Eliminating Appraisal Bias

Appraisals establish the value of a given home, making them extremely important to lenders, tax authorities, the housing industry, the economy, builders, buyers, and sellers. They’re integral to building home equity and wealth, giving advantages to some homeowners and disadvantages to others. 

Many lenders use automated valuation models to save time and money more so than to limit human bias, but historical data submitted by appraisers with conscious or unconscious bias, particularly in majority black and ethnic areas, may be subject to decades of undervaluation.

Appraisers limit competition by requiring candidates to undergo apprenticeships to become licensed, yet  Octoberresearch.com found that 77% of appraisers said they have no apprentice trainee and have no intentions to train anyone – effectively “closing the gate behind them.” The AppraisalInstitute.org found just over 78,000 active licensed appraisers in 2019 in the U.S.

New innovations in software could make a difference, notes Housingwire.com. Algorithms could search for patterns of neighborhood bias and focus on more relevant data. Artificial intelligence can assess a home visually, like a human appraiser, but with absolute objectivity. The appraisal industry could also overhaul itself to better compete with automated valuation software.

Meanwhile, there are ways you can fight appraisal bias. Make sure the appraiser has geographical knowledge of the area. Insist on a thorough on-site appraisal, not a drive-by. Check the comparables used in the appraisal for relevance and proximity. Draw the appraiser’s attention to improvements made in the home and ask for an adjustment if the appraisal seems too low.

The Benefits of Tree Trimming

Home insurer Allstate.com says there are three basic reasons for trimming your trees. In order of importance, they are:

  1. Falling tree branches are dangerous for anyone on your property and can cause damage to your home.
  2. Tree health. Dead or diseased branches harm the tree. Pruning helps the tree develop core strength.
  3. Trimmed trees are more attractive and grow healthier fruit, flowers and leaves.

You can trim trees yourself with the proper tools, such as loppers, 12-14-and 16 foot tree pruners, hand pruners, etc., as long as you don’t need to get on a tall ladder, but trees taller than your extension pole are best left to professionals.

According to Homeserve.com, you can expect to pay an average of $460 but up to $1,500 for professional pruning of a tall tree such as an oak or pine. Tree removal begins at $750, but make sure that any quote you receive includes stump grinding, clean up and hauling away debris. 

If you choose to trim your trees by yourself, an excellent resource is the USDA publication How to Prune Trees. It provides a safe size guide for cutting branches no larger than four inches in diameter. Anything larger, contact an arborist. A good rule is that if you wonder whether to cut a branch, don’t.

Work Shed Trend

Working from home during the pandemic allowed jobs to be saved, but posed challenges in terms of productivity, and performance. Now, homeowners are building or buying work sheds to get the privacy they need to work, create, and produce.

A work shed can offer physical as well as psychological distance. If you’re at home, you’re accessible, but less so if you’re not in the house. A work shed says “Don’t bother me when I’m in the shed unless it’s really important.”

A shed can be outfitted with enough electricity, storage and furnishings for homeowners to work in comfort. They can be built or purchased in any size you want, making them ideal for telecommuting, woodworking, crafting, model-building, gaming, pen-turning, or any other “ing-ing” your heart desires. And even with the most elaborate materials and finishes, a work shed costs thousands of dollars less, are less noisy, and can be made operational more quickly than adding a room onto your home.

According to ShedKing.net, you need to know if you can build a shed, where on your property you can put it and what size you can make it. Check local building codes to get a permit to build. Check deed restrictions for easements. If you’re part of a homeowners’ association, take your building plan to the board for approval.

Take your plans to the hardware store, lumber supplier, and home improvement store where they will give you an itemized estimate for all your materials and delivery charges. 

How To Care For Jetted Tubs

If your new home came with a jetted tub in the master bath or you plan to replace the tub with one with jets, here are a few tips to making every bath you take luxurious. Jetted tubs require special care, so before you take that first relaxing dip, read the manufacturer’s guidelines on cleaning frequency and whether or not you can use bath salts and oils that are guaranteed for use in jetted tubs.  

Because the bathwater is recirculated, the water pump can become damaged by bath salts, oils, and bubble baths, and even some kinds of soaps. Skin deposits, grease, oils, mold, bacteria, and algae must be cleaned out of the piping so that build-up doesn’t clog the pipes. Clean the tub with a non-abrasive cleanser designed for hydrotherapy baths and rinse thoroughly. Fill the tub with warm water, add a cup of bleach, and run the jets for 10 minutes. Drain the water and rinse the inside, then fill the tub again.  Run the jets for another few minutes to clear away any remaining bleach, then drain the tub.

To clean the jets, use a bio-cleaner for jetted tubs, or if you prefer to go “green,” use 2 cups of white distilled vinegar with 1 cup of salt, running the jets for about 15 minutes.  Drain the tub, then rinse the surface and jets.

Always wear gloves and use bath and cleaning products that are safe for jetted tubs and yourself.

Will solar panels be worth it?

What is your reason for installing solar panels?

Save Money? Less Impact on the environment? Selling your home upgrade?

