When you're planning to spend thousands of dollars on home improvements, the last thing you want is for your investment to go down the drain. For that reason, it's crucial to make sure you've taken all the necessary steps to insure your project before you begin.
Step One: Contact your insurer
Major renovations can leave your home exposed, physically and financially. Those new French doors could be stolen before they are installed. Major roof work might leave your home exposed to the elements, some of which might not be covered under a regular homeowners policy.
In such cases, adjust insurance coverage temporarily. During construction, there may be some kind of insurance rider just in case there's an accident or something that protects you in addition to your insurance coverage. Talk to your insurance agent about what you're planning, and he or she can guide you through short-term coverage options.
Step Two: Find an insured contractor
When hiring a contractor, check to see whether that person is properly insured. Make sure they have workers' compensation for their employees and have general liability insurance for the company. What that means is when a professional contractor is working on your house, if a worker is injured, you're not liable. If the contractor damages something, destroys something or burns your house down, you're protected.
Likewise, if something happens to the contractor's tools or equipment while the project is being completed, his insurance will pick up those costs. Uninsured contractors may charge you less for the job, but you'll pay the price if something goes wrong during the renovations. And even if a contractor tells you he's insured, don't take his word for it. Have the contractor show you a certificate of insurance.
What if you decide to do the project yourself? In that case you don't so much have a liability or a third-party liability issue. As a result, there's no need for workers' compensation or general liability insurance. But, depending upon the scope of the project, your insurance agent may suggest you hire a professional instead. We would never recommend that a policyholder go out and do any type of work that would require a license, especially around an electrical or plumbing system. Also, if you damage your property in the process and your insurance provider determines that your negligence caused the mishap, it might not pay the claim.
Step Three: Get building permits
Some jobs require building permits, particularly if the structure of your home will be changed. In these instances, work must adhere to building codes. Your city or county government can tell you whether your project is under this category. If so, have the contractor apply for the permits. Once the job is done, a building inspector will inspect the work.
If the work fails the inspection, the contractor is liable and has to make adjustments. Incompetent builders can have a tremendous effect on your home's coverage. If you add a room to your home and it does not meet building codes, your insurer could refuse to cover it.
Step Four: Estimate the project's worth
Every home improvement project need not warrant a change to your home insurance policy. If you buy a new refrigerator, change one or two appliances or upgrade one of the bathrooms, there's probably no need to make revisions. But any time you're investing more than $25,000 back into the value of your home, your insurance company should really be on notice of that change. If unsure, err on the side of caution and check with your agent anyway.
Step Five: Review your policy
Once the project is complete, your insurer can help you determine how much value the work has added. This information is crucial: You want the homeowners policy to reflect the new, upgraded value of your home. Say your home is insured for $200,000. Add an expensive addition but fail to revise the policy, and it's like the work didn't happen. If your house burns down, what proof do you have of any improvement work?
Monday, October 27, 2008
Friday, October 24, 2008
Tips for Buying a Foreclosed Home
In good markets and bad, real-estate agents are constantly announcing that "now" is the best time to buy. With housing prices weakening, inventories rising and sales slumping, this attitude has drawn a lot of ridicule in the press.
But you know what? Now may actually be a very good time to buy, or at least start looking seriously.
Though no one can really tell when the downward-trending housing market will reach its nadir -- most economists predict it will bottom out sometime in 2008 or 2009 -- there's no doubt that sellers have let go of bubblelicious notions of what their homes are worth. According to S&P/Case-Shiller, existing home prices dropped 4.5% nationally in the third quarter over the year before; price appreciation was even slowing in Charlotte, one of the few cities that the research group covers that showed price appreciation year-over-year. It rose at a tepid rate of 4.7%.
The media makes this out as a tragedy, but it's really not. For buyers, a market that's nearing its bottom is only a concern for flippers, who need a rising market to make money. For buyers making a long-term investment, it's a reason to rejoice.
Yes, loans are hard to find, but they are still being made, especially if you have good credit. While the qualifications for getting a loan are becoming stricter -- but no more strict than they were in the mid-1990s -- mortgage money is still cheap by historical standards and will likely remain so in the near future. The Mortgage Bankers Association projects that 30-year fixed rates will hover around 6% throughout 2008 and the first two quarters of 2009.
Meanwhile, bargains abound, particularly in foreclosure properties. While many Web sites sell foreclosure information (sometimes after letting you sample the Web site for a week-long free trial), you don't have to pay an online membership fee to find them. Title companies, real-estate agents and lenders -- including credit unions -- all have information on homes in various stages of foreclosure.
Homes that are being auctioned are listed in the legal notices section of the main local newspaper and can usually be found on the newspaper's Web site.
But generally, you will get a better deal if you buy a house before it goes to auction, or after -- if it doesn't sell on the courthouse steps. Bidders at an auction sometimes get caught in the heat of the moment and push up prices.
But you know what? Now may actually be a very good time to buy, or at least start looking seriously.
