Tag Archives: selling a home

Quality Control Week #2: Recognizing Low Quality

Hey all! Sorry about the silence last week. Between business and the recent floods in my neighborhood it was absolutely frantic. As always, my clients come first.

So when we left off we were talking about the factors that make for a high quality home. Today we’re going to talk about how to spot symptoms of poor construction and quality when you’re in a showing. After all, a home with even medium quality construction will suffice for many of you, especially for renters who are only going to be living there for a short while. Poor construction and materials, however, can be dangerous and costly. You would not want to purchase a cheaply-made home without budgeting time and cash for major capital improvements to occur before you move in.

Sometimes it's easy to spot a cheap knockoff. Here's how to spot them when you're looking for real estate.

Sometimes it’s easy to spot a cheap knockoff. Here’s how to spot them when you’re looking for real estate.

Preparations

You’ll want to do a little research before you get started.

Learn the names of the current specialty appliance lines.

I recently worked with a buyer who rejected all homes with American appliances. If the kitchen had Maytag, GE, Whirlpool or Frigidaire appliances it was immediately off the list. He was only interested in imported labels like Bosch, LG and Samsung. In truth, every manufacturer has different lines of appliances with varying levels of quality and warranty. For example, GE currently has it’s basic line, as well as the Cafe, Profile and Monogram lines. Whirlpool Corporation owns the Amana, Maytag and Whirlpool labels, each label having multiple lines of appliances. There’s a big difference between a regular GE fridge and a GE Monogram fridge – a difference of several thousand dollars and several years of longevity.

The seller of a kitchen full of Amana (budget line) and no-name appliances will expect you to replace them when you move in. They’re basically placeholders. However, a seller who’s sunk a lot of money into top of the line gear will expect you to recognize their taste and pay more for it.

The same goes for IKEA. Yes, they’re known for cheap furniture, but some of their lines are well-respected for durability.

Take a trip to Home Depot

Home Depot is not known for their contractor-grade supplies. If you see a home that’s been outfitted with nothing but Home Depot fixtures, you can be pretty sure that the owner has been skimping on quality. It’s worth taking a look around to see what the cheaper stuff looks like, especially the lighting fixtures, bathroom fixtures and kitchen cabinets.

Oh, and if you watch a lot of HGTV, remember that their main purpose is to drive business to their advertising sponsors. They can make crappy cabinets look nice, but a TV show won’t show their durability over time.

Your Testing Kit

Appliances and cabinets are easy to test, but testing the structural quality of a home is the toughest thing to do. Here’s some things you should bring with you that won’t draw a lot of attention.

A scarf

You’ll want to make sure that door frames and walls are straight and not sloping or bowed. A slightly heavy winter scarf will do as well as a plumb-line to accomplish this test. Hold it up to the wall or door and make sure it stays flush all the way down.

A marble

Uneven floors can indicate foundation problems. You don’t need a level to tell you if the place is sitting pretty, though – a simple marble is enough. Lay it on the floor and see if it stays put.

A ballpoint pen

Any basic ballpoint of normal barrel size will do. That’s about the minimum size hole that a mouse could fit through. You want to make sure that baseboards and floorboards meet with no gaps larger than the tip of your pen. You’ll also want to make sure that any gaps around pipes are smaller than your pen. Pay particular attention to the areas under sinks and in the mechanical room.

You can also use your pen for listening tests. Tap it against things to get an idea of their interior composition. If you’re tapping against something solid and well-insulated, you shouldn’t hear anything at all. If you’re tapping something cheap or hollow, it will sound much louder. (Don’t forget to try it on the floors, too.)

Things to Look For

As many of my physician friends like to warn me, symptoms don’t always indicate the same disease. However, if you spot a large number of these problems in the same property it’s probably best that you move along.

Air

When it comes to the components that make up your home, you want as little air as possible. Window frames and doors are the main places where a seller, landlord or developer can get cheap on the materials by installing lots of air. Hollow-core doors and hollow-frame windows are simply not as durable. You want windows and doors to serve as insulators as well as security features, and air just isn’t as good at either as something solid.

