New construction is back!

      New construction is (finally) back in full swing. It started only in the $500K+ price points in 2012 and mostly in the highest appreciating / highly sought after areas in Metro Atlanta Johns like Creek, Sandy Springs, Suwanee.  But within the last 6 months builders have now entered the $200K+ price point in some counties along with builders going into previously incomplete neighborhoods and finishing them out.  Communities in any price point, and in just about any county, are seeing these previously abandoned communities now under full-blown construction with houses selling as fast as the builders can complete them!  The low inventory has opened a window of opportunity for builders to re-enter and set the market pricing.  Bank-owned sales in September 2013 are now at 2%, down from 13% of total sales in September 2012.  This is great for homeowners that wanted new construction but had nothing to choose from and  also giving hopes to nearby homeowners looking for a property value boost to enable them to sell their homes.  New construction, as exciting as it is, does have it's pitfalls.

      The first thing you need to know about new construction in this market is that you don't have much leverage as a buyer. With all of the buyer competition you have little room for negotiation on pricing. Your best area to get a 'deal' is getting the builder to either add additional upgrades or complete unfinished spaces versus haggling on the price.  Closing costs are pretty much off the table as far as negotiation so you'll need to be prepared to pay for some closing costs even if you use the builder's lender.  Your best opportunity to get a price reduction in new construction is on a standing, completed homes since the builders want to sell those properties before they have to begin paying mortgages on them.

     The agents at new construction communities represent the BUILDER and not you!  Whether you use a real estate agent or not, the listing broker makes the same amount of commission (unlike traditional sales & foreclosures). You do not get a better deal by not using an agent since the builder has already equated paying a 6% or more commission into their bottom line.  Furthermore, builders don't use standard real estate forms. Their contracts are written up by their attorneys so you definitely need to have a good understanding of what you're getting into (especially when in comes to 'up-front' money) before you enter into an agreement.  Having an agent represent you doesn't cost you anything and is well worth it.

      When it comes to financing a new home, builders will usually offer an incentive or set contribution towards closing costs (or both) if you use their lender.  Even if you use their lender, most builders will not pay ALL of your closing costs.  You want to secure an outside lender first in order to have an idea of what loan product you qualify for in the free market. You can use this as leverage for the builder's lender to either match or beat what your current lender is offering and still get the incentive.  In some cases, the on-site lender cannot compete or are partially owned by the builder. In these situations, you want to present your lender's offerings and inquire if they've closed loans with the builder before. Builders are more likely to use an outside lender that they've had previous experiences with and may even give you the same incentives.

     Buying new construction can be a very exciting process.  Being able to customize a home and see it being built is definitely an experience that some people dream to have. However, the financing, contracts, and construction disputes can make it a nightmare so you need to educate yourself on the process before going in!

FHA Loan Buyers Facing Obstacles in the Current Market

Last May, I wrote a blog "Bidding Wars are Back" and since then, the competition has only gotten more fierce.  Not only are there other home buyers to compete with, but now out-of-state and international investors have hit the Metro Atlanta Market and are literally devouring the inventory. At the time of this blog, there is roughly a four-month supply of homes on the market by my estimation.  This is GREAT news for property values and upside-down sellers looking for a way to get out of their current homes to take advantage of the market.  This is troubling news to home buyers that are using FHA financing to obtain a home because the requirements that come along with an FHA loan are a major turn off to sellers and their agents alike. Here are the three biggest hurdles you face when using an FHA loan.
      The first hurdle with FHA loans is that the house must meet a certain condition requirement in order to pass an FHA appraisal be deemed eligible.  Most banks only sell properties "AS-IS" with no repairs and cash strapped sellers are not looking to do any repairs on a money pit. Most sellers would rather take an all cash offer for less money if it means they can unload the home in it's current condition.
      The second hurdle is the time it takes the loan to close. With the average lender quoting 30-45 days, this is not attractive to a seller. A cash deal can close in as fast as a week and conventional loans in under 30 days.  The bright spot here is that the time it takes an FHA loan to close does vary from lender to lender. All of the lenders I close loans with have the ability to (and actually have and still can) close an FHA loan in 18-21 days.  I have a list of the lenders I work with on my website.
      The third hurdle is the FHA appraisal. This appraisal is a double-edged sword. On one side, the appraiser is allowed to morph into a home inspector and note repairs that they feel are necessary to make the home liveable. On the other side, whatever the home appraises at (whether higher or lower than the list price of the home) the home is stuck with that value for 6 months. So let's say the house appraises for less than the contract price, the seller isn't willing to reduce the price and the deal falls through.  Even if another FHA buyer comes along and is willing to pay more, their lender will not allow them to obtain a loan for more than the current FHA appraisal.  So now the seller can only sell the property to a cash buyer or a buyer using conventional financing.
      If you are unable to save up more down payment to go conventional and you must use an FHA loan, all is not lost!  You must be EXTREMELY aggressive when making bids and willing to hunt alongside your real estate agent for listings, and be prepared to see homes the same day you find them.  Put out multiple offers and hope one sticks; even put in a blind bid if that's what the situation calls for.  The current Metro Atlanta real estate market will not wait on you to make a decision, you need to already have your mind made up before you start looking for a property!
     

