Author Archives: Joanne Y. Cleaver

About Joanne Y. Cleaver

Joanne Cleaver is a strategic communication consultant, media trainer, media readiness coach, editor, writer, and real estate guru. Check her out on Google+!

Selling Your House? Help Your Neighbors Help You

Perhaps more than you realized, other homeowners in your neighborhood can influence whether or not you achieve the highest possible sale price for your home.

We’ve all heard the real estate maxim, “location, location, location,” but not everyone fully appreciates how neighbors can affect the perception—and indirectly, the value—of a given property. If you’re in the process of selling your home, here’s how to help your neighbors help you:

Neighbors and Home Value


Be Considerate. Let your neighbors know if and when you are planning to host an open house, as their on-street parking or driveway access could be affected. Give them plenty of lead time, so they can plan accordingly. One peace-making idea is to invite your neighbors for a private pre-showing. Who knows? By request or their own election, they might choose to get the word out on your behalf, whether through social media channels or via old-fashioned gossip.

Consult your neighbors before you begin any pre-sale prep work, especially if that work is to be done on your home’s exterior. Try to minimize any negative effect your home improvement might have on those living nearby. Your porch needs some repair? Schedule the carpenter to come midday during the workweek, when your neighbors are least likely to be enjoying their own outdoor living space. As you set out to sell, the last thing you need is fresh resentment emerging.

Slideshow: 7 Renovation Tips to Boost Resale

Be on the Same Page. Potential buyers may poll your neighbors about touchy topics like the local flood history. It’s smart to inform your neighbors about how you are handling such questions. If you have fixed notorious problems known to your neighborhood, take care to bring everyone up to speed on your home’s current condition. Neighbors may need to be reminded of the investment you’ve put into the place, especially if it has a troubled history (e.g., foreclosure).

Share your pricing rationale with neighbors, and if appropriate, reveal the details of your appraisal. After all, even your most entrenched neighbors will sell their respective homes one day, and that means they are likely to be curious. Since your asking price and sale price will be a matter of public record eventually, there’s no advantage to playing coy.

Last but not least—assuming you can find a sensitive way to broach the subject—consider offering to pay for services, such as dog walking or landscaping, that would offset the effect of your neighbors on the appearance of your own property.

How To: Figure Out What Your House Is Worth

Curiosity is not least among the many reasons you might wish to estimate the value of your home. Fortunately, a number of online tools can help you pinpoint what your property is worth today.

Estimate Home Value


If you’re refinancing or selling your home and wish to find its estimated value, a handful of online tools can help you. While it’s true that a lender will only accept the valuation of a formal appraisal, any of the following sources can give you a pretty good idea of what your house is worth today:

• Chase Bank Home Value Estimator allows you to print out a summary, detailing the different factors that decided the estimated value of your home.

• Property Shark valuations include recent asking prices and a very useful FEMA flood zone map.

• A Zillow “Zestimate” relies on a proprietary formula, which combines public and user-submitted data to estimate the current market value of your home.

• RealQuest is the consumer snapshot version of the industrial-strength data crunched by CoreLogic. (A report costs $49.)

As part of estimating your home’s value, Be sure that any market “comparables” you consider are reflective of the very latest information, and that includes pending sales (transactions that are underway but have not yet been finalized).

Until a sale has been closed and registered in the public property records database—a process that can take eight weeks or more—the are only two ways to obtain specifics on pending sales.

One way is through real estate agents, who have access to pending sales data by virtue of membership to multiple listing services. The second way is to seek out your neighbors who in the process of selling and ask them directly. The latter may seem a tad direct, but it’ll all be a matter of public record soon, anyway!

Don’t Let Emotions Cloud Your Real Estate Judgment

Even recognizing that emotions are an unavoidable factor in real estate can help you get what you want out of any house negotiation.

Real Estate Emotions


Real estate agents like to say that house hunters make offers based not on price, but emotions. Recently, Duke University published scientific research that supports the reality of such a phenomenon.