A well-built window frame will be chambered and filled, not hollow. (Image from wikipedia.)

A well-built window frame will have many chambers, like this one, and be filled with insulation. (Image from wikipedia.)

Too much air in the walls – in other words, insufficient insulation – is also a problem. On a sunny day, head to the side of the house closest to the sun and hold your hand up to the inside of the walls. (Or on a snowy day, hold your hand up against the inside of any exterior wall.) If you feel too much of the outside temperature through the wall, you could be dealing with an insulation problem.

Stopgap measures and concealers

This one only works if the home is still occupied, but it’s definitely worth considering. Don’t get me wrong – I love duct tape and WD-40 as much as any other geek, but they’re still stopgap measures. A truly “fixed” item will not use either one. Pest control items scattered throughout the house are also a temporary fix that should really be remedied through more thorough means.

A lesser known fact is that the Chicago city inspector will fine a landlord who’s got visible damage to the sills and lintels that hold windows in place on the outside of a building. However, if the damaged sills and lintels are covered so the inspector can’t see them, they will escape the fine without solving the problem. Those sills and lintels are what keep water OUT and heat IN – you really want them to be intact, not just covered up to hide a deeper problem.

Systems with single Points of failure

When it comes to major fixtures in the home, you really don’t want any system to have a single point of failure. For example, the recent flood in Albany Park demonstrated the problem with sump pumps – many of them were hooked to the electrical grid without battery backup. During the flood, power was cut to many homes, rendering their sump pumps useless.

Of course, when your street looks like this even a sump pump can't help you much.

Of course, when your street looks like this even a sump pump can’t help you much. (Albany Park 2013, photo by me, unfortunately.)

Similarly, a furnace should have a manual cut off switch attached in case the thermostat fails, and outlets close to sources of water should have breakers built in.

Lack of Detail

While a simple aesthetic is certainly valid, complexity can in some cases be equated with quality. As we discussed last week, moving parts add to the usefulness and the expense of something like a kitchen cabinet. High levels of detail in trim indicate custom builds and considerably more care invested in the installation. Basic cabinets and plain walls will look frumpy by comparison. It isn’t just the visual impact that matters, either. While you certainly want your home to make your guests say “wow,” you also want it to last for a good, long time. Lack of detail can imply lack of quality – plain cabinets can be nice and sturdy, but you’ll definitely want to take a closer look at them than ones with lots of crown molding and heavy detail.

You should also pay attention to items that seem out of place. If you spot a contractor-grade ceiling fan in a home otherwise furnished with custom-grade decor, it may be a sign that the wiring behind the fan is faulty, resulting in multiple replacements over time.

Lastly, it’s worth considering how the moving parts, well, move. Do drawers and doors slam shut or do they quietly glide closed? Do faucets and drains open and shut fully and smoothly?

We Need to Go Deeper.

These tests are all quite superficial, and failing any one of them alone is not reason to walk away from a house. If you decide to put in an offer on a home, your inspector will be able to more thoroughly test everything so that you’re aware of major problems. Unless you’re planning on gutting the place, you definitely need to probe deeper than this before you get all the way to the closing table. However, basic awareness of quality and some quick on-the-go tests can save you from getting under contract on a clunker.

I’ll be back Friday (I promise!) with a special take on quality for folks who are looking for rentals. See you then.

Quality Control Week #1: What Affects Building Quality?

You probably know that there are different grades of quality when it comes to food. The USDA has three different grades for poultry, eight for red meat, and hundreds for fruits and vegetables. Similarly, building materials come in four different official grades: building, quality, custom and ultra custom. I would add “commercial grade” to those standard four. As the quality goes up, so does the cost; in some cases it increases exponentially. Homeowners must always walk a fine line between material quality and cost, but many are unaware of the differences and how they affect the bottom line.