To upgrade or not to upgrade? That is the question.

Most improvements made to a home are to add value when it's time to sell it FIRST and for personal enjoyment second. But since the housing bubble popped in 2007, the return on investment (ROI) on home improvements is not what it used to be.  Which brings us to the question, when you're buying a home, should you look for outdated homes that need upgrading to get a better deal OR look for homes that have already been remodeled with a higher price tag?

When you're purchasing a home, whether it's your first or third, you will usually have some ideas of what you want the house to have.  Taking on a construction project can be daunting, especially if it's one that involves contractors--which is pretty much ALL of them! Ever since the 'housing boom' of the 2000's, channels like HGTV or have been full of do-it-yourself home projects, design ideas, & dream (and nightmare) remodel shows. These shows spark the inner interior designer in all of us and cause consumers to entertain the idea of either wanting to upgrade a home they're looking to by or expanding their contractor vocabulary when identifying features in a home they're looking to purchase. Buying a property that needs upgrading is always less attractive than an upgraded property to new buyers but even more so now with low home prices.  In my recent experiences, you are better off purchasing a home already upgraded and paying the slight increase in price.  You'll end up spending less overall than buying the same home at discount and doing the same upgrades after purchasing it. So in other words, if you're looking at two comparable homes, paying $20K more for the home with the updated kitchen and bathrooms is a better move than buying the fixer-upper, which may cost you $30K or more to duplicate the kitchen alone.  Even if you look at this route as simply financing the upgrades, you're paying less overall for the upgrades so you still come out on top---assuming that you don't have a team of contractors at your disposal and are able to pay cash.  In the Metro Atlanta market,  finding a $250K home with features usually found in $400K homes was almost common place in 2009-2011 and are still found in foreclosures entering the market today.

If you're looking to do some updates before you sell you home consider this.  Over the last 5 years, home buyers have enjoyed amazing home prices and selection. As inventory has shrunk over the last 18 months, we're beginning to see investor flips entering the market for sale as well as traditional sellers (like you)  that are not underwater and are finally able to sell. The ROI on upgrades has not been what it used to be. Lately, adding heated, square footage has been the only guarantee to add instant value to a home. Kitchen and bathroom upgrades used to be automatic value boosters, but a lot of recent sellers will tell you that the $40K kitchen upgrade didn't do much to boost the price of their home in our current market. We are currently in a seller's market and I suggest sellers leave the property as-is. If you're going to take a hit on the sale of your home, it should be from the proceeds of the sale of your home (potential revenue) versus losing money on upgrades you do to potentially increase the value (out-of-pocket funds).  Only do actual repairs that a new home buyer would likely request to be done after having a home.  Most of your competition that upgrades properties before selling them are investors using their regular team of contractors; they can complete projects for 30-50% less than you could as a novice hiring new contractors that you have no relationships with.  Since those investors likely paid less for their property as a foreclosure or short sale than you you did as a retail consumer, it make is worthwhile for investors to upgrade the properties they flip. inspection.

Looking to Buy or Rent? Be Ready For a Surprise!!!

The metro Atlanta real estate market is now on the rise. The market hit bottom in 2011 and began it's climb in 2012.  A low supply of homes has now started a wave of new construction that has not been seen since 2006.  Banks are now favoring short sales over foreclosing on homeowners. Some previously upside down homeowners are now able to sell their homes and with rates below 3%, they are able to upgrade the house without upping the mortgage. Investors who purchased within the last 3 years with plans of buying and holding are now unloading properties.  So what does all of this mean for someone looking to buy or renting for the next few years before purchasing?

If you are looking to purchase the market is not a friendly one. There are not as many deals as you may have seen over the last 18 months.  The overall number of homes on the market it down and prices across the board are up.  With an influx of larger investors and second-time home buyers, competition is at an all time high.  This will require diligent efforts of your real estate agent to locate properties within your criteria and you making a QUICK and informed decision on how to bid the most aggressively to beat out the competition.  HUD, Fannie Mae, and Freddie Mac properties are the most favorable route since they offer periods that they will only look at offers from owner occupants. This gives everyone a fair shot at getting their offer submitted, reviewed, and hopefully accepted.  Unapproved short sales still are not favorable route for a buyer looking to move in 90 days or less. Buyers using loans will need to work on saving up more money to cover their down payment along with closing costs in order to make a more favorable offer to a seller. There are a lot of cash buyers so if you're using a loan the competition is fierce.

If you are looking to rent, you will notice that there is an abundance of rental properties now available.  You will see a lot of property management companies with numerous properties and stricter application processes. What you will also notice is that rent rates have become very negotiable since there is a glut of rental properties on the market as a result of the 2008-2011 foreclosure purchases.  As a renter, you will see  properties in better condition and with incentives all in an attempt to steer you into renting.  Always evaluate the fair market rent in an area before looking at properties so you are able to negotiate on the spot when you are viewing potential rentals. If you are a strong applicant (good credit, good rental history, solid employment) or are looking for a long-term lease you definitely have the upper hand in negotiating rental rates. Be sure to include provisions in the lease regarding if the landlord sells the property and that the landlord provide monthly proof that the mortgage(s) on the property are current.

