Home Inspection Top 5

One of the biggest myths about home inspections is that they are required. Home inspections are actually optional but usually recommended for peace of mind for the buyer.  There is a saying among agents (or maybe it's just me) that you can send three inspectors into a house and come back with three totally different reports.  While items each inspector chooses note or omit, there are some basic items that should be unanimous like code violations and safety hazards.  When it comes to cosmetic repairs and maintenance items, some inspectors can create a phone book of 'repairs' that can intimidate some buyers. But no worries, here are the top five things you need to look for in a home inspection

ROOF
   Starting from the top to the bottom a leaking roof can cause immediate damage to studs, rafters, and drywall. That moisture can then breed mold if not remedied.  Roof repairs can be reasonable, but replacing a roof can be extremely expensive.  If a house needs a new roof it is an expense that can be worth walking away from. When a roof has existing issues, there is no guarantee that your hazard insurance company will cover a new roof.

ELECTRICAL
   Outdated electrical systems or those with missing components can become a headache quickly. Older systems may require new breaker boxes & outlets.  Damaged or missing systems could add up to a ton of labor hours for an electrician to troubleshoot and remedy the issue. On top of that, it's an immediate fire hazard so any system with faulty components should be avoided if the owner is not willing to make the necessary repairs.

PLUMBING
   Plumbing issues can be very deceptive as they seem like very simple fixes, but the labor to repair them can get pricey. Broken, buried water lines & septic tanks are the more well-known issues to avoid but not many people know about things like polybutelene pipes which can be a nightmare if they begin to leak. There are home warranty companies like Old Republic & 2-10 Home Warranty that actually cover these systems and companies like Delta Mechanical in Lawrenceville that specialize in overhauls of these systems.  The labor for plumbing is two-sided since you pay for the parts & labor PLUS the expense of a separate contractor to repair the drywall & repaint walls that have to be opened to access the plumbing.

STRUCTURAL
   In my almost 12 years of real estate I haven't seen many homes with a structural problem, but when I did they were immediately evident. In some cases, the entire sections of the house will need to be rebuilt in order to preserve the structural integrity of the home. Sadly, some damage can be irreversible and the only options are to rebuild or temporarily brace the structure as there are not many long term solutions.

FOUNDATION
    While basements are the most popular location of a foundation issue, homes built on a crawl space and even homes on a slab can have foundation problems.  Crawl spaces can uncover an inadequate number of pillars and peeling back the carpet on a ranch may reveal a crack in the slab of the home. Most basement repairs can be done, but the prices can range from $4K to $60K+!!!

Mostly a home inspecting is to give you an unbiased assessment of a properties condition before you purchase it.  It also educates you on the numerous maintenance requirements a house demands along with the consequences if those items are not maintained. You should use your home inspection as a tool to negotiate repairs to be done prior to closing as well as a blueprint to items you need to address once you purchase a home and assume the responsibility for maintaining it.

HOW REAL ESTATE AFFECTS TRAFFIC

     

Metro Atlanta experienced 3"- 4" of snow followed by below freezing temperatures leaving icy roads and combined with a mass exodus of commuters caused a traffic nightmare causing stranded motorists. There was a similar occurrence in 2011 when the area experienced 5"-8" of snow but since it happened on a Sunday night, there were not as many people on the roads and traffic was not as bad.  Metro Atlanta is one of the only metropolitan areas that even if you live in the city, you'll still need a car due to the lack of extensive public bus/rail systems like you would find in Chicago or New York---even though Atlanta is the ninth-largest metro area with a population of about 5.3 million people. This recent turn of events will have some people rethinking where they live as it pertains to their commute and go about their daily activities.  Commercial real estate (mainly retail & office/industrial) and residential real estate are a factor in how these people will assess whether or not to move to a certain area. Let's look at how residential real estate affects infrastructure.
      To make it simple, when people inhabit a new area, as more people move, there roads are built to accommodate traffic & retail shopping built to service them. When new homes, condos, and apartments go up, the impact on traffic in the immediate area is obvious. New lights, turning lanes, or even streets are installed to help ease traffic.  As that area grows, the on-ramps and interstates themselves grow to accommodate the new commuters.  The money to fund these projects come, in part, from property taxes.  When legislation or new taxes are proposed for road projects, voters have the opportunity to vote to have their property taxes increase to pay for these projects. The residents directly influence the traffic by funding or declining taxes/legislation for new infrastructure.
      The Untie Atlanta campaign that was shot down in 2012 which proposed more mass transit and road projects in Fulton County. The recent shutdown of the city is an example of why proposals like this which will increase mass transit are needed.  Improved mass transit (mainly railways) provides an alternate form of transportation in/out of the city as well as means to evacuate when roads are not an option.  The same way the taxes are proposed and can be voted for/against, residents can also attend public hearings to approve/oppose new construction in their area. Enough opposition to a project from residents can deter the construction or allow it to move forward. An example of this is in Dekalb County when in a 5-year period a Wal Mart, a hotel, and a 400+ unit apartment complex were added---all within a 2 mile radius! This caused horrendous conditions to an already heavy commute between Panola and Evans Mill Road.  The most prevalent example of this working was the Gwinnett County SPLOST. It was recently renewed; it's most noticeable projects are the Sugarloaf Parkway extension, the revamping of the I85 / SR-316 junction, and the overpasses on SR-316 which are still under construction. Residents have the power to approve projects that will improve conditions.  If there is no opposition from the residents on negative impact projects, unfavorable commutes can be a reality almost overnight.
      The extension of public transportation systems (especially bus lines) have had tough times getting approval when up for a vote for various reasons.  This appears to the be the only solution to Atlanta's traffic woes; it is one of the ONLY cities where (as a native Bostonian brought to my attention) two major interstates actually MERGE TOGETHER THROUGH THE HEART OF THE CITY!!!  Expressway additions like the outer perimeter and Northern Arc were both snubbed by budgetary constraints, political pressure, and public opposition. The fact that some of the land originally designated for it was sold to housing developers during the real estate boom that peaked & crashed didn't help either.  New express lanes are being used but the fact that they do not have their own on-ramps/exits seem to defeat the purpose if you have to get back into traffic to access/exit them.
      When assessing an area to relocate to you want to take into account and satisfy your 3 main reasons for moving---whatever they may be. You then need to take into account your commute, access to retail, school systems, and taxes (i.e. what you get for your money) if they are not already in your top three!

