- Locks – doors and windows should be locked at all times. Additional locks like deadbolts or safety locks can provide a higher level of security.
- Home lighting - turn on the lights prior to purchasers arriving to improve the showing. Not only will they be able to see things better, it could prevent them hurting themselves unnecessarily. Outdoor motion-sensor lights provide additional security.
- Eliminate the possible hazards – try to identify anything that might cause a person to trip and fall such as loose objects on the floor or floor coverings that aren’t properly secured.
- Security system – If you have a security system, it should be monitored and armed, especially when you’re away from home. Most systems will allow you to program a temporary code that agents will be able to use based on your instructions.
- Prescription medications – remove or secure the drugs before showing the home.
- Secure valuables – jewelry, artwork, gaming systems; mail containing personal information like bank and credit card statements, investment reports; wine and liquor can also be a security issue.
- Remove family photos –pictures can be distracting to prospective purchasers but the concern at hand is to eliminate photos of a wife, teenage daughter or children that might provide information to a possible pedophile or stalker who could be posing as a buyer.
- Remove weapons – the reason to remove guns should be obvious to everyone but a knife block on the kitchen counter can become an opportunity of convenience.
- Unexpected callers - when some people see a for sale sign in the yard, they think that it’s an invitation to look at the home immediately. Keep your doors locked so that people can’t let themselves in. If they ring the doorbell and want to see the home but aren’t accompanied by an agent, ask them to call your listing agent.
Monday, September 29, 2014
September is REALTOR® Safety month when special attention is focused on the security of having a home on the market and the concerns for the well-being of owners is a day-to-day effort. The following list may help sellers secure their home and minimize risk.
Tuesday, September 16, 2014
A common expectation of homeowners is to want the components and systems in their home to work when they need them. Periodic maintenance is just as important as having a trusted service provider to make necessary repairs. Victims of Murphy’s Law can attest that their air conditioner goes out on the hottest day of the year or the water heater fails when you have out of town visitors. If the convenience of having things work doesn’t justify maintaining your home’s systems, consider that it can be less expensive than the results of neglect causing repairs or replacement.
- Replace burned-out, dim or missing bulbs in light fixtures and lamps. Consider switching to LED bulbs.
- Dryer exhaust vents build up lint even though you may be cleaning the filter regularly.
- Fire extinguishers need to be recharged or replaced after expiration date.
- Establish a recurring appointment on your calendar to change filters in your HVAC.
- Replace missing or damaged caulk around sinks, bathtubs, showers, windows and other areas.
- Clean gutters.
- Schedule an inspection with a pest control a minimum of once a year unless you have a service contract.
- Schedule a chimney cleaning prior to using the fireplace for the first time in the season.
- Keep all tree branches and shrubs trimmed away from the home.
- Pressure wash exterior, deck, patio, sidewalks and driveway.
- Keep levels of insulation in the attic above your ceiling joists.
- Check appliances with water lines for leaks or worn hoses. • ice maker • washing machine • dishwasher • others
- Test all GFI breakers and reset.
- Inspect all electrical outlets for broken receptacles, fire hazards or loose fitting plugs.
- Have furnace and air conditioner serviced annually.
- Test smoke and carbon monoxide detectors and change batteries.
Tuesday, September 9, 2014
Private mortgage insurance is necessary for buyers who don’t have or choose not to put 20% or more down payment when they purchase a home. It is required for high loan-to-value mortgages and it provides an opportunity for many people to get into a home who otherwise would not be able. The problem is that it is expensive and a homeowner’s goal should be to eliminate it as soon as possible to lower their monthly payment and avoid putting good money down the drain. FHA loans made after 6/1/13 that have 90% or higher loan-to-value at time of purchase have mortgage insurance premium for the life of the loan. FHA loans made prior to 6/1/13, can have the MIP removed after five years and if the unpaid balance is 78% or less than the original loan-to-value. VA loans do not require mortgage insurance. Conventional loans, in most cases, with higher than 80% loan-to-value require mortgage insurance. The cost of that insurance varies but with a $250,000 mortgage, it could easily be between $100 and $200 a month. Your monthly mortgage statement should itemize what your monthly fee is for the mortgage insurance. Unlike interest that is deductible, most homeowners are not able to deduct mortgage insurance premiums. If you plan to remain in the home or to stay there for a considerable number of years, the solution may be to refinance the home. If the home has increased since it was purchased, the loan-to-value at its new appraised value may not require PMI. You might even be fortunate enough to obtain a lower rate than you currently have.