Condo boards also face tough decisions when it comes to major capital improvement projects. Expensive materials will last longer – in fact, they may well outlast the current residents’ tenure in the community. Convincing condo residents to take on large special assessments for maintenance that they won’t be around to use is a difficult task. (more…)

Safety and the Illusion Thereof

One of the most common questions among renters and buyers moving to new areas is whether or not those areas are “safe.” In fact, the majority of moves, be it between apartments, condos or houses, are within a very short distance. Safety and comfort levels are definitely a factor in this particular statistic – people stay within the area that they know. However, with rising prices in both the rental and purchase housing markets, many Chicagoans are faced with moving to new sections of the city where safety is an unknown factor. As for the folks moving from outside the city, it’s tough enough to understand the hundreds of distinct neighborhoods within the city limits, let alone to compare crime statistics to a reasonable extent.

Antique maps show monsters and dragons beyond the edges of known lands. This is coincidentally also the worldview of people who are moving to a new neighborhood.

Antique maps show monsters and dragons beyond the edges of known lands. This is coincidentally also the worldview of people who are moving to a new neighborhood.

As much as I’d like to reach every renter and buyer and explain to them how to statistically analyze crime risk in a given neighborhood, I can’t do so. Even if I did, my own rational explanations would be massively overwhelmed by the media hype surrounding Chicago’s high crime rates. Those crimes may be consolidated in areas far removed from your neighborhoods of choice. They may have little to no bearing on your daily life. However, they are prominent in the minds of any home seeker, and it’s tough to combat emotional conviction with reason. What you must fight against is not the idea that your particular area is a bad neighborhood, but that the entire city is a homogeneous, crime-ridden hole.

If you’re a landlord or home seller, it’s therefore far more critical to be aware of how safe your neighborhood feels. You can rattle off all the stats in the world, but if a potential buyer or renter feels wrong in your immediate vicinity they will not be interested in making an offer on your property. This is even more critical if you’re expecting to get an above-average price for your listing, since those tend to be taken only by folks from out of town who don’t know any better. Curb appeal in Chicago is not just about the visual appeal of your yard and building. It is also majorly affected by the aura of safety or danger projected by your block.

Familiarity Breeds Contentment

I’ve been living in Chicago for 15 years now, but I grew up in the suburbs of Connecticut and spent several summers mucking about in small New England towns. The last town where I worked before moving here was so small, the residents got offended if they saw you locking your car doors. Now, this doesn’t mean that I was a wide-eyed hick when I moved out here in the late 90’s, but it did take a bit before I found my “city legs.”

Lincoln, NH. My last "home" before moving to Chicago.

Lincoln, NH. My last temporary “home” before moving to Chicago.

Before I moved out here the worst sort of crime I encountered was a prank phone call or two. Since then I’ve had my car windows smashed in three times. Now, for Chicago these crimes are pretty benign, but the first time it happened to me it was still pretty shocking. The third time? I’d gotten used to it. I rolled my eyes, called up my mechanic (Speed Dial 6) and hauled out the vacuum.

As owners in Chicago we become inured to the level of criminal activity that surrounds us. The longer we stay here, the more difficult it becomes to see our neighborhoods through the eyes of a newcomer. Unfortunately, if you’re trying to market your home to a new resident that is exactly what you have to do.

Zeroing Out the Scales

For me, getting into a buyer or renter’s head often involves a day trip to the suburbs. I encourage prospective home sellers and landlords to do the same before they put their property on the market. There is not enough difference between Chicago neighborhoods to truly serve as a “control” in our safety experiment. You need to get out of the city completely – maybe even out of the county – and go spend a day walking in the shoes of someone from the outside. I don’t just mean a quick jaunt to Evanston, either. Get out beyond the reach of the El and walk around a residential neighborhood that has absolutely nothing in common with the city. The best time to do it is a weekday afternoon.

Observe everything while you’re out there. Notice how far the houses sit back from the street. Pay attention to the people walking around, the cars and where they park, the separation of commercial and residential areas. Observe what happens when a school lets out for the day. Spend some time walking around after the shops close.

"Honey, look! They still have front-in parking here! That's so cute!"

“Honey, look! They still have front-in parking here! That’s so cute!”

Once you’ve zeroed out your mental scales for what clean, wholesome livin’ is all about, it’s time to head back into the city and reassess your home turf.

