Check out the National Association of Realtor's Cost v. Value Report for 2007. Chicago averages are on left, national averages on right.
Saturday, December 8, 2007
National Association of Realtors releases its 2007 Cost v. Value Report
Ever wonder what that remodeled kitchen would be worth? Wonder if it will raise the value of your home to remodel that basement?
Check out the National Association of Realtor's Cost v. Value Report for 2007. Chicago averages are on left, national averages on right.
Check out the National Association of Realtor's Cost v. Value Report for 2007. Chicago averages are on left, national averages on right.
Monday, November 19, 2007
Cash or Mortgage?
A question was recently posted on a real estate forum that I frequent. The question asker wanted to know: "To pay cash for a home or get a loan - which way saves more money if I plan to sell it in 7 years?"
My answer:
The best way to make your decision on cash v. mortgage is to measure the risk on return for both scenarios (with a financial adviser!).
Obviously, paying cash for a home means relatively few risks because a paid-for asset remains just that: paid-for (until, in the case of real estate, there is enough equity in a property to start making the property work for you).
But putting all your eggs in one basket does expose you to some risk: Liquidity Risk. Your cash is all tied up in one place -- what if you need it? Life emergencies do happen! One way to be proactive about this is to always have that 'emergency fund' of 6-12 months of living expenses set aside.
Another risk: There is always a chance that a "should not pass up!" investment opportunity might present itself, and with all your money tied up in the house, there goes the opportunity (opportunity risk ties in with the liquidity risk).
Paying cash also means losing out on the tax-deductible interest rate of a mortgage. If you stay in your home for minimum of 2 years, you will be sheltered from up to $250,000 in capital gains if you are single, and $500,000 if you are married. Returns on other investments are taxable, which minimizes your return.
In the end, it will take an analysis with a CPA to determine your personal best route. It depends on so many things: If you take out a mortgage and have lots of cash on hand, are you actually going to invest it wisely or blow it? If you do invest it, how much risk can you tolerate? It's not always easy to predict return and risk level on stocks and bonds, whereas real estate, though at the mercy of the market, is a bit more stable and predictable.
My answer:
The best way to make your decision on cash v. mortgage is to measure the risk on return for both scenarios (with a financial adviser!).
Obviously, paying cash for a home means relatively few risks because a paid-for asset remains just that: paid-for (until, in the case of real estate, there is enough equity in a property to start making the property work for you).
But putting all your eggs in one basket does expose you to some risk: Liquidity Risk. Your cash is all tied up in one place -- what if you need it? Life emergencies do happen! One way to be proactive about this is to always have that 'emergency fund' of 6-12 months of living expenses set aside.
Another risk: There is always a chance that a "should not pass up!" investment opportunity might present itself, and with all your money tied up in the house, there goes the opportunity (opportunity risk ties in with the liquidity risk).
Paying cash also means losing out on the tax-deductible interest rate of a mortgage. If you stay in your home for minimum of 2 years, you will be sheltered from up to $250,000 in capital gains if you are single, and $500,000 if you are married. Returns on other investments are taxable, which minimizes your return.
In the end, it will take an analysis with a CPA to determine your personal best route. It depends on so many things: If you take out a mortgage and have lots of cash on hand, are you actually going to invest it wisely or blow it? If you do invest it, how much risk can you tolerate? It's not always easy to predict return and risk level on stocks and bonds, whereas real estate, though at the mercy of the market, is a bit more stable and predictable.
Wednesday, October 31, 2007
The Dangers of Overpricing Your Home
It's your castle. It's much better-looking than the one down the street that sold last year in just 2 weeks. You spent thousands of dollars on upgrades. You need this much money to buy your next home. Hey, there's no way you're giving it away.
Is this you? If it is, and you are trying to sell your home right now, you might be putting yourself in the "No Sell" zone.
What is the "No Sell" zone? It's pretty simple: Your are placing your home on the market, not in the market. And if you are pricing your home based on the above thoughts, you are not selling your home.
The harsh reality is, nobody cares what you paid for it, how much you spent on upgrades, how much you owe, or how much you need to walk away with. A property is only worth what somebody is willing to pay for it - period.
In this market that can be a scary thing to accept, especially when you feel you are only 'breaking even'. Especially when your neighbor's home sold for $15,000 more last year. How can that be?
It just is.
So, if you are in a position where you want or need to sell your home, let's take a look at what overpricing it will do for you:
~Let's say the Market Value is $350,000, and you decide you want to "test" the market for a few weeks and you list it at $400,000. Did you know that the first 2 weeks on the market is the most crucial period of a listing?
~Well, we are now in week 2 and activiy should be at its peak. You should have had many showings by now. But for some reason, buyers are not looking at your house because the competition is priced lower.
~The dreaded 3-week mark. Interest is now fading. You've lowered the price, and your house is still on the market, but you are not ahead of the market, you are chasing the market now, and you are struggling to keep up.
~Uh-oh, It's been a month. Interest is seriously waning. Nobody is calling. You now price your property below market in hopes of generating some activity, but most buyers looking for your type of property are already looking elsewhere. They've already seen yours and it 'was too expensive'.
~~It's been 3 months. You've now dropped the price so far that your property is listed as "a steal!"
What happened to "not giving it away"?
