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Fixing to Sell: Don't Go Overboard

Fixer-uppers with upside potential were in high demand when the market was appreciating at a fast pace. Once depreciation took over, speculators disappeared until 2009, when low-end foreclosure properties in some areas became hot properties -- particularly if they were selling at a 50 percent discount from the peak in summer 2006.

In California, 70 percent of the homes bought by investors in 2009 were distressed-sale properties, according to the CALIFORNIA ASSOCIATION OF REALTORS®. Some were stripped of appliances and fixtures. But, at half price, there was profit potential for buyers who were up for a redo -- especially seasoned investors buying multiple homes to fix up and resell, or rent out.

Fixers priced over $500,000 aren't as easy to sell today. Most buyers in higher price ranges are buying a home to live in. They want a home in move-in condition that will suit their long-term needs.

There are exceptions. In high-demand market niches with few listings, there is occasionally a fixer-upper that draws a lot of attention. Usually, these fixers sell to buyers who will live in the property and fix it up themselves to save money. Often this is the only way they can afford to move into the neighborhood.

Sellers of fixers in such neighborhoods should make their property as presentable as possible by cleaning out clutter, both inside and out. Many home buyers can't visualize a property's potential. It's often worth a modest investment to show the house at its best advantage.

Cosmetic improvements, such as painting, replacing outdated floor covering, or refinishing worn hardwood floors can pay off. Some fixers are staged, even though the property needs a lot of work, so that buyers can envision themselves living there.

Presale inspections will help buyers make a decision about whether or not to tackle the project. Make reports available to buyers before they make an offer to avoid having to put the home back on the market if the deal falls apart because the buyer's inspectors discover defects not previously disclosed.

HOUSE HUNTING TIP: How much you spend preparing a fixer for sale depends on several factors. How much did you pay for the property? How much do you owe against the property? Is there demand for fixer-uppers in your area? Finally, how much does your real estate agent think you can sell the home for given current market conditions?

Sellers who have equity in their home and cash to invest in fix-up for-sale work should consider making cost-effective renovations, like a kitchen upgrade, but not an entire renovation. Ask your agent what the home would sell for with and without these improvements before doing anything to it.

The investment may not yield a profit, but could recover the costs when the home sells. In areas where fixers aren't selling, sellers might need to enhance the property to sell at all. A good real estate agent should be able to provide references for reliable, reasonably priced professionals who can do the jobs for sellers who haven't the time or expertise to do the work themselves.

Buyers who bought at the peak may not be able sell for even close to what they paid. One possibility would be to rent the property, if it makes sense financially. You may need to fix up the property somewhat to attract a good tenant. Consult with a certified public accountant about the tax consequences of converting a single-family residence to a rental.

Another option, if you don't have to sell now, is to stay put for awhile and fix the property up gradually over time. Avoid investing a large amount of money in the hopes of getting a bigger return.

THE CLOSING: The housing market in your area may be too uncertain for speculation.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.

Seller's Tips

At first the task seems daunting: You haven't sold a home before, the market looks complex, and what worked for owners 10 or 20 years ago seems inappropriate today.

What steps should you take? Here's a baseline list to get you started.

Contact a REALTOR®. The industry and the laws have changed. You need the protection of a professional who you know will be on your side, and guide you and protect you through the entire process.

You Can Do It. Some 5.5 million existing homes are expected to sell in 2009, more than 15,000 a day. Other owners have done it and so can you.

Define Your Goal. Do you want the highest sales price -- or the biggest check at closing? They're not necessarily the same. Imagine that two homes sell for $300,000, but one owner pays 2 points and agrees to replace the roof. The owner who sold without such costs got a bigger check at settlement. The bottom line: To have a successful sale you need to look at both price and terms -- you must have a strong negotiator in your corner.

Times Have Changed. Today's real estate marketplace is radically different when compared with 10 years ago. Purchasers now use the Internet, receive seller disclosure forms, get home inspections, and are routinely represented by buyer brokers. The result is that buyers can be better prepared than in the past.

Sparkle And Shine. Imagine going to a supermarket and seeing dusty fruit or aisles filled with old shelving and cans. It doesn't happen because the grocery store knows how to present its goods. Sellers must do the same. Get rid of things you don't want to move, organize closets and storage areas, and clean everywhere.

Mechanics Count. Buyers expect everything to work. Home inspections are now entirely common and what buyers miss home inspectors will catch. Fix and paint things now and they won't be an issue in the future.

Think Broadway. When buyers see your home, it's showtime. They want an environment where they can see themselves. Given them a show where everything is painted, arranged, and attractive, a home where the only issue is when to move in.