Whether you’re buying or selling a home, even a rudimentary understanding of how the brain synthesizes emotions can help you develop (and stick to) a logic-based valuation of the property in question.

Related: What’s My House Worth?

Let’s say that after 25 happy years, you’re putting the family home on the market. When you look at the place from the curb, you see holiday memories and the hard-won result of your maintenance and remodeling efforts.

Indeed, fond associations may lead you to view the property in more favorable economic terms than it warrants. But you can’t put a price on memories. For a fair assessment of the home’s market value, seek out a third-party appraisal.

Remember also that emotions figure largely in the real estate negotiation process, no matter which side of the table you are sitting on. And in the heat of the transaction, small incentives can deliver outsize impact.

If you are selling, hold back on a small concession, such as a $500 allowance for new carpeting. Once you are close to reaching an agreement, toss that incentive into the mix, as it might help your buyer feel more comfortable accepting the terms.

Conversely, if you are negotiating to buy, carefully monitor your own emotional response to the tactic described above. Don’t let your emotions attach an outsize value to the incentive. Ask yourself whether it’s truly enough to make you agree to the sale price.

Duke researchers found that for human beings, emotions inevitably factor into valuations. The best you can do is to be aware of your own tendency toward irrationality, working around it by focusing on facts.

Clean Credit Wins Home Loans

A first-rate credit history improves the likelihood that your application for a home equity loan will be successful.

Home Loan Credit Score


Mortgage interest rates continue at record lows, but if you’re hoping to snag a home equity loan for a planned renovation, you’ll soon discover that banks consider a different number to be more important: your credit score.

Related: HELOC? HEL, Yes!

Recently, a Federal Reserve official said that most housing-related loans are going to borrowers with a credit score of at least 620. If you’ve ever applied for a Federal Housing Authority (FHA) loan, this probably comes as no surprise, since the FHA requires a sterling credit history even of loan applicants who can offer a substantial down payment.

Home equity line hopefuls are wise to avoid a pointless hassle (not to mention the shock of disappointment) by reviewing their credit in advance of applying.

By law, you are entitled to one free credit report per year. While a credit report includes your aggregate score, it also includes your recent payment history. Here, you may detect black marks that are worth going out of your way to dispute.

Paid credit monitoring services abound. Bypass the shady outfits and instead, opt to deal directly with the major credit reporting agencies: ExperianTransUnion, and Equifax. The higher the score the better.

What if you’ve had credit problems in the recent past? Before using up your one free annual credit score request, gain insight into what you might find with Bankrate’s score estimator. Flag any likely glitches, then assemble the paperwork necessary to either correct or provide context for the issue.

Solving credit headaches can take months. Start now to win the lowest home equity rate for a late summer or fall project.

5 Smart Home Improvements? Think Again!

Before you find yourself saying, "What was I thinking?" see what five home upgrades topped last year's list of loss leaders.

Home Improvements to Avoid - Aquarium

Photo: Landmark Custom Homes

Built-in aquariums: the amenity that quickly becomes an eyesore.

Of all the misfired home improvements that Daniel Fries has observed in his 30 years as a home appraiser, aquariums top his list of 2012 loss leaders—home improvements that offered little to no return on investment.

“It’s not a prudent investment,” deadpans Fries, who is based in Atlanta, GA. The tank’s glass fogs, while grimy filters emit an odor of rotting seaweed. Even worse—yes, it gets worse—some owners repurpose fish aquariums as reptile dwellings. And few things send a potential home buyer fleeing faster than the sight of a bull snake in the dining room.

Aquariums top our list of “improvements” with poor return on investment, but every project on that list has at least one thing in common: a profound mismatch between a homeowner’s intent and a neighborhood’s standards.

Local culture, preferences, and market conditions dictate return on improvements. Sink your money into amenities that don’t reflect the norm for your immediate area and you won’t even gain a 5% premium over neighboring homes, regardless of what you spent, says Kevin Cross, owner of the Anchorage, AK-based real estate agency Cross & Associates.