Though no one can really tell when the downward-trending housing market will reach its nadir -- most economists predict it will bottom out sometime in 2008 or 2009 -- there's no doubt that sellers have let go of bubblelicious notions of what their homes are worth. According to S&P/Case-Shiller, existing home prices dropped 4.5% nationally in the third quarter over the year before; price appreciation was even slowing in Charlotte, one of the few cities that the research group covers that showed price appreciation year-over-year. It rose at a tepid rate of 4.7%.
The media makes this out as a tragedy, but it's really not. For buyers, a market that's nearing its bottom is only a concern for flippers, who need a rising market to make money. For buyers making a long-term investment, it's a reason to rejoice.
Yes, loans are hard to find, but they are still being made, especially if you have good credit. While the qualifications for getting a loan are becoming stricter -- but no more strict than they were in the mid-1990s -- mortgage money is still cheap by historical standards and will likely remain so in the near future. The Mortgage Bankers Association projects that 30-year fixed rates will hover around 6% throughout 2008 and the first two quarters of 2009.
Meanwhile, bargains abound, particularly in foreclosure properties. While many Web sites sell foreclosure information (sometimes after letting you sample the Web site for a week-long free trial), you don't have to pay an online membership fee to find them. Title companies, real-estate agents and lenders -- including credit unions -- all have information on homes in various stages of foreclosure.
Homes that are being auctioned are listed in the legal notices section of the main local newspaper and can usually be found on the newspaper's Web site.
But generally, you will get a better deal if you buy a house before it goes to auction, or after -- if it doesn't sell on the courthouse steps. Bidders at an auction sometimes get caught in the heat of the moment and push up prices.
Thursday, October 23, 2008
Home Prices Seem Far From Bottom
The American housing market, where the global economic crisis began, is far from hitting bottom.
Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession.
In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.
Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates -- all of which will reduce the already diminished pool of would-be buyers.
Despite the government's move to bolster the banking industry, home loan rates rose again on Tuesday, reflecting concern that the Treasury will borrow heavily to finance the rescue.
On Wednesday, the average rate for 30-year fixed rate mortgages was 6.75 percent, up from 6.06 percent last week. While banks are moving aggressively to sell foreclosed properties, the number of empty homes is hovering near its highest level in more than half a century.
As of June, 2.8 percent of homes previously occupied by an owner were vacant. Nearly 1 in 10 rentals was without a tenant. Both numbers are near their highest levels since 1956, the earliest year for which the Census Bureau has such data.
At the same time, the number of people who are losing jobs or seeing their incomes decline is rising. The unemployment rate has climbed to 6.1 percent, from 4.4 percent at the end of 2007, and wages for those who still have a job have barely kept up with inflation.
The number of empty homes is near a 52-year high. At left, a house in foreclosure in Deerfield Beach, Fla.; and at right, homes for sale in the Ladera Ranch neighborhood of Orange County, Calif.
In New York and other cities that rely heavily on the financial sector, economists expect that job losses will increase and that pay heavily tied to year-end bonuses will decline significantly. One reliable proxy of housing values -- the ratio of home prices to rents -- indicates that in many cities prices are still too high relative to historical norms.
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody's Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.
It increased the most on the coasts and somewhat less in the middle of the country. Economy.com's calculations show that while it remains elevated in many places, the ratio has fallen sharply to more normal levels in places like Sacramento, Dallas and Riverside, Calif.
The current housing downturn is much more national in scope and severe than any other in the postwar period, partly because of the proliferation of risky lending practices. Today, foreclosures are running ahead of the downturn in the economy, a reversal of previous housing slumps.
Colleen Pestana, a real estate agent in Orange County in California, said many people losing their homes in Southern California used to work at mortgage and real estate companies. Many of them bet heavily on real estate by upgrading to bigger houses every few years. Now, many are losing their homes.
At the same time, Ms. Pestana said, her clients who are looking to buy are having a harder time lining up financing. One of her clients recently had to give up on a home after the lender that had offered a pre-approved loan changed its mind -- a frequent occurrence, according to real estate agents and mortgage brokers.
To cushion themselves from potential losses if homes lose value, Fannie Mae and Freddie Mac, the mortgage finance companies that the government took over in September, have increased fees on loans made to borrowers who have good but not excellent credit records, even those who are making down payments as big as 30 percent.
Those higher fees are generally invisible to borrowers because banks factor them into mortgage interest rates. While the national average rate for a 30-year fixed-rate mortgage is now 6.75 percent, according to HSH Associates, mortgage brokers say the rates for many borrowers in the Southwest or Florida can be as high as 8 percent, especially for so-called jumbo loans that are too big to be sold to Fannie Mae and Freddie Mac. (Those loan limits vary by area from $417,000 to roughly $650,000.)
Higher interest rates result in bigger monthly payments, pricing some potential buyers out of the market. For example, monthly payments are $2,700 on a 6 percent 30-year, fixed-rate loan of $450,000. If the interest rate rises to 7 percent, those monthly payments jump to $3,000. All things being equal, when rates rise prices generally fall.
