Advice abounds about preparing a home for sale.  There is no shortage of information of how to get your primary residence looking good for the listings.  But is the process any different for preparing a rental or investment property for resale?  There are several similarities but a few differences as well.  Talk to your Summit NJ real estate agent about what your property needs.

Occupancy
When selling a primary residence you will likely be living in the home as it is being shown.  This means someone who cares will be there to keep the home looking livable but not “lived in”.  When you have a rental property, there situation can be drastically different.

In some cases the tenant still occupies the property.  Your tenant could be a meticulous house keeper or a total slob or anything in between.  You can’t count on a renter being as conscientious as you would be when the realtor is on the way.  If you have a smoker or a slob as a tenant you may need to wait until the lease is up and the tenant has vacated to show the property.  If you have a neatnik for a tenant, count yourself lucky and show him some appreciation (perhaps in the form of discounted rent) for the trouble of dealing with showings.

Cleaning
Cleaning takes on a whole new meaning when dealing with a rental property.  Not all tenants take care of their rented home in the same manner as they would one they owned.  Even “nice” people or “good” tenants can be a little careless.  A rental property will probably need a professional cleaning from top to bottom if you want to put it on the market.

Carpets should be steam cleaned, grout whitened and exteriors pressure washed.  You may need to apply a coat of primer to cover any wall or ceiling stains before painting.  Bathroom and kitchen floors can also be professionally steam cleaned.  Don’t forget to clean up the exterior as well.

Staging
Staging may be a touch more difficult when you are preparing a rental for sale.  After all, you won’t have your own furnishing to fill the space.  If your property is still occupied, it may be impossible to really stage the home for sale.  The best you can do is to ask the renter to straighten up and minimize the clutter.  If you have waited until the property is vacant, consider renting basic furnishing or hiring a stager to give the home a cozy feeling.

Your Summit NJ real estate agent can give you more advice about getting your rental property ready for the market.  Be prepared for some hard work.  It will pay off at the closing table.

Real estate has long been a good investment.  Wise investors have been including it in their portfolios for generations.  The recent changes in the market may have made investing in real estate work a little differently but that doesn’t mean it isn’t working.  Many investors are using the current climate to acquire even more real estate.  Your Summit NJ real estate agent can give you more details on how investing in real estate can benefit you.

There are at least two different strategies for investing in real estate and the market usually decides which is more profitable at any given time.  One strategy is short-term and the other is long or medium-term.  Each has benefits and draw-backs.

Short-term real estate investment, also called “flipping”, was very popular when prices were at their peak.  It was popularized on television and praised in the press.  In this strategy, one buys a low-priced property then makes improvements quickly and resells.  The timeline must be very short to avoid paying out more in mortgage payments and construction than can be made in profit.  Typically, the turn-around between buying and selling is between a few months and a year.  Some properties can take up to two years to complete and resell and still be considered short-term investments.

Flipping makes a good strategy when the initial buying price is quite low and there is a good market for the end result.  Construction cost cannot be allowed to exceed the budget or they can eat away any potential profit.  In any market where inventory is high, flipping is a risky investment.  When inventory is low, it can yield an excellent payoff.

Medium-term or long-term investing is a “buy and hold” strategy.  Long-term investors may own rental properties or vacation homes.  A primary residence can be called a long-term investment as well.  Usually, at least 5 years is required to cover enough of the expenses to make reselling a profitable endeavor.

Making money from a long-term investment requires patience.  You may have to wait through a few bad years before finding the best market conditions for selling.  However, during that time most investors are able to enjoy the property themselves, whether it is vacation property or a private home.  The biggest risk in long-term investing is in choosing a property that will appreciate in value over time.

Investing in real estate may still be a good idea, but it’s not a strategy to be taken on without help.  An experienced Summit NJ real estate agent can guide you to the investment that’s right for you.

Once you’ve decided to make the jump into real estate investment, you may find that you need some help.  Your Summit NJ real estate agent will be able to guide you toward properties that will make good rentals. However, finding renters may be harder than you think.

