are a meticulous, caring homeowner. A maintenance record also proves repairs and replacements for systems, such as wiring and plumbing, which might not be readily apparent.

Now, get off the sofa this weekend and do something to maintain the value of your home.

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Buying a Home? Don’t Be Too Picky

Are today’s first-time home buyers passing up great deals because they insist on flawless “move-in ready” houses requiring little or no changes — even at the starter-home price levels at which shoppers traditionally have been willing to factor fix-ups and renovations into their offers?

Or are they simply reflecting market realities? They see record inventories of houses sitting unsold, and they may not have the money, time or inclination to do fix-ups after making the purchase.

Some shoppers are so picky they walk out of well-priced houses solely because of relatively minor imperfections such as:

…..The kitchen appliances are by different manufacturers

…..There are no granite countertops — even though the house is a modest-priced starter home.

…..Carpet needs to be replaced, or the color doesn’t match their furniture.

…..Wall colors are “wrong,” such as white, when for today’s tastes, they should be a warmer hue.

Some would-be-homebuyers are missing out on some excellent, older lived-in houses — simply because they can’t overlook flaws that would not have bothered shoppers during the previous two decades.

With required down payments rising to 20 percent in some areas, first-time buyers today have to put a huge effort into coming up with their down payment, and they want to make sure that equity investment goes into the house that will need the fewest and least-costly upgrades.

Home buyers today tend to be hipper and more sophisticated about home design, furnishings, floor materials, countertops and appliances because they are exposed to far more information on cable TV than earlier generations. But constant exposure to cable design shows may also be fostering a lack of realism on the part of some shoppers.

Some of these shows have given some buyers the impression that all homes should have granite counters, stainless steel appliances, etc. There are a few shoppers who want all the bells and whistles of that $500,000 house for $200,000, and no amount of talking to them on the realities can change their minds.

The fact is, you just can’t have it all. You can’t have the big yard, the top-line updates and all that in a starter home. You’ve got to compromise somewhere or else you’ll never buy anything.