Tier One Real Estate

It is that time of year again that we get the annual bill for property taxes and gasp at the Tax Administration's evaluation of what our property is worth. I have had a few comments from clients that somehow the value of their property has increased since 2009 by 25%! "How Wonderful!" my clients tell me, "Let's get this house sold!".  I get excited and start pulling comparables in the neighborhood with anticipation, only to see that we are at our steady pace of 2.5% growth since 2005 with a drop of 10% in the last two years! This is good news that as in the stock market, real estate experiences up and downs and we are at the end of that cycle. However, in the last few years we are experiencing that "adjustment" and are just now leveling off to a realistic growth pattern. Click on http://www.governor.utah.gov/dea/forecasts/housing_retailsales.pdf  to get an idea of what has been happening in the last 30 years.

If you see that perhaps an appeal to the Board is in your immediate future, consider these guidelines and links to help you along the way.

This is a great link to access your tax notice and property tax information: http://propertytax.utah.gov/countysearch.html

This is a link to the Utah State Tax Commission's, Appeals Guide: http://tax.utah.gov/appeals/guide.html

Here is the Appeals Process Flow - Great Information!: http://www.taxadmin.slco.org/boeAppeals/appealsProcessFlow.html

Appeal Procedures require that the property owner submit two things with their appeal: a BE-01.2010 Appeal Form and evidence that supports the opinion of value. This is the Appeal Form:

http://www.propertytax.slco.org/pdf/BE-01_2010.pdf

Finally, if you decide that you need supporting valuation information, please feel free to call me at 801-898-6909 and I can assist you with determining your home's value from the Market's perspective.

All the signs are there for continued improvement in the economy as well as housing markets. It will be a year over year improvement that we can expect to see markets balancing the past few years, two of the country's top economists told REALTORS this week.
By the end of this year, practitioners should see 5.4 million existing-home sales and home price growth of up to 3 percent, said NAR Chief Economist Lawrence Yun.
Already many markets are seeing home price increases, including San Diego, where prices are up some 16 percent. Orange County, Calif., and Boston are two other strong areas, with price increases of 10 percent to 12 percent, Yun said. Salt Lake City is showing a 3% increase in sales from this time last year as well as housing prices stabilizing from a downward trend.

Did the Tax Credit Make a Difference?
The federal home buyer tax credit has been essential for getting buyers back into the market, stabilizing inventories, and shoring up prices, Yun said. He estimated that the credit -- which is available to buyers who had properties under contract by April 30 and who close on their sale by June 30 -- brought more than 4 million households into the market since it was enacted about two years ago. That includes about 1 million who otherwise wouldn't have bought.
More fundamental to the improving housing picture is the increasing strength of the economy, which is on track to expand by 3.1 percent this year after shrinking 2.5 percent last year, Yun said.
With inflation tame and interest rates low, businesses are enjoying robust profitability and their balance sheets are in the best position they've been in for years, said Mike Zandi, chief economist for Moody's Economy.com. That's helping with employment, which about two months ago turned positive for the first time since the economic crisis began and is now seeing about 125,000 net jobs added per month, he said.

What Does This Mean for the Utah Seller/Buyer?

The bottom line for the Utah real estate market is stable. There are opportunities at every corner and it is the ability to arm yourself with information and expertise that will play a vital role in your success. Work with an agent that has confidence and insight that knows how to price VALUE. Whether you are looking for a long term plan or just entering into the buyer's market you must work with an established agent and team to assist you in making those critical decisions. With my tools and team to work with whatever questions or scenarios you have, I am always available.

One of the most common questions that need to be addressed by home sellers is "should I try and sell my home on my own or should I use a Realtor?" Selling your home via FSBO (For Sale By Owner) may at first seem very appealing, after all just think what you could do with that 6% commission. But wait; there are certain things that must be considered before trying the FSBO route.

First of all you need to be aware that today over 7000 homes are for sale in the Salt Lake market, last month only 850 homes actually sold, that equates to an 8 month supply of homes if no other homes come on the market. Well, last month over 1200 homes went on the market.

And what's worse is the fact that only 2% of all For Sale By Owners sell the homes themselves and 98% are listed and sold by Real Estate agents. Can you afford to have only a 2% chance of selling your home?

You could play hardball and refuse to pay the commission on a home you sell yourself, but all that will do is either discourage the buyer from making an offer (after all if you don't pay the buyer will have to pay) because chances are that they will be using a Real Estate agent to buy... wouldn't you?