There are a number of factors that make a good renter.  It’s not always easy to find these qualities on your own.  As an independent landlord, you may not have the time or resources available that will sift out the good applicant from the bad.  You’ll need to have a carefully written contract, perform a background check and secure at least a few references.

Many property owners find this process to be daunting and time consuming.  For this reason, they choose to employ a rental agency to take care of all the details.  If you intend to use a rental agency, make sure you’ve chosen one that is trustworthy and will be able to fit your needs.

Check References.
When you choose your Summit NJ real estate agent, you probably asked around for references.  You checked with coworkers, friends and family to see who had good experience and who was not happy with their realtor.  You should do the same thing with a rental agency.  Talk to both owners and tenants so you get a full picture of their services.  Ask for references and call them.

Know your Needs.
Some agencies specialize in long-term rentals while others solely serve owners of vacation properties.  Still others so double duty and serve both needs.  Be sure you are choosing the right type of agency for your property.  The agency you choose should have experience in the type of rental you own or are planning to buy.  You don’t want to be the guinea pig for a start-up operation or an expansion.

Understand the Fees.
If an agency is securing, screening and checking the backgrounds of potential renters plus collecting rent and taking care of maintenance they will naturally expect to be compensated.  Make sure you’ve discussed their fees and services and are satisfied that the charges are fair.

Stay Informed.
Many property owners make the mistake of assuming the rental agency is taking proper care of their property, renting to only the best tenants and charging only necessary fees.  They sometimes get a nasty surprise when they decide to sell and find the condition of the property has become deplorable.  Don’t fall into the trap of complacency. Check up on your property and keep an eye on the bills.  A service call or two is expected but if the same item keeps showing up month after month they could b e padding the bill.

Real estate can be a solid investment.  A rental property can help subsidize your income and give you a nice nest egg for retirement.  Be sure you leave its management in capable hands.

If owning a home is the American Dream, finding a steal must be the American fantasy.  House hunters get a certain sparkle in their eyes when words like “price reduction” or “short sale” come up in conversation with their Summit NJ real estate agent.  When some buyers start talking about auctions, it turns into a gleam.

The idea of getting something very valuable for next to nothing is quite tempting.  However, making a real estate purchase at auction can be a bit tricky.  It’s not the best method for a first time buyer and even seasoned real estate veterans can make mistakes.  If you’re thinking about buying at auction, talk to your Summit NJ real estate agent about the pros and cons of this type of purchase.

Why do owners sell at an auction?
Real estate is typically auctioned off by a highly motivated seller who wants the process finished in the fastest possible manner.  The property may have been a foreclosure or an inheritance or anything in between.  Buyers come prepared to buy, not look.  The buying and closing period is accelerated and the owner doesn’t have to keep carrying costs.  Competitive bidding may also drive the purchase price to a better end for the seller.  There is no negotiation necessary.

Why buy at an auction?
A buyer may be able to find a piece of property at a price well below market value.  Not every auction will yield this kind of gem, though.  You can be confident of getting a property with a clean title at closing.  Again, there will be no negotiations and no hassles concerning price.  If you don’t want to pay beyond a certain price, don’t bid it.

Types of auctions
There are three basic types of auctions.
·    Absolute: highest bid wins, period.
·    Minimum bid: seller sets a starting point for the bidding and the price goes up from there.
·    Reserve: seller has the opportunity to accept or reject the winning bid, protecting him from selling below his needed price.

Cautions
Don’t think you’ll be able to browse all the area auctions till you find that diamond priced like a rhinestone.  Buyers may be required to produce a certified check for each property they intend to bid on to show they truly intend to purchase.  You can, and should, observe an auction or two before becoming a buyer to see how the system works.  Don’t buy a property that you cannot have inspected.  Buying “sight unseen” is never a good idea.  Your Summit NJ real estate agent can give you more precautions about buying at auction so talk to him before you pick up your bidding paddle.

Selling your home is a complex process.  One of the most important decisions you and your Summit NJ real estate agent will make is pricing your home.  This process is based on a number of different variables and your agent will help you sift through each one to arrive at a sellable price.  Keep an open mind when pricing.  Remember, you are looking for the price at which your home will sell and sell fast so don’t get too caught up in the numbers.