That's What Buyers DON'T Like

As spring approaches, the Metro Atlanta real estate market is seeing low inventory and rising property values. This is opening the door for regular resales to enter the market to compete with the short sales and foreclosures.  With multiple offers on foreclosures and lengthy approvals short sales being common place, this has made a 'normal' sale much more attractive; dealing with a person and not a bank, quick closings,and quick response times to offers.  This has set the stage for homeowners to list their properties in order to break even and possibly (dare I say) make a profit! However, some features of your home, that you think are special, may prove to be an obstacle in getting max dollar for your home.

CARPETED BATHROOMS
NO ONE wants this!!! Get rid of it....


VAULTED CEILINGS
Two story foyers and family rooms make a statement. What you don't want them to say is high energy bills. Provide a copy of your utilities for buyers to see in winter and summer months so they won't overestimate what their potential bills will be.


CORNER LOT
Some look at it as a 'premium' lot with great curb appeal. Most look at it as a lot with typically higher property taxes and an unfavorable backyard.  The best way to combat this is to fence in your backyard to eliminate the guesswork of the property line and to define the space. Planting leyland cypress bushes or trees to create a barrier can sell the idea of more privacy and a better view.

MASTER ON MAIN AND SPLIT-FOYER FLOOR PLANS
Master bedrooms on the main floor are appealing to older buyers or those with health issues.  They do not appeal to young families or those planning to have children because the secondary bedrooms are upstairs and not quickly accessible.  The split-foyer plan gives you additional living spaces & bedrooms like a home with a basement but feels more like a part of the the house. Most buyers don't like opening the front door, being confronted with stairs and having to go up or down. Unfortunately for these two floor plans, buyers will  eliminate them all together from their search so for the buyers who will consider them you will need to play to the strengths of each floor plan. For a master on main, make the master bedroom feel large and the other bedrooms functional an office, gym, or media room. On split foyer floor plan, make the lower level more attractive than the main level.

POOL
A pool can be a gift for parties and gatherings and a curse if you have the pleasure of maintaining it yourself.  The best way to overcome the negative aspects of a pool is to spruce it up and make it look new and well-maintained. Make it appear as all you do is turn it on and swim, little to no maintenance.  Be sure to have extra chemicals and all the necessary equipment (in working order) to pass on to the buyer making them confident that they can maintain it with ease.  You also want to use furniture and accessories to sell it as an additional entertaining space even when you're not swimming.

HOMEOWNERS ASSOCIATION
A homeowner association (HOA) should represent a stable, maintained community, with responsible homeowners that want everyone to be accountable for the neighborhoods condition. The reality is that some HOA's are bankrupt, don't do much to improve the community, and are ran by management companies and not the residents. A large perception of HOA's is that they are overly strict and can become a nuisance as they enforce the bylaws. The best way to overcome this apprehension is to offer a copy of the covenants and bylaws to potential buyers and if you are in a community with rather high HOA fees, consider paying a year's worth of fees as a buyer incentive.

2013 Metro Atlanta Housing Market

SHIFT IN THE ATLANTA MARKET

The last quarter of 2012 saw inventory across the board drop and prices begin to increase.  In 2013 that trend will continue.The first segment that will continue to see decline are the foreclosure/REO properties.  Lenders are looking to push bulk sales to investors and increase the number of short sales on their current borrowers.  Some lenders prefer to do a short sale over a loan modification.  In 2012 we saw lenders who actually solicited mortgagees to do a short sale and receive up to $30,000 in relocation assistance. With less foreclosures and more resales, prices across the board will begin to increase.  This will allow stale listings to finally be absorbed making way for new inventory.

HOW THIS AFFECTS YOU AS A HOMEOWNER

If you have a property that you would like to do a short sale on, you may see more favorable terms given by lenders to expedite the process.  If you have a home that is right on the borderline of being underwater, you may see property values in your area increase to whereas you can do a refinance or a traditional sale and either break even or (dare I say) make a profit!  If you are not planning on buying or selling and currently own a home, this is the market you've been waiting for!  Inventory gets low and prices increase. Less foreclosure comps on appraisals allow property values to rise.  In the Metro Atlanta area, I believe you'll see a noticeable increase in the next two years.  Until unemployment rates decrease, we will not see a dramatic change across the board since you will still have mortgagees that are in danger of foreclosure.

HOW THIS AFFECTS YOU AS A RENTER OR LANDLORD

As a potential renter, you will find a lot more rehabbed properties available with slightly less restrictive application processes.  As a landlord, you will see fair market rent go down slightly due to the influx of investment properties that have been rehabbed and put on the market for rent.  You will definitely need to do some cosmetic repairs to get fair market rent and some upgrades if you're looking to get top dollar.