2014 METRO ATLANTA REAL ESTATE FORECAST PART ONE

   2013 was a huge year in real estate for Metro Atlanta. Not only did we see sales increase all across the board, but the low inventory of homes pushed prices up.  There are three areas that you will see all around you this year as signs that the housing market is growing stronger.  I wouldn't say it's 'back' simply because it's been back for over two years now. News flash, the market rebounded in 2011! Let's look at 3 key areas: new construction, traditional sales, and foreclosures/short sales.
   The low inventory of homes in high-demand areas spawned a new construction boom that will catapult 2014.  All through Gwinnett, Cobb, and Fulton County builders were able to get back to good ol' days of new construction. Decorated model homes, on-site agents, standing inventory with incentives and pre-construction contracts. Extremely high-demand school districts with low resale inventory saw new communities pop up in the $300K+ range. Communities with vacant lots now new have builders constructing comparable homes. In-town areas are seeing undeveloped lots being sold and homes going up starting at $600K.  The benefit?  Everyone likes NEW! The downside?  Well, there are many. In most cases the aesthetics are inferior in quality compared to the original homes in the first phase(s). In the entry level in-town homes, the kitchens and master bedrooms are more grand but the secondary bedrooms/bathrooms and living spaces have suffered.  In the suburban homes, the interior floor plans have grown, kitchens have become more open, maintenance is also more economical with the removal of the two-story family and some builder moving away from gas utilities.  The short comings are in the appliance packages, standard flooring & fixtures, the exterior brick-front construction, smaller lot sizes, and backyard shrinkage.  Builders have continued the cut backs on items like refrigerators, garage door openers, window screens, alarm systems, shower doors, closet racks, architectural shingle roofing & gutters.  But overall, the trade-offs what what you get for your money being worth it or not, is in the eye of the buyer.  Granted, the housing market in 2014 is very similar to the market 6-8 years ago sparked by the current demand so skimping on those items is still justifiable.  What is not the same is no more shady builders.  With tight reigns still on commercial and builder financing, the only builders you see now are reputable ones who are solid financially; John Weiland, D.R. Horton, Ashton Woods are some names you'll recognize but others like Paran Homes & Almont Homes have numerous communities going up throughout the Metro Atlanta area.
   If you're looking at traditional resale homes, the most important thing (which hasn't changed with the new year) is to determine what the home is worth. Getting a quick Zestimate never hurt anyone, but it's what it says it is, an estimate! The good folks at Zillow actually confirmed this on my fan page a year ago (has it been that long?!?!)  To get the true retail value you need to look at homes that have sold within a 3-6 month period, within a 1-mile radius, similar square footage, age, and interior characteristics as ALL of these play a big part in the value of a home. A zip code change or a school district can drastically affect the value of a home even though it's less than a mile away! Finished basements, square footage, and number of bedrooms/bathrooms are also key so you need access to all of this information to compare, adjust cost, and determine the true value of a property. With that you'll then need to analyze the seller's mortgage position to determine the seller's bottom line and formulate an offer than gets you the best deal that a seller will accept! Sounds easy right? Well it AIN'T!!!! That is what great agents are for!
    Foreclosures and short sales are still big buzz words but both lost steam in 2013. Foreclosures because of the lack of them and short sales because the unemployment rate went down and more people were able to stay in their homes! Good for people, bad for inventory. Fannie Mae, Freddie Mac, and HUD foreclosures are still entering the market consistently, but the bank foreclosures are few and far between.  The trick now is getting your hands on one!  Short sales (sadly) haven't gotten any shorter and they can still take 3-9 months to close. My personal short sale listings average a 4-month turn-around from list to close. I still have some that drag out up to 6 months and hell, I know what I'm doing!
  Purchasing in a sellers market can be a real drag with all of the competition and low selection, but doing your homework up front and creating a strategy makes the difference between you either finding a home and keeping your sanity or driving you crazy and driving you around Atlanta!

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.