Checking comparable sales in your area will be one of the first things your Summit NJ real estate agent does to help you find the right price.  “Comps” are recent sales of homes similar in size and with similar features to your home.  You are looking for similarities, not exact matches.  Several factors are considered when looking for a comparable home.

•    Size:  Physical comparability, like square footage and lot size, will be a large part of choosing a comp sale.  The number of bedrooms and bathrooms and garage space will also be factored into the mix.
•    Location:  A comparable home should be relatively close by your home.  It may or may not be in the same neighborhood but it should be in one that has similar characteristics and amenities to your own.
•    Features:  A comp sale will have similar features to your own home, but they will not be exactly the same.  Some features have wide range of installation cost but a similar value.  For example, your exotic African mahogany hardwood floor may be valued about the same as your neighbor’s plain Jane oak.
•    Condition:  Your agent will choose homes that are in as good a condition as yours.  If you haven’t updated in decades or have deferred maintenance issues, your home will be compared to homes of a lower condition.
•    Age:  The year in which your home was built will be a factor for comps.
•    Terms of Sale:  If your home is not being sold as a short sale or foreclosure, you won’t likely be compared to homes that have been sold as such.  These sales may have a negative effect on your home’s value, but they won’t be considered for an “apples to apples” comparison.
•    Market Value:  This is often a tough pill for sellers to swallow.  The current market will have a lot to do with the price set for your home.  What you paid when you purchased the home has less to do with the selling price than most of us would like.

Talk to your Summit NJ real estate agent about the comps in your area and what they mean for your home’s selling price.

Charming Fixer or Money Pit?
Opinions abound on the question of whether or not buying a fixer-upper is a great idea or a huge mistake.  There are some who are convinced that move-in ready is the only way to buy and others who believe just as firmly that a little elbow grease will get you a better deal.  You and your Summit NJ real estate agent can discuss the pros and cons of each choice to see what is best for you and your family.  If you are committed to finding a fixer, here is a little advice for you.

The Pros
There are a few major points in favor of buying a fixer.  Price is one, of course.  You can often buy a home in need of some TLC at far below the market value.  There is a lot more room for price negotiation on a fixer and likely far less competition.  Yours may be the only offer they have on the table.  As a result, sellers are frequently more motivated to sell a fixer.  You may find a home in an otherwise unaffordable location if you are willing to put in the work.  When you have finished your renovations, additions or fixes you will have exactly the home you want.  You will be in control of colors, finishes and every other decision.

The Cons
Buying a fixer has some big negatives as well.  Fixer-uppers are notorious for supplying nasty, expensive surprises once the deal is closed and the work begins.  A fixer can indeed become a money pit in a hurry.  You’ll be likely have to live in the construction zone for some time as well, especially if you are doing the work yourself while working your regular job.  This can take a toll on everyone in your household, especially when you have to make dinner on a hotplate every night till the kitchen is finished or deal with an unfinished bathroom till the tile work sets up.

The Advice
•    Don’t skip the inspection.  In fact, have several done.  Ask your Summit NJ real estate agent about the different types of inspections.
•    Be realistic.  If you’ve never been a handy person before, this isn’t a good first project.  Know your own limits.
•    Research the reno.  Find out how much the changes you want to make will cost before you close on the home.  Know the limits of your budget.
•    Contact a contractor.  If you are not experienced in construction and the associated costs, ask a reputable contractor to help you asses a potential fixer.
•    Do the math.  Check the area comps and make sure you are getting a good deal.  You don’t want to over-improve for the neighborhood or end up with spending more in fixing that you save in buying the fixer.
•    Love the location.  Putting in all that time, effort and money isn’t worth it if you don’t love the neighborhood.
•    Look at the bones.  If a home has a solid structure and pleasing layout, your job will be much smaller than if you have to gut the whole interior.

Think carefully about whether buying a fixer-upper is a good idea for your family.  Talk to your agent about all the pros and cons before you make a decision.