I Spy With My Little Eye…

Upon returning from the city outskirts, it should become far more apparent what factors contribute to and detract from the feeling of safety in your own neighborhood. We’ve probably all had our moments in the city of turning down the wrong block and instantly knowing that we were unwelcome. However, if you’ve paid attention to the details in the suburbs you should be more able to pinpoint exactly what contributes to an illusion of safety.

Here are a few that I wrote down on my last trip back in from the hinterlands:

  • Claustrophobia. The distance from the sidewalk to the buildings (the “setback”) gets very shallow in some parts of Chicago. This can lead to a feeling of claustrophobia that can be off-putting for newcomers. The areas of the city that tend to feel “safer” also have deeper front lawns. Do buildings in your area crowd in close to pedestrians?
  • Gates and Grates. There are entire blocks where black iron fences line the street in front of the homes, and shops are secured with accordion grating. It’s a common enough sight in Chicago that locals tend to ignore it. To a newcomer, it can imply security problems and fear of trespassers.
This is probably not the "gated community" your prospective buyers and tenants have in mind.

This is probably not the “gated community” your prospective buyers and tenants have in mind. (Photo by therodabides on Flickr.)

  • Sounds. Listen to what’s going on, both during the day and at night. Do you hear lots of shouting? Traffic? Car alarms? How about friendly sounds, like the ice cream truck or the bus announcing streets as it drives along? Is it deathly quiet?
  • Interactions. Do the people walking past seem comfortable with your presence? Do they make eye contact or hurry past? Are there people just sitting around in their yards doing nothing? How about the local kids – what do they do after school? Are there parents and caretakers around? What about pets? Do you see a lot of people with small companion animals? Are there lots of strays? Do you see a lot of dogs that could be mistaken for guard dogs or fighting dogs?
  • Cars. What types of cars park near your house? Are they in good condition? Are there lots of cabs? How about old beater scrap metal trucks? Is there visible broken glass in the street left behind from break-ins? Any cars with the Denver boot, or piles of parking tickets?
  • Cameras. It isn’t tough to figure out that security cameras cameras in Chicago are a sure sign of a troubled neighborhood. Even without the obvious flashing blue lights, security cameras are a tipoff to newcomers that something has probably occurred to merit their installation.
  • Alleys. Newcomers won’t check, but Chicago residents know that our streets are like mullets – business up front, party in the back. Take a walk down your local alleys. Are they clean? Well-lit? Are the garages in good condition or are they covered in graffiti? How about the porches – are they well-maintained, or decrepit and covered in junk? Are the dumpsters tidy, or overflowing?
  • The Commute. The neighborhood around your house extends as far as the closest El station. Many newcomers will test the safety vibe of an area by making the walk from the train to their new prospective home. Alone. After dark. You should definitely do the same and make sure there’s nothing untoward to scare off a potential buyer or renter. Are the sidewalks in good condition? Are there panhandlers or large groups of loiterers hanging out anywhere along the way? Are there large stretches of empty stores or vacant lots?

These are only a few factors that contribute to my personal sense of safety in any given section of Chicago. I’m sure there are many others. Safety is a very relative thing, and I’ve lived here for a while now, so even with trips to the suburbs to freshen up my outsider eyes I know I’ve grown pretty blasé about the things that make Chicago feel like a city.

Assemble your own list of criteria and test it out by visiting a new section of the city. Do you feel safe there? Why? If not, why not? Which of your criteria are within your control to fix? Which ones do you just have to accept? Would you adjust your asking price accordingly because of them?

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What’s Your Sign? (How to Tell if YOUR Housing Market Has Recovered)

If you’ve been following the housing market at all, you’ve probably seen articles about how the housing market is recovering, mortgage rates are slated to rise, and prices are climbing again. However, as the inimitable Dennis Rodkin recently pointed out in Chicago Magazine, the Chicago housing recovery is happening in fits and starts.

Oh really? (Cover © Chicago Magazine)

Oh really? (Cover © Chicago Magazine)

As we’ve discussed before, even if you live in Chicago, when it comes to housing you don’t live in Chicago. You live in a district of Chicago with its own boundaries, attractions and demographics. Those districts in turn contain many different types of housing, not all of which are truly comparable to your current home or the one you want to buy. Statistics that may be useful on a national or citywide scale are useless when it comes to determining the right time for you to buy or sell.