Are you asking yourself “will solar panels be worth it?” – to save money, have better environmental impact or help in selling my home? First, you should be aware that the advancement of the products and technology will make these options a variable. Everything from price, to materials, to installations will change dramatically during some phases so you have to be mind full of that. Already, most residential services are 50% of what they were when things first started. These costs are expected to go even lower as competition heats up and that means solar energy value will fluctuate.

If saving money is your goal then how much you actually save will depend largely on your personal energy use, where you live and what financing/leasing you use.

The size of your home (including the parcel if using outdoor lighting), the number of persons in your household and HOW they use energy will all impact your energy consumption and therefore how many panels or what type of system you will need. There are 6ft by 4 ft panels or roof shingles with embedded solar technology and more options on the way. If you use less energy, less panels.

Location of your solar farm is also important. If you are trying to outfit a structure or produce solar energy in an area of less sun you will need more panels to collect the same amount of solar energy as from an area that has more sunshine. More panels mean increased solar cost of purchase/lease, or maybe a less aesthetically pleasing look with more lawn area or roof covered with panels.

Another area for planning is how you pay for your solar energy project. This article will look at the three most used options to consider: Leasing, owning with cash purchase or financing. Cash is the most easy to understand. You give a check, they install panels, and done. There are ways to finance the project if cash outlay is not your option. The most obvious is the Home Equity or HELOC option. If you own your home a bank will use the equity in the home to let you borrow up to a specified amount. Some loan programs let you open a line of credit on that amount so you only use what you want when you want, up to the specified amount of the loan. Currently there are some mortgage programs specifically designed for home energy projects that will loan, as a new mortgage or refinance, up to 15% of the appraised value of the home. Some states have additional programs they offer and those can be found through state links at the DSIRE Database https://www.dsireusa.org/. The advantage of the loan/HELOC option is if you need other repairs, say a new roof or new siding, most times you can add those to the amount of the loan if it keeps within the specified amount. Unfortunately, you may not see a substantial money savings from the solar system purchase until you pay off the loan for the system, but at that point it will be all yours. Leasing the solar system is also an option through solar leases and power purchase agreements. These agreements can be particular to the entity providing the system so in depth evaluation of the paperwork should be done very carefully. But a standard guide is the loan or lease payment should be equal or less than what you pay for electricity. The advantage to leasing is an immediate availability to save money per month. The lease is designed that way, it will continue for the duration of the installation, providing that savings throughout. The disadvantage is that you will not see any tax benefits from leasing as you do from purchasing. A purchased system can net a Solar Investment Tax Credit issued by the federal government (at least until 2024 when it expires, but can be renewed by Congress.)

As a REALTOR® I have encountered some instances of homes for sale that had solar panels. The questions are varied, depending on the motivation of the person asking. If someone is sold on solar energy then more detail questions about systems, longevity, power interfaces etc. are asked. If someone is new to the renewable scene then the look of the panels, the savings they can get or the cost of the system are more prominent. As with most upgrades, you never get the full amount back in an upgrade when you sell the home unless there is a sweat equity factor. As with most upgrades, you never really know how a buyer will appreciate what you have done to the property. So as I tell my clients, sellers and new owners, know why you are doing the upgrade. Investing a lot of money in something that buyers may like or not might not be a good use of your funds. But if you are making an upgrade for your pleasure then go all out and enjoy! Of course, maintenance issues or needed repairs are different because those have to be done at some level either to sell or to reside on the property. But with most of those needed updates you can better gauge how much it maximizes the property potential while pricing and selecting options to use.

So now we are back to asking our original questions “what is your reason for installing solar panels” and “are they worth it.” Hope this information helps with that.

THE PROBLEM WITH GARAGE CONVERSIONS

Many older homes come with a two-car garage, approximately 20 by 20 feet, or 400 more square feet of living area if you convert it. It’s already under the roof and walled on three sides, making it appear inexpensive to remodel into a den, bedroom or guest suite.

The problem is that a garage conversion can cause more problems than it solves. Unless you remodel the outside of the garage along with the driveway, it will always look like a conversion. When the driveway leads straight to a wall, it never looks right.

You’ll face problems with the interior, too. The garage floor elevation could be different than the rest of the house because it’s a concrete slab. Garages aren’t insulated, so there will be a noticeable difference in sound absorption, temperature and finishes.

When you sell your home, you can’t count the square footage you gained within your asking price. Homebuyers want the security, storage, and utility of a garage, and will likely build the cost of reconversion or building a new garage into a lower offer.

No matter how you count it, square footage gained at the cost of a garage isn’t worth it.

Why it Matters Whose Name is on the Deed to the House

So a friend of yours wants to buy a rental and asks you to go in on the purchase, destined to make “bags of money” they say. You and a roomy are DONE with rent and found the “perfect house” to save ” bags of money”. Who needs a ceremony and piece of paper to make our connection real, a house is that committment we were waiting for. “If these scenarios sound familiar then lets dig up some thoughts to ponder in case all that glitters is not gold and someone descides to leave the nest, potentially leaving someone high and dry.