The Foreclosure Next Door

Although the market has started to recover, foreclosures are still a difficult fact of life in many neighborhoods.  This devastating event affects the homeowner, of course, but it can have wider reaching consequences too.  The property values of the other homes in a neighborhood can be touched by a foreclosure as well.  How can a home owner mitigate the negative impact of a nearby foreclosure?

Keep your Perspective

It’s frightening to think that a neighbor has lost his home because it makes us realize what could happen to us if our employment, health or other circumstances changed.  It’s important to maintain some perspective and not let that fear turn into panic.  Your home’s value won’t plummet because of one close by foreclosure.

Appraisals are usually based on three primary factors: cost to build, value of the land and current market value.  While a foreclosure may show up as a comparable sale, most appraisers won’t give one aberrant sale much weight when appraising another home.  However if your neighborhood has a large number of foreclosures, you may have more cause for worry.

Pitch In

The average loss of value to a home that neighbors a foreclosure ranges between .5% and a little over 1%.  The homes impacted the most are the ones closest by the foreclosed home.  If you were to ask your Summit NJ real estate agent, he’d probably tell you the problem lies more in the neighboring home’s appearance than anywhere else.

Some REO (real estate owned) properties look just like every other home for sale.  They are well-kept and sell quickly.  Others fare less well.  Sometimes, owners in financial difficulties have allowed the property to fall into disrepair.  The lawn may become overgrown, the paint can suffer and the houses within sight of these eyesores suffer the worst damage to their values.  If the home is unoccupied and looking it, be a good neighbor and pitch in to make it look a little better.  Mow the lawn when you’re taking care of your own.  Organize the neighborhood watch to keep an eye on the home so it is not vandalized or looted.

Be Patient

A close-by home will feel the most damage to its value around the time the bank takes over the title to the home.  This is the time when neglect is usually at its worst.  The loss of value to other neighborhood homes will be at a peak around the time the foreclosure actually sells.  If you practice a little patience, you may be able to ride out the storm.  Talk to your Summit NJ real estate agent about the best time to sell.

Home Trends

Many homeowners have been choosing to renovate and update their current home rather than upgrade through a new home purchase.  That’s a great choice in a dicey economy, but choosing to renovate rather than buy or sell doesn’t mean you don’t still need the advice of a realtor.  Your relationship with your Summit NJ real estate agent can be a huge help in picking renovations that will increase the value of your home.

Trendy vs. Updated
When you shop for clothes, you always look to spend on fashion and not fad, right?  You should take the same approach to home improvement projects as well.  You want your home to look up to date and current, but not so trendy that it looks dated in just a few years.  Think about classic, timeless treatments in areas that are expensive and difficult to change. 

Take the two biggest renos most homes will undergo: the kitchen and the bathroom.  It wasn’t that long ago that the “country home” look was all the rage and we all thought it was a new classic.  Now those light oak cabinets, floral wallpapers and matching solid-surface counters in blue and green make buyers cringe with 80’s flash-backs.  Keep the big ticket items neutral and go trendy with things like paint and fabrics, which are relatively inexpensive and easy to change.

Don’t Over-improve
Talking to your Summit NJ real estate agent before you break ground on a reno will help you avoid one of the most common errors homeowners make: over-improvement.  Many forget that there is a certain maximum dollar amount that your home is likely to get on the open market.  Even if you double its value in renovations, you’ll only see so much at the closing table when you eventually do sell. 

Put the Money Where it Counts
There are certain renovation projects that will defy the trends and always provide a good return on your investment.  Anything that adds living space will give you a good return.  Converting unusable attic space into a bedroom or finishing a basement into a livable family room will add value to just about any home, especially if the result has a good ceiling height.  Decks and outdoor spaces that extend the living space are also good uses of a dollar.  Avoid trendy additions that are too taste specific to appeal to many buyers or cannot be repurposed by another owner.  A humidity and climate-controlled wine room might be perfect for an enthusiast but it won’t make a good guest room when the next owner needs one.

A reno won’t always guarantee you a bigger selling price.  If you are careful to keep trends in their place, you might be able to maximize your investment while still enjoying your home to the fullest.