Many years ago, Las Vegas hotels would entice customers with inexpensive rooms, meals and entertainment so they would gamble. It may have worked initially but if you’ve been to Las Vegas recently, the bargains are gone. Hotels expect each division to be a profit center on its own. As a consumer, I might not like the changes but as an investor, I’d have to be pleased with increased profitability. Years ago, real estate investors used to accept negative cash flow buoyed by tax incentives in hopes of making a big payday due to appreciation when they sold it. Today’s investors are focusing on tangible, current results like cash flow and equity build-up. Cash flow is the amount of money you have left over after collecting the rent and paying the expenses. Since rents have gone up considerably due to supply and demand in the last few years and mortgage rates are at near record lows, income is up and expenses are down, making the cash flows attractive. If the cash flow is sufficient, you could have a good investment even if the value of the property never increased. Cash on Cash doesn’t consider appreciation and measures the cash flow before tax advantages by the initial investment. A rental with $3,170 CFBT divided by an initial investment of $29,000 would generate a 10.93% Cash on Cash rate of return. Low down payments on investor properties are also a thing of the past. Non-owner occupied mortgage money is available but the investor should expect to put down 25-30%. An advantage of having a smaller mortgage is a lower payment. Most mortgages are amortized loans with both principal and interest due with each payment. The forced savings of the principal contribution builds equity in the property and can be considered a part of the rate of return. A $100,000 mortgage at 4.5% for 30 years would have $1,613.29 applied to principal in the first year. Divide that by the same $29,000 initial investment and the amortization would generate another 6%. Without factoring in appreciation or tax advantages, this rental example generates much more than most alternative investments. There certainly are many different aspects that affect the risk and return on rental investments. If you haven’t scrutinized single-family rental opportunities in a while, you should look again.
A dirty air filter decreases the effectiveness of your HVAC system because it inhibits airflow and allows dirt, dust, pollen and other materials to blow through the system. The challenge is how often it should be changed to keep the system working efficiently and extend the equipment life. Too often and you’re wasting money and not often enough and your increasing the operating and maintenance costs. Fiberglass panel filters are inexpensive and easy to find but they’re not very efficient and they allow most dust to pass through. They were popular years ago but there are much better products available currently. Pleated air filters are available in MERV ratings from 5 to 12. As these filters collect dirt and other particles, they become less efficient to the point of impacting air flow. Allergy sufferers can benefit from this type of filter. These should be changed every two to three months based on local conditions. HEPA filters stand for High Efficiency Particulate Arrestance. They are very efficient and more expensive than previously described filters. Since they are very efficient, they require changing more frequently; possibly, every month. Electrostatic air filters are permanent and washable. They generally cost more initially but the savings will be based on how long they last. This type does not add to landfill issues or produce ozone. Improperly maintained filters will lower the quality of the air in the home, have a negative impact on air flow, cause it to use more electricity and eventually require maintenance to the systems. In an attempt to easily comparing filters, a rating system was created called MERV, an acronym for Minimum Efficiency Reporting Value. The rating from 1 to 16 indicates the efficiency of a filter based on standards set by ASHRAE. Higher ratings indicate a greater percentage of particles are being captured in the filter. To create a system to remind you when to change your filters, set a reminder on your electronic calendar to recur for whatever frequency you determine is best for you. Be sure to keep a supply of filters on hand to be ready to change them out when the time comes.
Monday, September 8, 2014
How old is your bedroom furniture and what did you pay for it? Don’t know? That’s okay, let’s try an easier question. When did you buy the TV in your family room and is it a plasma, LCD or a LED? Whether you are the victim of a burglary, a fire or a tornado, most people are comforted they have insurance to cover the losses. However, unless you’ve filed a claim, you may not be familiar with the procedures. The adjustor will want to know the date and how the loss occurred. Assuming you have contents coverage, the claim for personal belongings is separate from damage to the home. You’ll be asked to provide proof of purchase, like receipts or cancelled checks, or a current inventory. If they’re not available, you can reconstruct an inventory from memory. The challenge is trying to remember things you may not have used for years and may not miss for years more. Relying on memory can be a very expensive alternative. A prudent homeowner will create a home inventory with pictures or videos while all of their belongings are in the home and they can see them. Download a home inventory to make your project a little easier.
With all of the encouragement from celebrity spokespersons like Fred Thompson, Robert Wagner and Henry Winkler, there is a growing awareness of reverse mortgages. The fact is that our population is getting older and more than 25 million homeowners meet the age requirement. A reverse mortgage will allow homeowners age 62 or older currently living in their home to tap into their equity. The amount available is determined by the borrower’s age, the home’s current value and current interest rates. The loan proceeds can be received in a single, lump-sum or periodic payments. The closing costs can be paid in cash or rolled into the loan amount. There are no payments on a reverse mortgage but the homeowner is still responsible for property taxes, insurance, maintenance and other home costs. When the borrower dies, moves or fails to fulfill the terms of the loan, the lender is paid from the sale of the home. The borrower or their estate is not responsible for more than the proceeds of the sale. However, if the proceeds are greater than the amount owed to the lender, the remainder goes to the homeowner or their heirs. Unlike normal mortgage requirements, the borrower’s income and credit are not used to determine the amount of the loan. The homeowner must occupy the home as their principal residence and it must be free and clear of encumbrances or have substantial equity. Reverse mortgages are an opportunity to generate income or funds for capital expenditures but they can pose risks to homeowners. HUD, the largest insurer of reverse mortgages, is concerned about misleading or deceptive program descriptions encouraging borrowers to obtain HUD reverse mortgages also known as the HECM (Home Equity Conversion Mortgage). As of June 18, 2014, FHA will only insure fixed rate reverse mortgages where the homeowner is limited to a single, full draw made at closing. A reverse mortgage, like any financial decision involving a home, is an important decision that deserves careful consideration, due diligence and expert advice. For more information, check out The National Association of REALTORS® Field Guide to Reverse Mortgages, FAQs about HUD’s Reverse Mortgages and Reverse Mortgages – Alternative Home Equity Funding by Real Estate Center at Texas A & M.