Another fact that you should consider when making a decision, is that on average a home sold using a Realtor with achieve 16% more than a home sold via FSBO. So most people wanting to save money by selling their own home are in fact financially losing out. This increased sale price is due to a number of reasons including, incorrect pricing (seller setting the price too high or too low) and poor or ineffective marketing.

The most effective marketing tool when selling your home is the MLS (Multiple Listing Service). Hands down, it's a fact. Unlike other states, Utah does not allow Realtors to provide MLS only listings (a MLS only listing is when a Realtor places your home on the MLS but you are responsible for all other aspects of the real estate transaction). This means that if you want your home to appear on the MLS you must list your home with a Realtor.

Another advantage in selling your home via a Realtor is that it saves you time. A good Realtor will guide you through the home selling process ensuring that you do the least amount of work and suffer the least amount of stress. The reality is that the only people that call you when you try and sell yourself is real estate agents - because they know you really don't have a chance of selling the home by yourself.

The reality is that in today's "buyer's market" you have to use every means necessarily to ensure you get the highest price, the best marketing, and the best representation available.

At about 3 o'clock New Years Eve afternoon, going into a long three-day weekend, our home furnace died. Luckily I found a repairman willing to make a quick temporary fix to get us through the long weekend, we're now faced with the decision to band aid the thing or replace it entirely. I've been aware Utah was given money from the federal government for replacing old appliances, did some research and came across this article by Lois M. Collins in the Deseret News summing up the program details:

Utah consumers will soon be able to get rebates for replacing energy-hog appliances as part of the federal stimulus program. State energy officials are in the process of hiring a contractor to administer the program, expected to start around mid-February.

In July, Congress announced its $300 million State Energy Efficient Appliance Rebate Program, the equivalent of a "cash for clunky appliances" program. Utah's share will be $2.6 million and change, paid in the form of rebates for the purchase of new appliances like washers and refrigerators. An energy-efficient washer can save a consumer as much as 40 percent in utility costs, according to Rocky Mountain Power.

How much a new appliance will yield in rebates is still undecided, said Jason Berry, manager of the Utah State Energy Program, which will oversee the rebate efforts. But they're likely to be similar to rebates offered by Rocky Mountain Power and Questar, he said, with one exception: While those programs pay a flat amount for a qualifying appliance, this rebate will probably pay more for higher-performance products, which tend to be more expensive. There are degrees of efficiency within Energy Star-rated appliances, he said, and the state wants to give an incentive to get the best product, even if it costs a little more.

The stimulus rebates also can be paired with other rebates to boost savings, but they are not retroactive. If consumers have to replace an appliance before the details are worked out and the program formally opened, they'll get no stimulus rebate.

And it's a limited pot of money, distributed first-come, first-served, Berry said.

Consumers won't have to guess, though, about what qualifies. The state plans to create a list of acceptable products and how much the rebates are.

Some states have already kicked off their version of the program, and there is great variation. Some have required that the transaction include having the old appliance hauled away. Some also offer the rebate not on the basis of a purchase, but solely on the fact that the purchase is taking an older, inefficient appliance out of commission.

Utah plans to include the recycling of old appliances, particularly refrigerators, freezers and air conditioners as a condition of the rebate.

People who want to learn more can go online to geology.utah.gov or can e-mail energyappliancerebate@Utah.gov to get on the mailing list for updates.

I'm not sure our furnace will last until the bureaucracy is straightened out or if it will even be included in the program. I've signed up for updates and will note any as I receive them.

After investing in real estate for the last 10+ years I've had my share of mistakes. Luckily they've only been small because I always had a plan and I always had more than one exit strategy. I've always invested for the long term so watching the latest fix and flip craze leave so many people, my friends, in dire straights has been extremely painful. At one point, as the market was going up, one of my mentors - someone I really looked up to told me I was being too conservative and was missing out on an opportunity of a lifetime. Recently I come to find out that all I missed out on is purchasing one of his "flips" in a pre-foreclosure short sale.

Here's a list of mistakes most beginner (and experienced) investors often make.

Speculate - Most new investors follow the herd, listen to the media and buy with the hope the property will appreciate. This is as much of a gamble as hand picking stocks or going to the Casino. Buy below market properties that cash flow.

Buy at Market Value - Beginners almost always buy property straight off the MLS for market value. You can find deals in any market and there are always distressed properties. Cherry pick from distressed properties at 70% or less of market value. These still can be found on the MLS but it takes a lot of searching and a good agents assistance.

Fall in love with a deal and get your emotions involved - Many beginners are guilty of this one. Their first few deals they spend minimal time finding a deal. As soon as a prospect is located, they fall in love and do anything to get that property. Emotions drive the decision, instead of making an informed business decision. I look at hundreds of properties before I find a keeper. Filter out the duds and cherry pick only the best deals.