A Glossary of Terms

Any newspaper you pick up or read on-line is going to have at least a few articles on real estate gracing its pages.  For first-time buyers, recent grads and anyone else new to the real estate, some of the terms tossed casually around can be confusing. 

If you are house hunting, you may want to ask your Summit NJ real estate agent for clarification on any abbreviations or technical terms you don’t fully understand.  Don’t worry about appearing foolish.  It’s always better to simply ask a question than to make a decision as big as buying a house without a full understanding of what you’re doing.  Until you can make time to talk to your agent in person, here is a quick rundown of a few important industry terms you should know.

ARM:  This abbreviation stands for Adjustable Rate Mortgage.  In this type of mortgage, your monthly payment is tied to an index.  The interest you pay will rise and fall according to this index.  In short, the interest rate fluctuates and your payments can go up (or down) with market trends.

Fixed-Rate Mortgage:  In contrast to the adjustable rate mortgage, the interest payments on a fixed rate mortgage will not change.  The rate is “locked in.”  This type carries far less risk than an ARM but should interest rates fall, your payments will not follow suit.

Earnest Money:  Sellers may require a certain amount of money to be paid up-front to prove that the buyers are serious about the purchase of the home.  Also known as a “good faith” deposit, the money is usually held in a real estate broker’s trust account until the times comes for the property to change hands.  You may or may not get this money back if the sale falls through.  Be sure to ask your Summit NJ real estate agent for all the details before writing a check.

Escrow:  In the simplest terms, escrow is money held by a third party until a certain condition or conditions are met.  For example, you may have to pay into an escrow account, in addition to paying again the principle and interest, to pay off taxes or homeowners insurance when they are due.  This is an oversimplified definition so be sure to have your agent give you a full explanation.

PITI:  This abbreviation stands for principle, interest, taxes and insurance.  These are the four basic elements of your mortgage payment.  Principle is the actual amount you borrowed.  Interest is the fee you pay for the privilege of borrowing.  Taxes and insurance are fairly self-explanatory.

These definitions are a bit over-simplified but they will at least give you a few points to discuss with your agent.  Don’t be afraid to ask questions.  It’s the best way to learn.

The Skinny on Closing Costs

Are you trying to close on a home before the April deadline for tax credits expires?  If so, you’ll need to get the skinny on closing costs quickly.  Your Summit NJ real estate agent will give you all the details but here’s a little bit of information to get you started.

In the most basic terms, closing costs are any fees associated with buying or selling a real estate.  The term covers any fees or payments other than the actual purchase price of the home.  Some of these are negotiable, some aren’t.  Some are assessed to the buyer while others are paid by the seller.  Closing costs fall into two different categories of expenditures.  One is non-recurring costs.  The other category is called “pre-paid” items.

Non-recurring costs are, as the name implies, only paid once.  A non-recurring cost could be something like the cost of an appraisal, a title transfer fee, notary fees or loan fees.  Pre-paid fee are those that you will be paying over and over again like taxes and insurance.  Your lender will want you to pre-pay many of these fees in order to protect their investment and yours – the home. 

The total sum of these costs will vary depending on the buyer and the seller involved.  A good rule of thumb is to expect to pay somewhere in the range of about 2-4% of the home’s purchase price in closing costs.  The buyer will have to have these funds ready at the closing table, so keep that in mind when you are planning you down payment and overall new home budget. 

Some sellers are willing to pay the buyers closing costs in order to close a sale quickly, especially in the midst of a buyers’ market.  This is by no means required, however.  As a buyer you can always try to negotiate this point, but you may not always get your way.  Remember, a seller will have certain costs to pay on closing day as well.  Transfer taxes and prorated property taxes will have to be paid off as well as title insurance and commissions. 

Buying a home will require you, as a buyer, to pay more than just your down payment on closing day.  It is essential that you plan these costs into your budgeting.  Keep that extra 2-4% in mind when you are house hunting.  It may not seem like much but a home costing just $200,000 that could mean $4000 to $8000 in closing costs. Keeping this fact in the budget may help keep you from falling for a home above your price range as well.  Your Summit NJ real estate agent will help you determine and plan for all these incidental costs, so don’t be shy about asking for help.