Today we’ll be looking at how you can determine what section of the market you should be watching and how to figure out whether or not the market has recovered.

What’s Your Market?

Much like your personality can theoretically be affected by the motions of the stars, planets and other cosmic bodies, there are also many factors that contribute to a home’s real estate horoscope.

Local Attractions & Neighborhood

The name recognition of a neighborhood will do a lot to dictate when your market recovers. Trendy neighborhoods that everyone recognizes will come back faster than the ones nobody knows about. Areas closer to the El trains and Metra stations will come back faster than those that require a car. Give some thought to which type of neighborhood you’re in and base your comparisons on similar areas. In other words, if you live in Hermosa you should not be using Wicker Park as a barometer.

Single family/Townhome/Condo

Condos and townhomes are popular among younger families, older folks and singles. There’s different types of condos to consider, too. Skyscraper towers with their $700+ assessments attract a far different population than small, self-managed walk-up conversions.

Single family homes generally attract an older, more stable population. But some will target ranches and split levels while others will want bungalows, Georgians or Victorians.

Uniqueness

Do you own/want a Prairie Style house in a neighborhood full of Colonials? Or a vintage walk-up on Sheridan Road? A 3 story loft built into the chimney of a Chinatown noodle factory? Or this contemporary beauty that’s nestled in the middle of pre WWII brick in Lakeview? The market for non-conforming properties is always the toughest to gauge in terms of speed and price. If you’re trying to sell or buy something that’s out of whack with its surroundings you need to be aware that the market statistics in your immediate surroundings only marginally apply to you. They’ll have an effect on price, but less impact on market time.

Beautiful story, but that would have been a very hard house to sell.

Beautiful story, but that would have been a very hard house to sell.

Age of Property

New constructions and rehabs fresh out of the developer’s hands are in a totally different market from owner-occupied homes. Buyers interested in one will have a very hard time shifting gears to consider the other.

Current buyers are used to seeing nothing but rehabs on the market, since it’s been dominated for years by conversions of distressed properties while homeowners waited out the downturn before listing. Meanwhile, sellers who have occupied their homes through the downturn may have pushed too-small homes to their limits, or run short on funds to maintain them. If you’re trying to sell your home of the past ten years, you cannot consider the performance of the prefab Green Tech home they just built down the street.

Nearby Schools

As poor as Chicago’s public school reputation may be, proximity to a good school (public or private) will still buoy up the surrounding neighborhood. NorthCenter and Edgebrook have both largely survived the downturn with minimal loss in value due to their strong public schools, while their neighbors Irving Park and Jefferson Park took a tumble without similar strength to anchor them.

Lender vs Cash

Who is likely to buy your building? Someone who needs a loan or someone with cash? At low prices and very high prices, cash buyers can cause a feeding frenzy. In the middle price ranges you find mostly buyers with mortgages, especially between about $150k and $450k. Cash dominant areas are going to seem to move more quickly because it takes less time for a cash deal to close.

Price

This should be a no-brainer, but you really do need to consider your budget/target sale price as part of determining your specific market. The markets under $100k and over $1m have been on the upswing for several months already. In the middle we’ve seen slower growth.

Politics

The politics of a neighborhood will affect how quickly your market recovers. Some folks don’t want to live in TIF districts. Others may shy away from high property taxes in a particular area, or only want areas with blue recycling carts. Given the long history of some members of the City Council some folks may have sworn to never again live in Alderman So-and-So’s ward. The city, county and state also court buyers into some neighborhoods with down payment assistance and lower loan interest rates.

Figuring out what portions of the market to watch is like finding your Chinese astrology symbol on a placemat.

Figuring out what portions of the market to watch is like finding your Chinese astrology symbol on a placemat.

What to look for

So you’ve determined that you should be watching for new construction single family homes in the Bell school district, or perhaps you’re looking for a 1960’s condo along Harlem in Montclare. Now that you know what types of homes you should be watching, what signs should you look for?