This month, Fannie and Freddie canceled a fee increase that would have applied to markets where home prices are falling, but the companies still have many other fees in place. In an effort to help drive down rates, the Treasury Department has announced plans to buy mortgage-backed securities issued by Fannie and Freddie. The government also recently increased the amount of loans the companies can buy and hold.
Still, those efforts will take time to have an impact and it is not clear whether they will be sufficient to get banks to lend more freely, especially in areas where jumbo loans make up a bigger percentage of lending, like New York and parts of California and Florida. Economists say that prices in those places will probably fall further.
In some of those places, price declines are being driven by a sharp increase in sales of foreclosed homes.
Hudson & Marshall, a Dallas-based auctioneer that holds sales for lenders, reports that banks are accepting prices that they refused to consider just 12 months earlier. In a recent auction of 110 foreclosed homes in the Las Vegas area, for instance, the auctioneer's clients accepted 90 percent of the bids submitted by buyers, up from 60 percent a year earlier, said David T. Webb, a co-owner of the company.
Single-family home prices in Las Vegas have already fallen 34 percent from their peak in the summer of 2006, according to the Standard & Poor's Case-Shiller home price index. Prices in San Diego have fallen 31 percent since late 2005.
While those declines have been painful to homeowners in those cities, economists said the quick decline might help the markets reach bottom faster than in previous housing cycles, said Edward E. Leamer, an economist at the University of California, Los Angeles. In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again.
In Florida, Jack McCabe, a real estate consultant, said that while some cities, like Fort Myers, are showing tentative signs of a rebound, others like Miami and Fort Lauderdale are still under pressure. Two homes on his street in Fort Lauderdale that sold for about $730,000 apiece in 2005 recently sold for $400,000 -- a 44 percent decline.
Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession.
In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.
Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates -- all of which will reduce the already diminished pool of would-be buyers.
Despite the government's move to bolster the banking industry, home loan rates rose again on Tuesday, reflecting concern that the Treasury will borrow heavily to finance the rescue.
On Wednesday, the average rate for 30-year fixed rate mortgages was 6.75 percent, up from 6.06 percent last week. While banks are moving aggressively to sell foreclosed properties, the number of empty homes is hovering near its highest level in more than half a century.
As of June, 2.8 percent of homes previously occupied by an owner were vacant. Nearly 1 in 10 rentals was without a tenant. Both numbers are near their highest levels since 1956, the earliest year for which the Census Bureau has such data.
At the same time, the number of people who are losing jobs or seeing their incomes decline is rising. The unemployment rate has climbed to 6.1 percent, from 4.4 percent at the end of 2007, and wages for those who still have a job have barely kept up with inflation.
The number of empty homes is near a 52-year high. At left, a house in foreclosure in Deerfield Beach, Fla.; and at right, homes for sale in the Ladera Ranch neighborhood of Orange County, Calif.
In New York and other cities that rely heavily on the financial sector, economists expect that job losses will increase and that pay heavily tied to year-end bonuses will decline significantly. One reliable proxy of housing values -- the ratio of home prices to rents -- indicates that in many cities prices are still too high relative to historical norms.
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody's Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.
It increased the most on the coasts and somewhat less in the middle of the country. Economy.com's calculations show that while it remains elevated in many places, the ratio has fallen sharply to more normal levels in places like Sacramento, Dallas and Riverside, Calif.
The current housing downturn is much more national in scope and severe than any other in the postwar period, partly because of the proliferation of risky lending practices. Today, foreclosures are running ahead of the downturn in the economy, a reversal of previous housing slumps.
Colleen Pestana, a real estate agent in Orange County in California, said many people losing their homes in Southern California used to work at mortgage and real estate companies. Many of them bet heavily on real estate by upgrading to bigger houses every few years. Now, many are losing their homes.
At the same time, Ms. Pestana said, her clients who are looking to buy are having a harder time lining up financing. One of her clients recently had to give up on a home after the lender that had offered a pre-approved loan changed its mind -- a frequent occurrence, according to real estate agents and mortgage brokers.
To cushion themselves from potential losses if homes lose value, Fannie Mae and Freddie Mac, the mortgage finance companies that the government took over in September, have increased fees on loans made to borrowers who have good but not excellent credit records, even those who are making down payments as big as 30 percent.
Those higher fees are generally invisible to borrowers because banks factor them into mortgage interest rates. While the national average rate for a 30-year fixed-rate mortgage is now 6.75 percent, according to HSH Associates, mortgage brokers say the rates for many borrowers in the Southwest or Florida can be as high as 8 percent, especially for so-called jumbo loans that are too big to be sold to Fannie Mae and Freddie Mac. (Those loan limits vary by area from $417,000 to roughly $650,000.)
