The End is Near

For the last few years, homeowners have been eligible for a nice tax credit for making energy-efficient changes to their homes.  Well, the end is near.  When 2010 come to a close, so do the tax credits.  If you are buying or renovating, talk to your Summit NJ real estate agent about how you can claim this tax credit before it’s too late.

What’s Included

There are a number of improvements that qualify for the credit.  The energy efficient improvement must have been a new purchase made in the years 2006, 2007, 2009 or 2010.  (Purchases in 2008 were excluded.)  The credit is 30% of the purchase price up to $1500.  The improvements must have been made to an existing home in use as your principle residence.  This means that you will not be able to claim the credit for improvements made on vacation and rental properties.  Renters, likewise, are not eligible for the credit either.

Here is a list of some of the qualifying purchases according to the Energy Star website.

•    HVAC (heating, ventilation and air conditioning) Systems
•    Insulation
•    Roofs (Metal and Asphalt)
•    Windows (including storm windows)
•    Doors (including sliding glass doors, storm doors and garage doors)
•    Biomass Stoves
•    Non-solar Waterheaters (gas, oil, propane or electric)

A few more extreme green items qualify for 30% of the purchase price with no maximum limit.  If you’ve purchased any of the following items for your home, be sure to claim this credit for yourself.

•    Residential Wind Turbines
•    Geothermal Heat Pumps
•    Solar Energy Systems

If you’ve purchase one of these items within the qualifying years, you can still file for the credit.  You’ll need the proper forms and a Manufacturer’s Certification Statement to file.  Check with your accountant to be sure you’ve completed the proper forms.  Not all Energy Star products qualify for the credit.  Be sure to check the website for details before you purchase any of home improvements.

If you have been considering making any of the additions to your home, this summer and fall will be the perfect time to make the changes.  If you are house hunting with your Summit NJ real estate agent, take the tax credit into account when looking at homes that may need a few improvements.

You still have several months to make these energy efficient changes to your home and qualify for the tax credit.  You’ll not only be reducing your carbon footprint and doing something good for the health of the planet; you’ll be doing something good for your own financial health as well.

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.

When You Don’t Agree

What couple agrees on everything?  Aside from those plastic families in your kids’ toys or on TV commercials, people who live together just don’t always agree.  When it comes to choosing something as big as a home a disagreement can become a major relationship rift.  So what do you do when you don’t agree?

Before the Argument Begins

Before you make an appointment to tour homes with your Summit NJ real estate agent, have a discussion about your needs and wants.  Try to find the common ground instead of focusing on the differences.  Think about the important features like the neighborhood, number of bedrooms and proximity to your job.  Decorative features won’t matter nearly as much in the long run.  Decide on your “deal breakers” together and agree not to compromise on those points, no matter how much you love a property.

During the Hunt

While you are touring home with your Summit NJ real estate agent, don’t nitpick.  Keep an open mind for each home whether it’s your most favorite style or least.  Remember that once you own it you can change a lot of the things you don’t like.  If you’re a modernist you can change out traditional moldings or cabinet hardware for a sleeker look.  Traditionalist can add elements like wool rugs and wainscoting to a minimalist room for instant warmth.  Think about how the home fits your list of deal breakers and discuss it with your partner after you’ve seen the whole house.  Talk about the home’s features and benefits after you’ve seen the whole place and then discuss it again a few days later.  This will give you a chance to become more objective about the home.

After the Argument has Begun

You may eventually find that one partner has fallen in love with a home and the other has another one in mind.  This can put a huge amount of stress on a relationship.  Be aware of this fact and make protecting your relationship your first priority.  You won’t feel very good about winning the argument if you lose your partner in the process!  Ask your agent to help you both take an objective look at the properties you favor.  Check the comps in the area and see which is priced the best.  Find out what the rate of appreciation has been on each one.  This may help you predict which one will hold its value the best.  Go back to your list of non-negotiable items and see which one fills more of your needs.  Be willing to compromise.  You may even need to scrap both homes and start searching again.

It may take some work to find the perfect place for both of you.  When you find it and can call it your own, the home you make together will be definitely be worth the effort.

Standing Out in the Crowd

Inventory is up is most markets.  In the real estate industry, this simply means that there are more homes for sale than there used to be.  While this is great for buyers, a market with high inventory tends to make sellers sweat.  Don’t worry.  You and your Summit NJ real estate agent can make you home stand out in the crowd.

Price
The importance of correct pricing in a buyers’ market cannot be overstated.  You don’t want to give the house away, but you cannot set a too high a price either.  Most sellers have a similar thought process.  “We’ll set a higher price so we have more room for negotiating.”  Unfortunately, this plan usually backfires. 

What this strategy actually does is prevent most of your potential buyers from even looking at your home.  The ones who are looking at similar homes to yours will look past you big price tag to other, more reasonably priced properties.  The ones looking in your (high) price range will be expecting more that you have to offer and move on as well. 

