Steps to Ensure Your Property Retains its Value
By Linda Horn, CEO of Capital Concepts
For most of us, our home is our biggest asset. So, when the “For Sale” sign lingers a little too long on a neighbor’s lawn or a home in your neighborhood is foreclosed upon, it’s natural to worry whether your home’s value might be impacted. However, there are several steps you can take to ensure your property retains its value, even in a down real estate market.
Stay up-to-date on changes in your local market. According to the Center for Responsible Lending, 2.2 million families with subprime loans issued from 1998 through 2006 have lost or will lose their homes to foreclosure in the next few years. That represents a projected maximum equity loss of $164 billion (Source: http://www.responsiblelending.org/
While foreclosure rates are highest in California and Florida, a general weakness in the housing market is evident just about everywhere – and even one foreclosed upon home in your area can make buyers skittish about your neighborhood. Foreclosures may prompt some potential buyers to float you a lowball offer because they figure that you, too, are dealing with financial difficulties. A foreclosure in the area can also impact how real estate agents price your home.
You can educate yourself about the subprime lending crisis by visiting the Center for Responsible Lending’s web site at www.responsiblelending.org. Of course, the easiest way to keep on top of the local real estate market is to read the real estate section in your newspaper each week. Additionally, make it a habit to walk or drive around your neighborhood to take note of “For Sale” and “Sold” signs and attend a few open houses each month. To figure out your home’s estimated value, log on to www.ofheo.gov and click on “House Price Calculator.”
Form a neighborhood watch team. It doesn’t take long for an abandoned, foreclosed upon house to start looking like it belongs in the opening scene of a bad horror movie. To protect your real estate investment, get together with neighbors and form a group to watch the house, ensure there’s no vandalism, and take care of routine maintenance such as mowing the lawn or shoveling the walk. Better yet, if the house has been on the market for awhile, pull some weeds or plant flowers to boost its curb appeal. Finally, if other people in your area are having trouble paying their mortgage, suggest they contact the Home for Ownership Preservation Foundation at 888-995-HOPE. The Department of Housing and Urban Development also can provide counseling. Call 800-569-4287.
Scale back home improvement projects. Now may not be the time to do major home renovations. According to the recent “Cost vs. Value” report from Remodeling magazine, this year’s industrious homeowner won’t be recovering as much of the costs for remodeling as renovators did in past years. For example, although in 2005, most projects returned at least 85 cents on the dollar, today, less than a quarter of home renovation projects return the same amount. In particular, high-end renovations may be viewed as over-improvements (Source: http://www.remodelingmagazine.com./
Keep up with routine maintenance. Sure, major or trendy overhauls are out of the question, but routine maintenance, like cleaning out the gutters and downspouts, is always a must. Think of the old cliché, “An ounce of prevention is worth a pound of cure.” That is, the tree limbs you prune today won’t crash through your picture window in an ice storm and thoroughly inspecting your pool before opening it for the season can help prevent accidents.
Review your insurance. Uncertainty is a fact of life in any market, and homeowner’s, mortgage, and term life insurance policies can ensure your home is paid off if something happens that impacts your ability to pay your mortgage. To completely protect your investment, however, make sure that your home is insured for at least 100% of its estimated replacement cost. That means you should review your homeowner’s policy annually to make sure that your coverage matches your needs. You might answer these questions: Have you recently remodeled or improved your home? Has the rate of inflation risen since your last appraisal?
Rethink your strategy if buying or selling. Forget the bidding wars of recent years where homes sold for more than the asking price. If you are looking to buy during this down cycle, you may be able to drive a harder bargain. A larger inventory of new homes on the market is fueling buyers’ ability to cajole builders into including extras like granite countertops. However, to temper the risk that, in the short-term, the home you purchase today may fail to increase in value or may even decrease, take a conservative approach to financing. This may not be the best time for an interest-only mortgage.
If you are selling, prepare to work harder. You might start with the little things, like sprucing up the yard, that increase curb appeal. Remember, too, that in a slow market buyers won’t overlook leaky roofs and wet basements, so make these repairs before putting your home up for sale. Finally, follow the lead of homebuilders and consider throwing in extras, such as your appliances or yard tools, to attract buyers.
Keep a long-term view. Don’t panic. It’s important to think of homeownership as a long-term investment. Of course, in a hot real estate market, it’s possible to make a quick buck, but remember that you don’t lose money on a home until you sell at a discount of your purchase price. Unlike the darlings of the dotcom bubble, the price of real estate will never drop to zero. At some point the housing market will rebound but, unfortunately, as is the case with stocks, it is impossible to time the market.
Independent Contractor of Money Concepts International Inc. All Securities through Money Concepts Capital Corp. Member FINRA/SIPC
11440 Jog Road Palm Beach FL 33418