Higher interest rates result in bigger monthly payments, pricing some potential buyers out of the market. For example, monthly payments are $2,700 on a 6 percent 30-year, fixed-rate loan of $450,000. If the interest rate rises to 7 percent, those monthly payments jump to $3,000. All things being equal, when rates rise prices generally fall.
This month, Fannie and Freddie canceled a fee increase that would have applied to markets where home prices are falling, but the companies still have many other fees in place. In an effort to help drive down rates, the Treasury Department has announced plans to buy mortgage-backed securities issued by Fannie and Freddie. The government also recently increased the amount of loans the companies can buy and hold.
Still, those efforts will take time to have an impact and it is not clear whether they will be sufficient to get banks to lend more freely, especially in areas where jumbo loans make up a bigger percentage of lending, like New York and parts of California and Florida. Economists say that prices in those places will probably fall further.
In some of those places, price declines are being driven by a sharp increase in sales of foreclosed homes.
Hudson & Marshall, a Dallas-based auctioneer that holds sales for lenders, reports that banks are accepting prices that they refused to consider just 12 months earlier. In a recent auction of 110 foreclosed homes in the Las Vegas area, for instance, the auctioneer's clients accepted 90 percent of the bids submitted by buyers, up from 60 percent a year earlier, said David T. Webb, a co-owner of the company.
Single-family home prices in Las Vegas have already fallen 34 percent from their peak in the summer of 2006, according to the Standard & Poor's Case-Shiller home price index. Prices in San Diego have fallen 31 percent since late 2005.
While those declines have been painful to homeowners in those cities, economists said the quick decline might help the markets reach bottom faster than in previous housing cycles, said Edward E. Leamer, an economist at the University of California, Los Angeles. In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again.
In Florida, Jack McCabe, a real estate consultant, said that while some cities, like Fort Myers, are showing tentative signs of a rebound, others like Miami and Fort Lauderdale are still under pressure. Two homes on his street in Fort Lauderdale that sold for about $730,000 apiece in 2005 recently sold for $400,000 -- a 44 percent decline.
Wednesday, October 22, 2008
Apartment Sales Volume Down
The level of distress among apartment sellers is increasing rapidly, according to the latest Capital Trends Monthly report on the apartment sector, released by Real Capital Analytics (RCA). The continuing effects of the collapsed condo conversion market have elevated levels of distress since 2006, but the recent spike indicates that financial troubles beyond the failed conversions are starting to emerge. Over eight percent of recent apartment sales can be linked to a distressed seller, and this percentage has quadrupled over the past year.
By dollar volume, distressed apartment sales have ranged between four percent and six percent for much of the past year and peaked at just under 10 percent in fourth quarter of 2007. Recent trends indicate that a greater number of smaller properties are facing trouble. By either measure, the distressed sales are well above reported mortgage delinquency rates and indicate that pressure among all sellers is growing, according to the report.
Even so, the sales volume as well as number of sales in the apartment sector are both down by more than 50 percent. In the past 12 months, 4,430 apartment properties have been sold nationally, equaling $115.53 billion.
In fact, cap rates for closed deals ticked up slightly to over 6.5 percent while asking cap rates averaged 6.2 percent, underscoring the large gap in pricing that separates buyers and sellers, according to the RCA report. Meanwhile, the volume of apartment properties listed for sale exceeded closings again in August. Year-to-date, offerings have exceeded closings by a ratio of 1.5-to-1 nationally and are rising. The oversupply of property offerings in tertiary markets is even greater, although large inventories of properties for sale have recently started accumulating in primary and secondary markets as well, the RCA report finds.
At the beginning of September, closed sales in the third quarter totaled $4.5 billion, with another $6.5 billion reported in contract and the market was on pace to easily exceed the $9.3 billion in transactions recorded in the second quarter, according to this report. However, the uncertainty surrounding the takeover of Fannie Mae and Freddie Mac, followed by even greater upheaval on Wall Street has stalled the market. Reports are already surfacing of another wave of deals delayed, re-traded or called off. Sellers are also shocked and the seasonal surge in offerings that is typical each September has been modest.
By dollar volume, distressed apartment sales have ranged between four percent and six percent for much of the past year and peaked at just under 10 percent in fourth quarter of 2007. Recent trends indicate that a greater number of smaller properties are facing trouble. By either measure, the distressed sales are well above reported mortgage delinquency rates and indicate that pressure among all sellers is growing, according to the report.
Even so, the sales volume as well as number of sales in the apartment sector are both down by more than 50 percent. In the past 12 months, 4,430 apartment properties have been sold nationally, equaling $115.53 billion.
In fact, cap rates for closed deals ticked up slightly to over 6.5 percent while asking cap rates averaged 6.2 percent, underscoring the large gap in pricing that separates buyers and sellers, according to the RCA report. Meanwhile, the volume of apartment properties listed for sale exceeded closings again in August. Year-to-date, offerings have exceeded closings by a ratio of 1.5-to-1 nationally and are rising. The oversupply of property offerings in tertiary markets is even greater, although large inventories of properties for sale have recently started accumulating in primary and secondary markets as well, the RCA report finds.