If you overprice, you run the risk of sitting on the market too long.  Once that happens, buyers get nervous about your home even if you’ve moved the price to the right numbers.  Price your home well and do it right from day one. 

Staging
Once you have your home properly priced, get the home ready to be seen.  We’ve talked a lot in this blog about staging and curb appeal techniques.  This is the time to pull all those ideas out and put them to good use.  Here are a few phrases buyer use when they choose a home.

• The house felt like a boutique hotel.
• It was so clean it was like no one had ever lived there.
• It looked like home.

This is the kind of feeling buyers want; make sure your property delivers. 

Marketing
There is a whole new world of marketing technology open to realtors.  Is your Summit NJ real estate agent up to date on creating an on-line presence for your home?  If your agent isn’t using today’s techniques as well as the old standards, it may be time to choose someone who will.  The vast majority of buyers will at least begin their home search on-line if not do most of their searching there.  You need an excellent on-line presence with lots of clear, detailed photos.  This is where you will build interest in your property.

Just because there’s more inventory on the market doesn’t mean you can successfully sell your home.  Make sure your property stands out and you’ll be the one who get the offers.

Choosing a Property

House hunting isn’t for the weak.  It’s a tough job and you have to treat it as such.  You and your Summit NJ real estate agent will both be dedicating some serious time and energy to finding the right home for you. 

Deciding on what type of property you want is usually the first step.  It can also be the hardest.  There are so many choices of home to see and so much to like about each one.   You’ll need to narrow the field down a bit, especially in times like these when the inventory is high.  Let’s look at two contrasting pairs of properties and compare some of the pros and cons of each one.  Then you can decide which one work best for you and your lifestyle.

New vs. Old
There are lots of quaint older home in our community and plenty of new construction as well.  Older homes have charm and grace.  They have a proven track record of appreciation and will hold their value fairly well.  They were often made with better materials than we can find in today new homes, like wide plank hardwood floors and cast iron tubs.  Older home were also often made with what is now considered substandard plumbing.  This can be an expensive “repair and replace” project.  They may look dated or have maintenance issues as well.

With a new home you can be more certain that the structure meets or exceeds current code requirements.  The floor plan and designer details will be more current as opposed to a dated older home.  There will be less wear and tear damage on a newer home.  However, they lack the charm and proven track record of an older home.

City vs. Country
This debate has raged for years.  Many say the city is the only place to live.  It’s close to restaurants, shopping and entertainment.  The night-life is much more interesting near a city center that in the suburbs.  There’s also congested traffic, crowding and typically a higher crime rate.  Homes in town are usually smaller and older, too.

The suburbs and country offer more spacious yards and less crowded conditions.  Communities are more tightly knit and people become invested in each other lives.  The sense of community is strong and taxes may be lower.  Your commute may be longer and more expensive the farther you move from town.  You will likely sacrifice proximity to the city’s amenities as well as to your job.

Your Summit NJ real estate agent can help you sift through the different types of properties available in your price range.  Ask lots of questions, make a few lists and soon you’ll know just what type of property suits you best.

All in the Details

The details are what make a house a home.  Little touches and features can capture your heart and stick in your memory long after you’ve moved.  It’s easy to get caught up in the more practical features that our Summit NJ real estate agent is pointing out and we forget to look for those things we will come to value over the years.  Let’s look at a few of the detail you can look for when you’re buying your next home.

Kitchen
Well, this is one room that is necessarily focused on the more practical aspects of life.  Of course you want to look for updated appliances, plenty of storage space and good materials.  But you’ll also want o look for things like cabinet that go all the way to the ceiling.  As your collection of china and serving pieces grows over the years, you’ll appreciate the extra few inches for storing the pieces you use only on Thanksgiving.

Would you like a truly unique but incredibly handy feature in your next kitchen?  Look for a pot filler.  That’s a faucet installed directly above the stove top.  This will save you many trips between the sink and stove toting heavy stockpots of water.  It’s a feature you’ll come to love on pasta night.

Family Room
In the family room, technology reigns supreme.  You’ll want to make sure there is a cable hook up in a convenient spot.  If you can fit in connections for the Internet you’ll be able to use the room for more than just TV viewing.  Look for handy storage for games, toys, books and all the other things that collect in this room.  Make sure the room isn’t too drafty or too hot since you will likely spend more of your time at home in this room than any other.

A rally great feature to fin in a family room is a built-in storage and TV unit.  This will save you money.  You won’t have to buy an expensive piece of furniture to fit the space.

Bedroom
The bedroom will get the next largest chunk of you time at home.  Be sure this room is large enough to be comfortable.  If you can fit a comfy chair or chaise in your bedroom, it will serve as a mini-retreat as your family grows.

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.