Put too much down or too much of your own money - Real estate is an OPM or Other People's Money industry. You should minimize how much of your own money is in a deal. And always make sure you have plenty of reserves to handle any not so pleasant surprises.

Only have one exit strategy - To minimize risk, it is imperative to have multiple exit strategies. If you cannot flip a property you can quickly end up upside down, behind in payments and lose the property and your credit. Instead, buy below market properties that cash flow. That way you can sell retail, wholesale, lease option, seller finance, refinance, even rent and hold.

Buy in Warzones - In today's market you can find huge discounts in many areas with the glut of foreclosures. Do your due diligence. Buying a property for 20K worth 80K sounds like a slam dunk, but not if the property is vandalized multiple times during repairs, surrounded by 20 other foreclosed properties and there is next to zero interest from renters or buyers due to the location in or near a warzone. Make sure there is strong demand from renters and/or ownership in the area.

Do not consult an expert or build a team - Many people are do-it-yourselfers and cannot fathom the idea of another person giving them advice or handling tasks. Real estate can be very passive if you build a solid team and many experts are more than willing to give you advice that could significantly impact your success and experience as a beginner.

Many gurus make real estate investing sound so easy.

News flash, it is not.

Many beginners make one, if not all the above mistakes and this can lead to a miserable investing experience. Whether you are a beginner or an expert, it is always a great idea to get as many expert opinions as you can, they will make you aware of many potential mistakes and red flags. Play the numbers game and cherry pick from as many prospects that meet your criteria as possible. Always do extremely thorough due diligence and have multiple exit strategies. And finally, happy and profitable investing.

When you purchase a home you are not just buying a home, you are making an investment. As with all investments you want to know if you will get good returns, or if you will lose money.

History shows that in the U.S. homes increase in value about five percent per year. Now obviously in some years homes will increase more than 5 percent and some years will see homes decrease in value. Home price appreciation also varies from region to region.

Now 5 percent may not seem much, you could probably earn more by investing in the stock market. The difference is when you buy a home the chances are you will not be paying cash, most of the cost of the home will be covered by a mortgage. For example, typically you put 10% down and the remainder is paid via a mortgage. So given this information if you purchased a $200,000 home, your cash investment would be $20,000. With an average appreciation of 5 percent, your first year's return would be $10,000, that's a return of 50% on your cash investment of $20,000.

Now obviously there are other costs to consider. There is the property tax, home insurance, utilities, maintenance and of course the mortgage payment. While these costs may seem to cancel out any gain in home value, there are certain criteria, which can offset this cost.

For a start both property taxes and mortgage interest can be deducted from your taxable income. So for example, if you pay $10,000 in mortgage interest and property taxes in a year, you would get a $10,000 taxable income deduction. The other main cost, which offsets your mortgage, is the cost of rent you would be paying if you had not purchased a home. With rent you receive no benefit, any appreciation in a homes value benefits the landlord, while you pay the landlords mortgage via your rent payment. In other words rent is dead money.

One of the other benefits of owning your own home is that you have fixed monthly mortgage payments (assuming you have a fixed rate mortgage and not a variable rate mortgage), which makes it easier to plan your finances. With a normal fixed rate mortgage your interest payment will always be the same, if the monthly payment is $1000, then in 10 years time the monthly payment will still be $1000. How much will your rent have gone up in those 10 years?

Depending upon the type of mortgage you choose, owning your own home may also help you save money. With a repayment mortgage each time you make a payment, some of the money goes towards the interest and some of the money is used to pay down the principle. This means you are reducing your loans balance, if effect increasing your savings (assuming the value of your home is not going down).

The benefits are clear. Buying your own home could be the biggest and best investment you make in your life.

One question that we Realtors get asked regularly by folks who are listing their homes for sale is what do-it-yourself home improvements would be most beneficial in selling their home. 

HomeGain just released the results of their annual survey, Home Sale Maximizer.  This survey covers the top do-it-yourself home improvements as recommended by Realtors, and the expected monetary return on investment.  After reading the survey results I have to say that based on my personal experience I would have to agree.

According to the HomeGain survey, the top five home improvements that Realtors recommend to home sellers based on cost and return on investment (from highest to lowest ROI) are: 

1. Cleaning and de-cluttering ($200 cost / $1,700 price increase / 872% ROI)
2. Home staging ($300 cost / $1,780 price increase / 586% ROI)
3. Lightening and brightening ($230 cost / $1,300 price increase / 572% ROI)
4. Landscaping ($320 cost / $1,500 price increase / 473% ROI)
5. Repairing plumbing ($385 cost / $1,250 price increase / 327% ROI) 

"Many Realtors agree, especially in a buyer's market, that sellers who make these recommended home improvements often get their homes sold faster and at higher prices," stated Louis Cammarosano, General Manager at HomeGain.