At the beginning of September, closed sales in the third quarter totaled $4.5 billion, with another $6.5 billion reported in contract and the market was on pace to easily exceed the $9.3 billion in transactions recorded in the second quarter, according to this report. However, the uncertainty surrounding the takeover of Fannie Mae and Freddie Mac, followed by even greater upheaval on Wall Street has stalled the market. Reports are already surfacing of another wave of deals delayed, re-traded or called off. Sellers are also shocked and the seasonal surge in offerings that is typical each September has been modest.
Friday, October 17, 2008
Advantages and Pitfalls of Home Equity Borrowing
Scenarios when borrowing might make sense
You have erratic or hard-to-prove income: Because home equity borrowing is a secured loan and a number of lenders still base loan approval on credit score alone, you have a better chance of approval, providing your credit score is good. Plus a line of credit can act as backup between income infusions, usually at a lower rate than credit cards.
Your child is applying for financial aid at a private school: Need-based student aid decisions are determined partially on your assets, including primary residences whereas credit card debt is not reflected. Consolidating credit card or other outstanding debt using home equity dissipates the value of that asset, more accurately reflecting your financial picture. NOTE: This does not apply to FAFSA, the Free Application for Federal Student Aid, used at state schools.
You need to bridge a short financial gap: If you have a realistic view of your financial picture, and have determined you have the means and financial discipline to pay down the loan, there are benefits that could make home equity borrowing the smartest choice.
Advantages of home equity loans
Tax-deductible interest: Interest on the first $100,000 is tax-deductible, regardless of use. Additional interest may be tax-deductible if used for a business expense or another allowable purpose. Remember, you must itemize.
Lower rates than unsecured loans: Lenders carry lower risk holding your home as collateral, translating into lower interest rates than offered with unsecured loans.
Pitfalls of home equity loans
Not everyone can deduct interest: You must file an itemized tax return to claim the tax deduction on the interest paid. Your tax savings isn't dollar-for-dollar, says Katie Porter, associate professor of law at the University of Iowa and mortgage bankruptcy researcher. "For every dollar you get to deduct, you're reducing your income, which saves you -- depending on your tax bracket -- 20-25 percent on your taxes."
Shouldn't be used in place of making tough financial decisions: Taking on debt when money is tight is rarely a good idea. "It might be better to sell your car and get a cheaper one," Porter says, "than to put your house at risk."
You're taking on risk: "People need to be clear with themselves about the risks," says Porter. "Be very aware that your home and all the payments you have made toward it are the collateral. With unsecured credit, the interest rates are higher because it is the lender who is assuming the bulk of the risk. Securing your loan with your house as collateral means that you are assuming the bulk of the risk." You could lose your home.
It may limit your options: Your home's value may slide, leaving you owing more than you can get for your house if you try to sell. This is especially a problem for high loan-to-value (LTV) loans, in which the borrower can draw on up to 100 percent (and sometimes more) of the home's equity.
Understand the terms: Home equity lines of credit, or HELOCs, and many subprime loans often come with stiff prepayment penalties, sometimes equivalent to six months' payment. Adjustable-rate mortgages, or ARMs, frequently start off with a low teaser rate that increases after a set amount of time. Crunch the numbers on the ceiling amount; make sure you can afford your payments when the interest rises.
Plan for the unexpected: "Unexpected crises -- getting sick, getting hurt, losing a job, having spouse leave you -- almost all of us will experience this type of loss at one time or another and consumers need to build a cushion into their budget," says Porter. She further cautions, "If you tap into equity in good times, then you won't have money to tap in an emergency."
Don't ignore your other options
Lower interest rates can be enticing, but consumers should consider all other options before converting unsecured debt to a secured loan. Try these strategies.
Call credit card companies. See if you can work out a payment plan and negotiate lower rates.
Consider credit counseling. Choose a nonprofit credit counselor to negotiate on your behalf.
Cut back somewhere else. Get a cheaper car. Have a yard sale. Put your wallet on a diet.
You have erratic or hard-to-prove income: Because home equity borrowing is a secured loan and a number of lenders still base loan approval on credit score alone, you have a better chance of approval, providing your credit score is good. Plus a line of credit can act as backup between income infusions, usually at a lower rate than credit cards.
Your child is applying for financial aid at a private school: Need-based student aid decisions are determined partially on your assets, including primary residences whereas credit card debt is not reflected. Consolidating credit card or other outstanding debt using home equity dissipates the value of that asset, more accurately reflecting your financial picture. NOTE: This does not apply to FAFSA, the Free Application for Federal Student Aid, used at state schools.
You need to bridge a short financial gap: If you have a realistic view of your financial picture, and have determined you have the means and financial discipline to pay down the loan, there are benefits that could make home equity borrowing the smartest choice.