  1. Shortening market times. This means how long it takes a property to sell. You can find this information on many real estate sites. Just look at the date the listing was posted and when it went under contract. An average of 3 months is good. Anything shorter is great. Anything longer and you’ve still got a long way to go.
  2. More resales. As owners surface from underwater status, more of them will list their currently-occupied homes for sale. When you start seeing homes on the market while the owners are still living in them, that’s a very good sign.
  3. Fewer renters. In a rising market, the homes temporarily occupied by renters will return to the sales market. A good chunk of those renters will convert to buyers. Many of them were waiting for their credit to recover after short sales in the late 2000’s.
  4. Homes selling at list price or higher. Realtors aren’t going to turn around and start listing homes at higher prices. They will let buyers in multiple offer situations bid the prices up over list. For a long time now we’ve seen the average sale prices of homes at anywhere from 50-95% of their list prices. When that tips over 100%, your market is on its way back.
  5. Homes sitting under contract for 60+ days. A house is “under contract” if the seller has accepted an offer but the deal has not yet closed. For years now, contingencies in sales contracts have been plentiful but one specific type of contingency has been largely absent – the home sale contingency. This means that the purchase of a new home is contingent on the buyer selling their prior home. In the slow market, most places have been under contract for 30-45 days even when lenders are involved. If you start seeing homes under contract for 2-3 months, you can bet there’s a home sale contingency involved. This is a very good sign.
You cannot simply price your house higher than the market and hope to lead the market recovery.

You cannot simply price your house higher than the market and hope to lead the market recovery.

What does this mean for you?

If the market is starting to come back, then the price for your home of choice (or your current home) will be rising. However, sellers should not assume that they will immediately surface from being underwater, nor should buyers panic and think that prices are going to skyrocket out of reach. There are still a lot of foreclosed homes that the banks need to sell off, and the underwater homes may have a lot of appreciation to do before they can resurface. Even if the sections of the market jump 10% this year, remember that an average, sustainable appreciation rate is more like 3% per year.

Realtors may call you and try to convince you that now is the time to buy or sell, using national or citywide statistics. Before you jump on board with them, make sure they’re looking at the right “horoscope” for your particular home of choice.


 

Friday I’ll be back to discuss the taboo against listing prices on “for sale” signs, and how it might be leaving the door open for scammers. See you then!

Three Little Pigs Get a Windfall (Or, Mortgage Discount Points FTW)

Once upon a time there were three little pigs. (I’m surprised I haven’t done this in the past year.) The pigs have a grand adventure in store for them involving building supplies and poached wolf, but for today we’re starting at the beginning of their story, and that means it’s math time.

Yay math time!

Yay math time!

They were each sent out into the world to make their fortunes. When it came time to buy housing, their mother gave each of them a surprise gift of $5000 in addition to the money they’d already saved.

Now, let’s say that they’d each saved up the same amount of cash, had similar credit scores, and all bought $300k townhouses in the same development using FHA loans with 3.5% down. (I know that isn’t how the story goes, but I’m not talking about construction materials today.) However, each one chooses to do something different with their $5000 gift from their mother.

Pig #1: $5000 on new appliances.

The youngest pig spent the extra $5000 on new appliances for his kitchen. He got a new Fridge ($1300), a new stove ($1300), and a new washer and dryer ($1200 each). Ten years later when he sells the property he’ll have spent $154837 in debt service on his mortgage. His appliances would be close to the end of their useful lifespans, so they won’t contribute much to the value of his home. In fact, he might have to replace them all again in order to sell the property.

Maybe he got something awesome like this modular stacking refrigerator.

Maybe he got something awesome like this modular stacking refrigerator.

Pig #2: $5000 towards the down payment.

The middle pig was quite content with the appliances that the developer provided, so he chose to add $5000 to his down payment. This lowered the amount that he had to borrow from the bank. When he sells his property ten years later, he’ll have paid $152163 in debt service. This means he’ll have saved $2674 over his younger brother. He’ll still have to replace the appliances before he moves out, but he’ll at least have saved a nice bit towards the cost.

I should note here that given the same 3.44% interest rates on their loans (which happens to be the current national average), it doesn’t matter what the down payment was nor what the cost of the property was. Over 10 years, the savings will always be $2674 if you add $5000 to the down payment.