Case in point: Granite countertops actually undermine market value in Alaska. Extreme temperature changes force constant settling and resettling of home foundations, which results in warping and cracking of solid stone surfaces. Laminate gives just enough to make it the counter material of choice.

“Understand that anyone looking for a house is going to stand in front of yours with their cell phone looking at all the estimated values of the houses all around yours,” he continues. “When a buyer looks at a house, they’re not looking for reasons to buy a house. They’re looking for reasons to not buy yours. Your job is to remove as many of those reasons ‘not to buy’. If it’s priced right, clean, staged and looks inviting, an older house will sell faster than a new house even with superior amenities.”

Buyers pick up on price discrepancies immediately and aren’t willing to pay for misguided improvements… like the rest of the items on our list of top don’ts.

Home Improvements to Avoid - Theater

Loss leader #2: Built-in electronics
Bragging rights last only a few months when it comes to the latest televisions and sound systems. Once the next gizmo lands on the market, today’s shiny toy quickly tarnishes. The value added by splurging for top-of-the-line freestanding electronics may be debatable, but at least you can easily take the gear with you. Built-ins often dominate the entire room and their reverberations can erode the usability of adjoining rooms, too.

The owner of a $3 million house bragged to Fries that his built-in sound system cost $650,000. That was overkill even for a mansion. “He could have spent $50,000 on the media room and gotten just as much value from it,” says Fries. “You have to consider electronics as personal property, even if they are built in.”

Loss leader #3: Eliminating a third or fourth bedroom.
Sure, a walk-in closet and expanded master bath would be a selling point—but only if that space isn’t hijacked from a third or fourth bedroom. If the neighborhood norm is three bedrooms, a two-bedroom house is at a severe disadvantage. The number of bedrooms should be in balance with the common living space. A house with too many or too few bedrooms has a lopsided layout that won’t be useful to many buyers. Still want that master closet? You might be able to justify it if you apply the second cardinal rule of return (keep reading).

Loss leader #4: Overimproving the basement.
Below-grade improvements never pay back as much as space renovated or added above grade. Carefully compare the cost of renovating the attic, adding a dormer or even raising the roof, to a high-end basement remodel. This is especially true for mid-priced houses. High-end houses may well be able to retain the value of a finished basement, but only if all the above-grade space is livable.

Home Improvements to Avoid - Outdoor Kitchen

Loss leader #5: Expansive outdoor living space out of synch with the climate.
Outdoor kitchens with manly grills and wood counters can be used ten months a year in the South, so those projects retain value, says Fries. Not so much in the North, where a fireplace is a cozier investment. Cross reports that water features don’t sell Alaskan houses, considering that they are under four feet of snow for half the year. Especially if you are relocating, settle in to the local lifestyle before creating a sunroom, screened porch, elaborate deck or outdoor kitchen.

Each of these horrors is grounded in the grand misconception of home improvement: if you build it, they will pay. Fries explains that appraisers’ guidelines will force a challenge from the lender if improvements boost the market value of the house more than 10% from its value without the improvement. As you scope out the budget for your project, keep the total tab to no more than 10% of the current value of your house. Spend more only if you count the payback in terms of personal enjoyment.

Use as a reference Remodeling magazine’s annual Cost vs. Value Report. The regional breakouts chart the cost of remodeling, the return, and the difference. The averages are useful for benchmarking estimates and can help you set expectations from the start.

It can be a balancing act to polish to the point of perfect return, especially if you expect to sell the house soon. Consider putting in one moderately priced focal point improvement that can make the room memorable. For example, one—just one—built-in specialty appliance in the kitchen can be a selling point. That appliance might be a warming drawer, or a wine cooler, or a five-burner stove with a griddle instead of the standard four-burner stove. Even then, calculate your payback in terms of a shorter selling time, not in terms of dollar return.

There is an antidote to misfired improvements. Appraisers call it the ‘cost to cure,’ and it’s the second cardinal rule of return. How much will it cost to rip out the offending amenity and make that part of the house look, well, normal?