Advantages of home equity loans
Tax-deductible interest: Interest on the first $100,000 is tax-deductible, regardless of use. Additional interest may be tax-deductible if used for a business expense or another allowable purpose. Remember, you must itemize.
Lower rates than unsecured loans: Lenders carry lower risk holding your home as collateral, translating into lower interest rates than offered with unsecured loans.
Pitfalls of home equity loans
Not everyone can deduct interest: You must file an itemized tax return to claim the tax deduction on the interest paid. Your tax savings isn't dollar-for-dollar, says Katie Porter, associate professor of law at the University of Iowa and mortgage bankruptcy researcher. "For every dollar you get to deduct, you're reducing your income, which saves you -- depending on your tax bracket -- 20-25 percent on your taxes."
Shouldn't be used in place of making tough financial decisions: Taking on debt when money is tight is rarely a good idea. "It might be better to sell your car and get a cheaper one," Porter says, "than to put your house at risk."
You're taking on risk: "People need to be clear with themselves about the risks," says Porter. "Be very aware that your home and all the payments you have made toward it are the collateral. With unsecured credit, the interest rates are higher because it is the lender who is assuming the bulk of the risk. Securing your loan with your house as collateral means that you are assuming the bulk of the risk." You could lose your home.
It may limit your options: Your home's value may slide, leaving you owing more than you can get for your house if you try to sell. This is especially a problem for high loan-to-value (LTV) loans, in which the borrower can draw on up to 100 percent (and sometimes more) of the home's equity.
Understand the terms: Home equity lines of credit, or HELOCs, and many subprime loans often come with stiff prepayment penalties, sometimes equivalent to six months' payment. Adjustable-rate mortgages, or ARMs, frequently start off with a low teaser rate that increases after a set amount of time. Crunch the numbers on the ceiling amount; make sure you can afford your payments when the interest rises.
Plan for the unexpected: "Unexpected crises -- getting sick, getting hurt, losing a job, having spouse leave you -- almost all of us will experience this type of loss at one time or another and consumers need to build a cushion into their budget," says Porter. She further cautions, "If you tap into equity in good times, then you won't have money to tap in an emergency."
Don't ignore your other options
Lower interest rates can be enticing, but consumers should consider all other options before converting unsecured debt to a secured loan. Try these strategies.
Call credit card companies. See if you can work out a payment plan and negotiate lower rates.
Consider credit counseling. Choose a nonprofit credit counselor to negotiate on your behalf.
Cut back somewhere else. Get a cheaper car. Have a yard sale. Put your wallet on a diet.
Thursday, October 16, 2008
7 Questions You Must Ask Before Buying a Condo
You've found your dream condo, and you're ready to relax among the mango trees and swaying date palms. Hold everything. To keep from getting stuck with a lemon, you've got to do some homework. Here are the seven most important questions you need to ask before buying a condo.
1. "What's the Beef?"
Take a look at the minutes of the condo association board meetings to see what the owners have been griping about. If everyone was complaining about the faulty plumbing or the gardener's absence, you know that the complex is having management difficulties. Even if there aren't any complaints, reading the minutes will reveal the sorts of projects that are under way at the complex -- projects the seller may have neglected to mention.
2. "Who's Been Naughty and Who's Been Nice?"
Find out the delinquency rates of present owners. If people aren't paying their association dues on time, that is either a sign of discontent or an indication that the association might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a reserve-fund review in the past five years. Lester Giese, the author of The 99 Best Residential & Recreational Communities in America, recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that amount should be 50% or above. Residents who brag that they don't pay much in maintenance may be in a complex that either is not being kept up well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association's policy. First see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Then make sure that the policy has a building-ordinance clause, which means that the insurance will cover the cost of bringing the building up to code if there is any rebuilding to be done. On older buildings, there may have been many code upgrades since the time of construction. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. The smart condo owner will insure his or her personal belongings, along with any other items within the unit that are not covered by the association's policy. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.
5. "Does the Association Present Any Legal Problems?"
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, there's so much more involved. Contact a local real estate lawyer and have him or her go over the bylaws of the association. Do they make sense? Are they consistent with the state laws? Giese, the author, once found that the association bylaws of a large garden-style condo complex had been lifted from the books of a high-rise condo, leaving confused tenants with rules about shared hallway space and the correct use of garbage chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your lawyer screen the association at the local courthouse, to see if any owners have filed suit against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Does the management company find renters for you? If so, do they get enough good renters? Ask other tenants about their experience. In addition, ask to see the association's rental lease, and have a real estate lawyer look it over. Keep one thing in mind, though: An association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent, the less chance that will happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners manage the place themselves. Although many are operated efficiently, self-management can lead to more hassles for owners -- especially those who live thousands of miles away. If the complex is professionally managed, check out the management company as thoroughly as you check out the association. Ask other owners. Ask people in nearby buildings. And be sure to interview the day-to-day manager directly. If you hook up with a bad manager, you can be sure of this: Your dream condo will keep you up at night.
1. "What's the Beef?"