When you are ready to sell your home, the best thing you can do for yourself and your profit is to remove yourself emotionally from the equation. Listen to the market. You may not like what it has to say, but in the end, it can save you thousands of dollars.
Is this you? If it is, and you are trying to sell your home right now, you might be putting yourself in the "No Sell" zone.
What is the "No Sell" zone? It's pretty simple: Your are placing your home on the market, not in the market. And if you are pricing your home based on the above thoughts, you are not selling your home.
The harsh reality is, nobody cares what you paid for it, how much you spent on upgrades, how much you owe, or how much you need to walk away with. A property is only worth what somebody is willing to pay for it - period.
In this market that can be a scary thing to accept, especially when you feel you are only 'breaking even'. Especially when your neighbor's home sold for $15,000 more last year. How can that be?
It just is.
So, if you are in a position where you want or need to sell your home, let's take a look at what overpricing it will do for you:
~Let's say the Market Value is $350,000, and you decide you want to "test" the market for a few weeks and you list it at $400,000. Did you know that the first 2 weeks on the market is the most crucial period of a listing?
~Well, we are now in week 2 and activiy should be at its peak. You should have had many showings by now. But for some reason, buyers are not looking at your house because the competition is priced lower.
~The dreaded 3-week mark. Interest is now fading. You've lowered the price, and your house is still on the market, but you are not ahead of the market, you are chasing the market now, and you are struggling to keep up.
~Uh-oh, It's been a month. Interest is seriously waning. Nobody is calling. You now price your property below market in hopes of generating some activity, but most buyers looking for your type of property are already looking elsewhere. They've already seen yours and it 'was too expensive'.
~~It's been 3 months. You've now dropped the price so far that your property is listed as "a steal!"
What happened to "not giving it away"?
When you are ready to sell your home, the best thing you can do for yourself and your profit is to remove yourself emotionally from the equation. Listen to the market. You may not like what it has to say, but in the end, it can save you thousands of dollars.
Thursday, October 25, 2007
Hold on to your hats, boys and girl! It's the Market Update by Chicago Association of Realtors
Click on any of the pics for a larger view...
First, the "Quick Glance" for the week of October 17-23rd:
Wait! There's more....... Median 3rd Quarter Sale Prices for attached single-family homes (you know you want it...don't act like you don't)
And finally.... 3rd Quarter Number of Attached Units moved in Chicagoland (because it's what you need):
First, the "Quick Glance" for the week of October 17-23rd:
Wait! There's more....... Median 3rd Quarter Sale Prices for attached single-family homes (you know you want it...don't act like you don't)
And finally.... 3rd Quarter Number of Attached Units moved in Chicagoland (because it's what you need):
Wednesday, October 24, 2007
Weekly Real Estate News Channel has arrived....
Enjoy this week's Real Estate News Channel
If you'd like to get a copy sent to your email inbox every week, simply click on the email link in the "Sign up for my free Weekly Real Estate News Channel" located in the sidebar.
If you'd like to get a copy sent to your email inbox every week, simply click on the email link in the "Sign up for my free Weekly Real Estate News Channel" located in the sidebar.
Foreclosures - Really the best deal?
Foreclosures are a tricky business, and despite what the media and 'investment gurus' are leading you to believe, they are not always the best deal.
Remember this: The wave of foreclosures that are happening right now are the result of subprime loans made during the housing boom. Those loans were made when market values were much much higher. Therefore, many of these banks, though not in the business of selling real estate, are holding loans that are larger than the worth of the house. Meaning? No equity. A good deal -- a really good deal -- is buying into equity. Not only that, these banks are not so crazy about giving up these houses for less than what is owed to them. Sure, they may be forced to adjust the value of the house they are holding downward to stay inline with today's prices, but they are not likely to go BELOW market value. Basically, the prices are likely to be the same as any other home out there on the market, except....
Often times when people go into foreclosure, they stop taking care of their homes. They are angry, sad, feel it's not worth it. So guess what you are getting? Deferred maintenance issues and a bank-owned property with no disclosures.
Think again. Deals can be had, but right now some of the best deals out there are houses on the market that have not gone upside down on their mortgages. Houses still owned by their owners. Houses with disclosed history. Houses whose ultimate sale price is a decision controlled by the owners who may be willing to strike a deal with you - much more so than a bank.
Remember this: The wave of foreclosures that are happening right now are the result of subprime loans made during the housing boom. Those loans were made when market values were much much higher. Therefore, many of these banks, though not in the business of selling real estate, are holding loans that are larger than the worth of the house. Meaning? No equity. A good deal -- a really good deal -- is buying into equity. Not only that, these banks are not so crazy about giving up these houses for less than what is owed to them. Sure, they may be forced to adjust the value of the house they are holding downward to stay inline with today's prices, but they are not likely to go BELOW market value. Basically, the prices are likely to be the same as any other home out there on the market, except....
Often times when people go into foreclosure, they stop taking care of their homes. They are angry, sad, feel it's not worth it. So guess what you are getting? Deferred maintenance issues and a bank-owned property with no disclosures.
Think again. Deals can be had, but right now some of the best deals out there are houses on the market that have not gone upside down on their mortgages. Houses still owned by their owners. Houses with disclosed history. Houses whose ultimate sale price is a decision controlled by the owners who may be willing to strike a deal with you - much more so than a bank.
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