Ok, so it's a pug, not a pig. Still, if you saved $2674 you'd be saying "neener neener" to your brother too.

Ok, so it’s a pug, not a pig. Still, if you saved $2674 you’d be saying “neener neener” to your brother too.

Pig #3: $5000 towards 1.5 Discount points.

We’ve talked about mortgage discount points before. Basically, for a fee equal to 1% (one “point”) of your loan paid up front, your interest rate lowers by a specific amount, usually 0.25%.

The eldest pig used the $5000 to purchase 1.5 discount points on his mortgage, lowering his rate by 0.375%. His brothers got loans at 3.44%, but he came in at a cushy 3.065%. Over the next ten years he will spend $147686 on his loan, saving $7151 compared to his youngest brother. This means he’ll actually make a profit on his mother’s gift! (Thanks, Mom.) He’ll also have accrued $3055 more in equity on his townhome than his younger brother, meaning he can replace the appliances and still walk away with a nice $5000 in savings.

Needless to say, the eldest pig made the smart move here.

You bet it feels good, little piggy.

You bet it feels good, little piggy.

The moral of the story is that cash at closing can be spent in many different ways, and that bulking up your down payment is not always the best way to go. First time buyers rarely think about mortgage discount points. In fact, residential buyers often don’t consider points at all, unless they are required to pay them in order to get a loan in the first place. However, if you have the cash to spare and today’s already ridiculously low rates aren’t good enough for you, spending some extra dough to push the rate down even further can have a very good effect on your bottom line. Of course, your mileage may vary and you should always run the numbers yourself after a hearty conversation with your lender.

We also learn that an extra $5000 can go a very long way. When saving cash to purchase a home, every bit helps.

See you Monday.

Anatomy of a Showing: Is Same-Day OK?

The matter of booking showings with very short notice has come up several times with my clients lately, so I thought I should address it for everyone. With the recent holidays the time required for booking a showing has been longer than normal, but even in normal circumstances there is a fine balance required to get you in to view a home or apartment.

Requesting a showing with very short notice is like springing a pop quiz on the current residents.

Requesting a showing with very short notice is like springing a pop quiz on the current residents.

The Process of Booking a Showing (more…)

10 Steps to Secure Your Home or Apartment for Showings

So your landlord or an agent has called to say that she needs to show your home.

For owners this should come as no surprise. If your house is on the market, showings will happen and your agent will probably request that you absent yourself while they occur.

For renters, showings may be a surprise as they can happen at any time of year. You don’t have to be moving out. A showing in the middle of your lease does not necessarily mean that your apartment building is for sale! Your landlord may be trying to get a better insurance rate or refinance the property. Both of these tasks could require access to your apartment. You should grant it provided that your landlord gives you proper advance notice.

Regardless of who is coming to view your apartment, though, you can be certain of one thing – strangers will be entering your living quarters and you may not be able to be home when it happens. Whether it’s a new prospective renter, an appraiser or a Realtor, you’ll want to take precautions to make sure that you’ve safeguarded your belongings. After all, your landlord’s insurance won’t cover the items if they go missing or get damaged.

Google currently shows over 36 million results for the phrase “robbed during an open house.”

Here are ten things you can do to make sure your stuff stays safe when your home has an encounter with stranger danger.

(more…)

The Average Chicago Condominium

We’ve done average apartments. How about average condos?

Second verse, same as the first.

A few weeks ago I did a little overview of what the average Chicago apartment looked like. It was pretty popular. But my office is on me for material that they can promote from their new social media campaign, and they’re not so pleased with all the rentals that I do. (They are a residential sales brokerage, after all. They want me selling stuff, not renting it. Hint hint.) So, we’re going to do the same thing with condos today as I did with rentals before – find the profile of the average condo and then pick out a few from the recent sales bin to show you what they look like.