Take a look at the minutes of the condo association board meetings to see what the owners have been griping about. If everyone was complaining about the faulty plumbing or the gardener's absence, you know that the complex is having management difficulties. Even if there aren't any complaints, reading the minutes will reveal the sorts of projects that are under way at the complex -- projects the seller may have neglected to mention.
2. "Who's Been Naughty and Who's Been Nice?"
Find out the delinquency rates of present owners. If people aren't paying their association dues on time, that is either a sign of discontent or an indication that the association might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a reserve-fund review in the past five years. Lester Giese, the author of The 99 Best Residential & Recreational Communities in America, recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that amount should be 50% or above. Residents who brag that they don't pay much in maintenance may be in a complex that either is not being kept up well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association's policy. First see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Then make sure that the policy has a building-ordinance clause, which means that the insurance will cover the cost of bringing the building up to code if there is any rebuilding to be done. On older buildings, there may have been many code upgrades since the time of construction. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. The smart condo owner will insure his or her personal belongings, along with any other items within the unit that are not covered by the association's policy. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.
5. "Does the Association Present Any Legal Problems?"
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, there's so much more involved. Contact a local real estate lawyer and have him or her go over the bylaws of the association. Do they make sense? Are they consistent with the state laws? Giese, the author, once found that the association bylaws of a large garden-style condo complex had been lifted from the books of a high-rise condo, leaving confused tenants with rules about shared hallway space and the correct use of garbage chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your lawyer screen the association at the local courthouse, to see if any owners have filed suit against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Does the management company find renters for you? If so, do they get enough good renters? Ask other tenants about their experience. In addition, ask to see the association's rental lease, and have a real estate lawyer look it over. Keep one thing in mind, though: An association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent, the less chance that will happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners manage the place themselves. Although many are operated efficiently, self-management can lead to more hassles for owners -- especially those who live thousands of miles away. If the complex is professionally managed, check out the management company as thoroughly as you check out the association. Ask other owners. Ask people in nearby buildings. And be sure to interview the day-to-day manager directly. If you hook up with a bad manager, you can be sure of this: Your dream condo will keep you up at night.
Wednesday, October 15, 2008
Boosting Your Home's Value in a Down Market
Real estate may be considered a long-term investment, but you should be keeping track of your home's short-term value just as you would the rest of your portfolio.
With foreclosures reaching an all-time record in the third quarter, the housing market has been flooded with the highest number of single family homes up for sale since 1988. That glut, in combination with the ongoing credit crunch, helped to strip 5.7% off the value of the average U.S. home last year, according to Zillow.com, an online real estate service. Values could continue to dive well into 2008.
Even if you're not planning to sell your home anytime soon, you should be concerned about falling home prices. An estimate of your home's current value is a must for assessing homeowners insurance and property tax, as well as for planning your estate. It's also an important factor in figuring out which remodeling projects you should embark on now in order to get a bigger payoff in the long run.
If you seek to boost the value of your abode, make sure you don't overdo it. Now is not the time to dip into your home's equity or rack up credit-card debt to fund pricey remodeling projects.
Instead, choose projects that offer the most bang for the buck. Here are five ways to beef up your home's value without embarking on a costly and massive renovation.
Keep up with the Joneses. Find another outlet to express your individuality. To get the most money out of your home, you need to be in lockstep with your neighbors. "You don't want the biggest house on the block, or the nicest," says Sid Davis, author of "Home Makeovers That Sell." If most of the other homes on your block have laminate kitchen countertops and you splurge for granite, it's unlikely you'll get that money back in added value. Nor does it pay to be nonconformist. If all your neighbors' homes have designer kitchens, buyers will see replacing your olive green '70s-era refrigerator and oven as one more line on their tab.
Go green. Projects that improve energy efficiency offer some of the best returns, says Vena Jones-Cox, past president of the National Real Estate Investors Association. You'll reap immediate savings in the form of lower energy bills. And when you're ready to sell, rest assured that these upgrades will catch cost-conscious buyers' eyes. "If you look at what features real-estate agents are pushing, it's 'new furnace,' 'new windows,' 'new roof,'" she says. Swap out 10 old windows with insulated wood replacements, for example, and you could expect to recoup 81% of the project's $11,384 cost, according to Remodeling magazine's 2007 Cost vs. Value Report. In comparison, spending $69,817 to add a sunroom returns just 59%.
Gossip. Nearly 80% of consumers now start their search for real estate online, according to the National Association of Realtors. Considering that so much of a home's value is desirability (i.e., how close your house is to the best schools or how safe the neighborhood is) it can't hurt to do some cyber-boasting about your area's best features, says Diane Saatchi, senior vice president for Corcoran Group, a New York-based real estate broker. StreetAdvisor.com lets homeowners rate everything from sidewalk cleanliness and noise to cellphone reception and neighborly spirit. YourStreet.com users can post local news stories and debate each other about the best local pizza joints or dry cleaners.