First of all, verbal agreements are a terrible idea for these situations. Friends, roomates or “close as can” be romantic partners can sing whatever song they choose but unless it is in writing it is no good. Whatever name is on the deed will get the house if someone leaves. With everyones name, who invested or continues to invest via mortgage payments, on the deed then everyone owns the house.

If all applied for the mortgage, all signed for the mortgage, then all are responsible for the debt and pay until the mortgage is paid off ( possibly when house is sold.) This will happen even if a couple un couples, family rift on the rental or roomy’s find a different room. Even amicable partings will leave the house as it was set up at time of purchase.

Talking things out prior to the purchase is the best option, verbal situations are great here. THEN call an attorney to find out your best options and get it in writing, however all involved want it. I have had many buyer clients in these situations, and a call to Maether Law Firm has always found the best solutions. Unfortunately, even some seller clients that did not consult an attorney ahead of their purchase have had to give Bryan Maether a call to see what they can do after the fact, not a good place to be and less options at this point.

Home ownership, or rental investment properties, are great and I would highly recommend them, and give me a call. But as with everything else about the purchase of that property ( area to purchase in, style of house, how much square footage, how big a lot etc.) the paperwork needs to be addressed. Making sure your home has a solid foundation and updated electric makes for a sound home investment. Adding a well thought out, firm, closing paperwork packet makes all the expectations of your “bags of money” dream house complete.

“Contingent” – Means what for the Property Purchase Offer?

When you were a child your mom or dad may have said; “clean your room and I will take you for ice cream.” Ice Cream is contingent on cleaning your room.

Purchase contracts could have contingencies attached to them as well. A home inspection or radon test is a contingency. The buyer will ask for these items, for the home inspection and radon the results will have to be approved by them in order to move forward with the transaction. But it doesn’t end with these items. Either party, buyer or seller, can add a contingency and as long as the other party agrees, its a deal.

In this era of multiple offers we have seen many contingencies and few contingencies. A buyer will offer a weeks stay in a timeshare in Key Largo if the seller accepts his contract. The contract is contingent on this timeshare if the seller is going to accept it. In a buyers market ( we have a sellers market currently), the seller may offer a years snow removal to sweeten the deal for the buyer, and the contract is contingent on this snow removal.

Depending on the type of market we are in, and how many multiple offers are submitted, will dictate if contingencies are in order. What contingencies do we normally see the buyer include? Home Inspection, radon, staking the lot during the seller purchased survey, seller concessions, delayed closing for 4 months ( normal closing takes 2 mos.) If a buyer is submitting an offer and there are multiple offers then the less contingencies that are required of the seller the better. If an offer gets “heavy” with contingencies it makes the offer more undesirable for the seller to accept. If there are “lighter” offers with fewer contingencies then it is easier for the seller to follow through with the offer so more desirable.

Overall some contingencies are a good idea, they provide a level of comfort that is important to the buyer. But their are some that are nice things to have but not necessary for the buyer to have a sound investment purchase. A qualified Accredited Buyers Agent will know what is a valid ask and what can be accomplished after the purchase. Contact me for any questions regarding contingencies and how they affect an offer.

Will Home Prices Keep Rising ?

Homebuyers are getting a lot of mixed messages this year. Interest rates are near record lows, but housing prices are still rising. So should you continue to rent or go ahead and take the plunge to buy? That depends a lot on both your needs and where you live.

You may be wanting more space for home offices, play areas for kids, and more.  You may not have to be close to work, which is one reason why there’s a current exodus out of expensive cities like New York City and San Francisco to suburbs or smaller towns. Another reason is cost.

According to HomebuyingInstitute.com,  home prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand. Interestingly, the pandemic appeared to fuel the housing market. Realtor.com reported that median home listing prices rose 15.4 percent between January 2020 and January 2021. And, in the 50 largest U.S. metros homes sold 12 days faster in 2021.  

At the same time, the number of homes for sale in January was down 42.6% year over year. That means 443,000 fewer homes for sale which only exacerbates demand.  

Mortgage interest rates hit record lows in January 2021, with nowhere to go but stay the same or go up. You may want to take advantage of that to keep monthly payments low before housing prices rise further.   

Meanwhile, some home markets may level off, while others like Austin, Seattle and Tampa are expected to heat up.

5 Year Equity Plan

When you buy a home, plan on staying there for approximately five years. Why? You’ll need equity in order to sell the home without losing money.

Equity is your percentage of ownership VS how much the bank owns. With any mortgage loan, the first few years of payments go more toward paying interest than reducing your principal. To build enough equity to sell at break-even or a profit, you’ll have to recoup closing costs and fees as high as 14% in some areas. To build equity over time, do the following:

Put more money down. If you put 20 percent down, you’re in good shape, but if you put down 3.5%, 5% or 10%, it will take longer to build equity, so be patient.

Pay your mortgage on time and in full. Paying principal builds equity. The more months you pay, the more equity you’ll build.

Make additional mortgage payments. You can add an extra $50, $100, or any amount per mortgage payment. This will also help you get rid of private mortgage insurance or allow you to refinance to a PMI-free loan once you reach 22% equity.

Let time and the housing market work for you. The housing market typically rises one to two percentage points above inflation annually, but if you’re lucky, your home may gain much more value than that.

Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.