How's The Market? Real estate is local. Your broker can explain current market trends in your community, including what's selling, what isn't selling, and why. This information is central to getting the best possible price and terms.

Know Your Rivals. Your property will be competing with other homes for buyer attention. Ask your broker how to be competitive -- and how to have an edge.

What Time Is It? Markets differ by location and time. When interest rates are low and the local job base is growing, it's great to be a seller. But when times are slack and mortgage rates are rising, homes also sell. In 1981, when the prime rate topped 20 percent and the population was smaller, 2.4 million existing homes were sold. The trick is to be realistic, to get as much as market conditions will allow.

Understand The Plan. Real estate marketing involves far more than a sign in the yard and an ad in the paper. Successful brokers use a variety of methods to attract and qualify prospects, including the latest Internet and communication advances.

Buyer's Tips

Smart Buyers avoid the most common mistakes made by normal buyers.

1) Unknowingly participating in a mortgage loan that may not be in your best interest.
A professional mortgage officer knows in excess of 50 ways to finance your mortgage. Everyone’s personal situation is a little different. As an example, your mortgage can be designed to reduce your payoff term and increase your equity with virtually the same monthly payment. Why wouldn’t you choose this type of alternative, because, you simply did not know. A Smart Buyer is a person who wants to know! We believe that is YOU.

2) Waiting until after the contract to process their mortgage, or just obtaining a pre-qualification letter before submitting a contract.
Pre-approval benefits you more than you can imagine. By starting your loan process and obtaining loan pre-approval, not just pre-qualification, will place you be in a much better position to negotiate with a seller who knows you are financially prepared.

Additionally, you can solve any obstacle, no matter how small, without delaying the closing as many buyers do by processing their loan after placing a contract on a home.

3) Not having a thorough market analysis prepared for the home that you choose.
With Realtor’s computer capabilities, agents have complete information, and you should have all the facts as well. Knowing details regarding comparable sales and active competition will increase your knowledge when you are negotiating the price and terms of your home. (Some buyers do pay top dollar for their home, but it shouldn’t be without knowing where they stand.)

4) Not having complete cost estimates based on the specific home contracted for, not just an estimate done at loan application.
Each home has specific costs associated with it, such as taxes and insurance. These can vary dramatically in different areas.

5) Settling for weak negotiating. This can cost you a few hundred or thousands of dollars.
Many buyers and agents settle for that “let’s just get a deal done” scenario. Think about it sincerely; would you rather just make a deal, or do you want your representative to do the very best possible negotiating on your behalf?

6) Not being selective - trying to see everything in and out of their price range, (or being too selective.)
Seeing homes in the proper price range and areas gives you a better feel for the market, and educates you while you look. Your area has a variety of neighborhoods and property types. Make sure that you see what you need to be comfortable with your decision. These statements are not contradictory; you should see all that fits you without wasting time on homes that won’t.

7) Not previewing schools, shopping, and other neighborhood amenities.
Take the time to know the convenience of your area, and whether the schools, shopping and amenities will help you attract the next buyer.

8) Not requiring the proper inspections.
It is money well spent, and paying attention to the results will let you know the condition of the home that you plan to make yours. In addition, making sure that a home warranty is in place can save you unexpected expenses.

If you have any questions on the above information or would like to begin the pre-approval process, please call Glenn today.

Sound Investment

Lake Arrowhead is home to many celebrities, politicians, bankers, lawyers, musicians, doctors, and other professionals. Local residents benefit from the influence these professionals have on local politics. As any economist or politician will tell you, a good way to preserve natural beauty is to involve celebrities in the process of protecting that environment. Lake Arrowhead has done just that, and as a result, the pristine ecosystems are likely to stay that way.

In short, due to the high positions of some of its inhabitants, the Lake Arrowhead community is quite safe from industrial developers. This makes your investment in Lake Arrowhead real estate that much safer--your property values aren't likely to depreciate due to industrial development in the area. In fact, since that development is destined to happen in some other community in lieu of Lake Arrowhead, your investment in Lake Arrowhead real estate will likely increase in value. As fewer and fewer properties are available that can offer such a surfeit of natural beauty, it is almost inevitable that your purchase will increase in value.

It can be confusing and frustrating to navigate the (unnecessarily) complex and sometimes confusing world of buying and selling real estate. Unfortunately, since most people only engage in real estate transactions a few times in their lives, they do not have a chance to climb the steep learning curve. By being a well-informed house hunter, you will be in that much better of a position to know a deal when you see a bargain and pounce on it. All it takes is a little bit of research on your part, and most of that can be accomplished online. Shopping for real estate has rarely been faster or more convenient. But, the most important part is to use the expertise and advice of a trained and experienced REALTOR®. Glenn Tinturin is just that person.