What’s the point? Well, if these are all hovering around the median price point for recent sales, then you can reasonably expect to find something comparable at or around this price in the immediate future somewhere in Chicago. Prices have started to tick upward, especially at the lower end of the spectrum, so we may not see this as the average for much longer. More importantly, this serves as a historical snapshot of what the average Chicago home buyer could afford to purchase in 2012. (more…)

Stat check: Real Estate & The Sex Offense Registries

Megan’s Law means sex offender registry information is available to the public, but is anyone using it?

Do Sex Offenders Affect Home Values?

I may get in a lot of trouble for this entry. Gonna do it anyway. This has become crimes & misdemeanors week here at StrawStickStone so I might as well finish in the same vein.

So most of us know that there are websites that US Residents can use to look up whether or not a registered sex offender is living in the immediate vicinity. California’s “Megan’s Law” and similar legislation in the other 49 states require the information to be freely available to the public. The registries are maintained by the FBI, Department of Justice and local police forces. They’re pretty darn accurate.

Here’s one.

Here’s another.

If you’re in Illinois, here’s a third.

When the laws were first enacted, there was some pushback from homeowners who feared that publication of registered sex offenders’ addresses would have a severely negative effect on home values. I’ve been wondering for years if this has actually been the case. (more…)

Confronting our Agoraphobia, Part III: The Long Road Back

(This is part 3 of a series that started with Confronting Agoraphobia, Part I: Carefully Taught and Confronting our Agoraphobia Part II: The Bad Guys are Winning.)

Where We’ve Been

Over the past two entries in this series we’ve reviewed how bargaining has gone from common to rare, and how shopping in America has become a passive experience. We’ve discussed how the evolution of marketing and discounting have consolidated the power of pricing entirely in the hands of the manufacturers. We’ve discussed the potential gain from choosing to haggle – a peak negotiator saved $2500 in a year. That means an average negotiator could save about $1500. What we haven’t discussed is how to work our way back to an even distribution of power.

Let me expand on that number a bit. $1500 saved per person, per year. 206 million adults in the United States, give or take a hundred thousand or so.[1] Roughly 10% of them are incarcerated.[2] If the rest of them saved $1500 per year, that would total $278.2 Billion saved. Annually. (That’s about 2x the annual revenue of Wal-Mart as reported to the NYSE,[3] or, sadly, just 1.7% of the national debt at this moment.[4])

Let’s have one more quote to get things moving forward:

“A recent Consumer Reports survey showed only 28 percent of Americans haggle over prices. A separate report from market research firm BIGresearch found 45.1 percent of adults haggle for things other than cars and homes.

However, the Consumer Reports survey found that consumers who haggle succeed as often as 83 percent of the time in landing a better bargain.”

— Yuki Noguchi, “Haggling picks up steam during recession,” NPR.org, August 2009.

 

(more…)

  1. [1]Wolfram alpha: What is the adult population of North America, July 2012.
  2. [2]NY Times: Adam Liptak, “1 in 100 U.S. Adults Behind Bars, New Study Says,” Feb 2008.
  3. [3]Ycharts: Wal-Mart Stores Revenue (WMT) as of July, 2012
  4. [4]US National Debt Clock, July 2012

Confronting our Agoraphobia, Part II: the Bad Guys are Winning

This is part II of a series that started with Confronting Agoraphobia, Part I: Carefully Taught.

Rollback Further

My folks have a good friend – we’ll call him Doug – who’s learned a thing or two about saving money. A wunderkind who made an early fortune in the evolution of microloans, he knows that small amounts add up. He’s also learned that to most businesses any sale is better than no sale. Doug haggles for everything. He will walk to the counter at Wal-mart with a $25 pack of t-shirts, toss it on the belt, and tell the clerk “I’ll give you $15.” He renovates kitchens for a living. He will go to furniture stores and open with a bid at 50% of list price.

You’d be amazed at how often he gets the discounts he requests.

Did you think you couldn’t haggle at Wal-mart? Have you ever tried? If you haven’t, you’re probably not alone, and you aren’t entirely to blame. It sounds like a fairy tale because you’ve been on the receiving end of a lengthy, multifaceted agenda to make you think bargaining is scary, difficult, time consuming and futile. Let’s take a look at how outside forces, both intentionally and accidentally, have contributed to the decline of negotiation in commerce. (more…)