The cost to cure a derelict aquarium is only about $1,000. The cost to revert a walk-in closet to a bedroom could be as little as $500. But the cost to rip out an algae-clogged, crumbling swimming pool could run ten times that. When in doubt, get two estimates: one to put in the improvement, the other to take it out.

If you must have it, budget time and money for the ‘cure’, and make sure you squeeze every moment of happiness from that feature in the meanwhile.

So, You Want to… Add an In-Law Suite

Build or remodel a secondary building on your property so that someone—an in-law, perhaps—can live next to you, but not with you.

In-Law Suite Additions


No matter what you call it, an in-law suite or an intergeneration living unit, it’s the same thing in the end: one address, two dwellings. Post-recession, these additions are back in vogue. Before you proceed toward creating a place where someone can live next to you—but not with you—don’t forget these considerations.

Related: 7 Renovation Tips to Boost Resale Value

Is it legal?
To relieve the housing crunch during and after the Second World War, many single-family residences were divided in two. Succeeding decades saw the rise of zoning; under these laws, existing two-family residences were allowed—they were ‘grandfathered’ in—but restrictions were put in place to limit their construction.

So the fact that you might see in-law suites around your neighborhood does not necessarily mean you can add one of your own. Consult with local building officials to find out exactly what you can and cannot do along these lines. Handicapped access or additional off-street parking may be required for compliance with current regulations.

How will it affect cash flow?
If you’re planning to rent the in-law suite, it may be possible to write off some of the improvements or repairs associated with making the space habitable. You might even be able to get a tax break on some of your in-law suite’s operating expenses (e.g., a portion of the water bill).

But don’t get too excited: Besides routine maintenance costs, you might also have to upgrade your homeowners’ insurance and/or shell out for scheduled safety inspections. Calculate both the expenses and the income you anticipate and as always, confer with your accountant.

Will it annoy neighbors?
Sure, an in-law suite probably only means one more car on the block, one more person coming and going, but in dense areas, neighbors are often annoyed by any disturbance to the status quo. Weigh the potential impact of your in-law suite on the houses nearby and if possible, build in a way that promotes privacy and shields your occupant’s presence from plain view.

Don’t Waive That Inspection Contingency!

Though it may be tempting to remove any possible barrier to your offer being accepted, going so far as to waive the inspection contingency is ill-advised.

Inspection Contingency


With home sales running a solid 12% ahead of last spring, some house hunters are waiving the inspection contingency. So worried about landing a desirable property, The Boston Globe reports, these buyers are choosing to remove every possible barrier to their offers being accepted by sellers.

Temping though it may be, waiving the inspection contingency is ill-advised. Here’s why.

Many homes on the market today are yesterday’s foreclosures. Though some of these have been updated and are in compliance with building codes, others may have received little beyond a coat of paint or some cheap granite counters. Still others may have been rented in the interim, suffering inevitable wear and tear. So without an inspection, there’s no way to separate the good from the gross.

Even if it was not a foreclosure, it’s important to review a home’s history, in part because during the downtown, nationwide spending dropped on home improvement and repair. Did previous owners skimp on maintenance? A thorough inspection is the only way to know for certain.

Last but not least, let’s face it: There are some unscrupulous sellers out there. These “businessmen” slap attractive prices on substandard houses, hoping to palm off lemons on naive buyers. Don’t allow yourself to be taken advantage of: If you submit an offer, insist on there being an inspection contingency.

What’s Up with Down Payments?

With the housing market in recovery, 10% minimum down payments on mortgages may become increasingly common.

Minimum Down Payment


For the past several years, 20% has been the minimum down payment for standard loans, but as the market recovers and lenders relax (a little), there’s talk of 10% down becoming more widely accepted.

A lower down payment doesn’t come without hurdles. For one thing, in order to qualify, you are probably going to need a stellar credit score. Another likely requirement will be mortgage insurance, which protects the lender in case you default on the loan.

Related: 10 Things to Consider Before Buying a Foreclosed Home

In a typical agreement between lender and homebuyer, mortgage insurance is not always involved, because with 20% or more down, the lender figures that defaulting will hurt you more than the bank. (Use this calculator to estimate the cost of mortgage insurance in your case.)