Rounding out the top 12, the list of low cost, do-it-yourself home improvements includes: updating electrical, replacing or shampooing carpets, painting interior walls, repairing damaged floors, updating kitchen, painting outside of home, and updating bathroom's.

The home improvement projects with the highest price increases to a home's resale value are updating the kitchen ($1,200 cost / $2,850 price increase), followed by painting the outside of the home ($900 cost / $1,815 price increase) and home staging ($300 cost / $1,780 price increase). 

I offer all my clients a complimentary evaluation of their home and what things they can do to increase their odds of selling in the least amount of time and for the most money.  I also can offer a list of good, professional stagers and home organizers.  Some sellers are very receptive, and some are not. 

Congress has extended and expanded the homebuyer tax credit. The modifications become effective when President Obama signs the bill. The dates enacted in Feb 2009 expire Nov 30, 2009. The new rules extend the credits from Dec 1, 2009 to April 30, 2010. See the PDF attachment for a side by side comparison of the changes.
Homebuyer Tax Credit Changes.pdf

Congratulations! You just made it through the worst economic downturn since the 1930s. While it may be a little premature to declare the recession is over, all indications point to a growing economy and a recovering housing market. The biggest news of an economic turnaround came last week when the Commerce Department reported that all goods and services produced (gross domestic product) in the United States rose at an estimated annual rate of 3.5 percent in the third quarter.

The positive uptick follows one year of negative declines to GDP. Closer to home, sales of existing single-family homes across the Wasatch Front climbed 4 percent in this year's third quarter compared to the same period a year ago. The increase was the first time in four years that home sales showed a year-over-year increase during a third quarter.

Nationally, the good news is that home prices have stabilized and even started to rise. According to the latest S&P/Case-Shiller Home Price Report, 17 of 20 major metropolitan areas showed house-price increases from July to August. Of the 20 cities tracked, only Charlotte, Cleveland and Las Vegas showed small decreases (Salt Lake City was not included in the report). These developments, in part, led Moodys/Economy.com economist Mark Zandi in a recent report to national homebuilders to declare that "the housing crash is history."

For home buyers, that means the bottom of the market has likely come and gone. And more personally, it means the worst is behind us.

A short sale occurs when the seller owes more on their property than they can sell it for and so asks the bank to accept less than what the seller owes. The process of selling a home via short sale contains many complications and contract issues, and can be stressful for both the seller and buyer of the property.

With all of that said, they can also represent an excellent value - but not all the time and not for all people. To buy or sell a short sale, you need to have time, if fact they should really be called long sales given the amount of time it can take to close the transaction. Depending upon where you are in the bank cycle (is it an approved short sale etc.), they can take 3-4 months to close, but can also take as long as 9-12 months.

Short sales become common in a declining market, where home prices fall in value and sellers can no long meet their mortgage payments. In these circumstances it is easier and often cheaper for the bank to accept a short sale, rather than take the home into foreclosure and then have the expense and work of having to sell the property themselves.

One thing I must point out is that each lender goes about the short sale process in a different way and some take longer than others. There are really two ways you can initiate the short sale process, one is to try contacting the bank fill out the paperwork and get the short sale preapproved before it is listed for sale. The other way is to place your home on the market and when you receive an offer, present that to the bank and initiate the short sale approval process at that stage. Given than banks are currently overwhelmed with short sales, most currently will not even consider a short sale until the home has received an offer. 

In order to get approval for a short sale, you must work with the banks loss-mitigation department, and complete some financial forms to prove that you are meet their requirements for a short sale. Once the paperwork has been submitted you wait, in fact you can be waiting several months before you hear anything. If a short sale is approved the bank will assign a negotiator, who will order an appraisal. Once the appraisal has been completed the lender will be in a position to accept or reject any offers for the home.

Because the bank is the party taking the loss, there are also some implications for the real estate contract. A short sale is a sale between a buyer and a seller that is contingent upon the banks approval. Because the short sale process is often initiated after an offer has been made on a property, a common tactic is to price the home so low that it will receive multiple offers. The bank may accept one of these offers, counter, or may go back to the buyers and tell everyone to provide their best offer. Remembering that this process may have taken several months, the chances are there will be some very disappointed buyers, who will now have to start the process all over again.