Home values are improving, but most economists predict they will not rise rapidly. If you put 10% down, it will take longer to accumulate equity, one result being that you will have less to draw on for a home equity line of credit down the line.

Depending on your situation, a 10% down payment may be well worth the accompanying complications. To be sure you’re making the right choice, however, it’s wise to calculate, and discuss with your lender, the fees and factors attached to different down payment sizes (i.e, 10% versus 20% down).

Has the Recovery Hit Your Block?

As real estate experts are so fond of saying, all markets are local. Whether you are buying, selling, or refinancing, knowledge of local property value trends is key to developing a winning strategy.

Housing Recovery


The residential housing market is finally experiencing an upswing across most markets. Even relatively stable regions like Texas and the Carolinas have begun to gain traction. Real estate experts are fond of saying all markets are local. Indeed, that is why it’s so important to understand, not just national leanings, but property value trends in your own specific geographic area.

Related: Suddenly, a Seller’s Market?

Housing Recovery - Value Trends

CoreLogic Regional Home Value Trends

Whether buying, selling, or refinancing, you must be able to estimate a home’s value. To do so accurately, it helps to scrutinize graphs like this one from mortgage data cruncher CoreLogic. Insight into current price data enables you to fine-tune your approach, no matter your goal.

For example, if you’re buying a house and trends suggest the market is strengthening, then if you find a place you love, it may be wise to lead with a strong opening offer. Likewise, be prepared for a bidding war; even before one erupts, settle on a strategy. Will you participate or walk away?

Adopt an equally aggressive strategy if you are selling in a neighborhood with rising prices. Set your asking price ahead of the market, but not so far ahead that your buyer’s lender rejects the price. By closely observing regional shifts, you can push the limit without stepping over the line.

Refinancing? Your lender is going to require an appraisal, and the appraiser will need hard evidence to value your house at top dollar. Help him out by furnish documentation of the maintenance and improvements you have overseen as homeowner.

If you are launching into a major home improvement project, be sure that you are spending with an awareness of what’s happening in your local market. Don’t spend more than is likely to be supported by a property value increase, and try to focus your investments on the types of upgrades preferred in your neighborhood.

Want to Build Wealth? Pick the Right Mortgage

A new study suggests that choosing a mortgage with advantageous terms is critical to ensuring that homeownership helps your family build wealth over the long term.

Choosing a Mortgage - House Keys


Owning a home is the best way to build family wealth—that’s been the prevailing wisdom, at least, for the last several decades. And despite the 30% drop in home equity that hammered millions of households during the recent recession, Americans continue to believe in the wealth-building power of homeownership.

Related: 10 Simple Home Staging Tips Every Seller Should Know

New research from Washington University in St. Louis suggests that owning a home does not lead directly to improved financial status. Rather, the details of your mortgage strongly influence whether or not your real estate proves to be a profitable investment over the long term.

Authors of the study looked at the difference in household wealth between moderate- and low-income homeowners and at that between moderate-and low-income renters. The researchers analyzed underlying factors, as well, finally determining that mortgages contributed to net worth only if:

• The buyer paid low fees in the application and approval process.

• The interest rate was low.

Choosing a Mortgage - Lessons Learned


Applying these lessons learned can help middle-income borrowers get on the right track:

• Shop around for a low interest rate that is sustainable and accompanied by low fees.

• Understand all fees (property transfer fees, ancillary costs for inspections, and so on). Charging some or all of them will put you behind the curve.

• Calculate the impact of paying down the loan principal in advance. In the first five years of the loan, making a couple of extra mortgage payments can trim several years from your repayment schedule, because you are left to pay less interest on the balance.

• Don’t forget to consider the carrying costs of property insurance, taxes, and other expenses that may negate the appreciation of your property.

• Weigh decisions based on the assumption that you will hold onto the property for the foreseeable future. While selling costs amount to at least 6% of the asking price, that percentage represents a much higher proportion of your actual equity.