Clean house. Aim to complete several small upkeep projects each year, like weather-stripping entryways, re-plastering a cracked facade or securing a loose floorboard. Although these problems are simple and inexpensive to fix, left untouched, they can cumulatively spell big trouble at sale time, cautions Saatchi. Buyers expect a $2 discount for every dollar of damage discovered during a home inspection, according to home inspection service HouseMaster. "People are very mindful of things that add to the cost of the house," she says. "Better you think about that first and can correct it before you put the house up for sale."
Exercise contractor caution. With fewer new homes being built, more contractors are looking for work. The good news: As contractors scramble for your business, bids will be more competitive, says Jones-Cox. You may also be able to negotiate a smaller upfront payment. The bad news: You'll need to be more vigilant about picking the best contractor for the job. "Contractors are starving for work," she says. "They may tell you they can do jobs they don't have the skills to do." Check that your would-be contractor has the appropriate licenses with your town building department, and that there are no outstanding complaints with the Better Business Bureau. Also, ask the contractor for a list of former customers for whom they've completed similar jobs, and follow up with each.
With foreclosures reaching an all-time record in the third quarter, the housing market has been flooded with the highest number of single family homes up for sale since 1988. That glut, in combination with the ongoing credit crunch, helped to strip 5.7% off the value of the average U.S. home last year, according to Zillow.com, an online real estate service. Values could continue to dive well into 2008.
Even if you're not planning to sell your home anytime soon, you should be concerned about falling home prices. An estimate of your home's current value is a must for assessing homeowners insurance and property tax, as well as for planning your estate. It's also an important factor in figuring out which remodeling projects you should embark on now in order to get a bigger payoff in the long run.
If you seek to boost the value of your abode, make sure you don't overdo it. Now is not the time to dip into your home's equity or rack up credit-card debt to fund pricey remodeling projects.
Instead, choose projects that offer the most bang for the buck. Here are five ways to beef up your home's value without embarking on a costly and massive renovation.
Keep up with the Joneses. Find another outlet to express your individuality. To get the most money out of your home, you need to be in lockstep with your neighbors. "You don't want the biggest house on the block, or the nicest," says Sid Davis, author of "Home Makeovers That Sell." If most of the other homes on your block have laminate kitchen countertops and you splurge for granite, it's unlikely you'll get that money back in added value. Nor does it pay to be nonconformist. If all your neighbors' homes have designer kitchens, buyers will see replacing your olive green '70s-era refrigerator and oven as one more line on their tab.
Go green. Projects that improve energy efficiency offer some of the best returns, says Vena Jones-Cox, past president of the National Real Estate Investors Association. You'll reap immediate savings in the form of lower energy bills. And when you're ready to sell, rest assured that these upgrades will catch cost-conscious buyers' eyes. "If you look at what features real-estate agents are pushing, it's 'new furnace,' 'new windows,' 'new roof,'" she says. Swap out 10 old windows with insulated wood replacements, for example, and you could expect to recoup 81% of the project's $11,384 cost, according to Remodeling magazine's 2007 Cost vs. Value Report. In comparison, spending $69,817 to add a sunroom returns just 59%.
Gossip. Nearly 80% of consumers now start their search for real estate online, according to the National Association of Realtors. Considering that so much of a home's value is desirability (i.e., how close your house is to the best schools or how safe the neighborhood is) it can't hurt to do some cyber-boasting about your area's best features, says Diane Saatchi, senior vice president for Corcoran Group, a New York-based real estate broker. StreetAdvisor.com lets homeowners rate everything from sidewalk cleanliness and noise to cellphone reception and neighborly spirit. YourStreet.com users can post local news stories and debate each other about the best local pizza joints or dry cleaners.
Clean house. Aim to complete several small upkeep projects each year, like weather-stripping entryways, re-plastering a cracked facade or securing a loose floorboard. Although these problems are simple and inexpensive to fix, left untouched, they can cumulatively spell big trouble at sale time, cautions Saatchi. Buyers expect a $2 discount for every dollar of damage discovered during a home inspection, according to home inspection service HouseMaster. "People are very mindful of things that add to the cost of the house," she says. "Better you think about that first and can correct it before you put the house up for sale."
Exercise contractor caution. With fewer new homes being built, more contractors are looking for work. The good news: As contractors scramble for your business, bids will be more competitive, says Jones-Cox. You may also be able to negotiate a smaller upfront payment. The bad news: You'll need to be more vigilant about picking the best contractor for the job. "Contractors are starving for work," she says. "They may tell you they can do jobs they don't have the skills to do." Check that your would-be contractor has the appropriate licenses with your town building department, and that there are no outstanding complaints with the Better Business Bureau. Also, ask the contractor for a list of former customers for whom they've completed similar jobs, and follow up with each.
Tuesday, October 14, 2008
How to Avoid Contractor Disputes, and What to Do If They Arise
In hindsight, the red flags were waving, says Karen, a suburban Atlanta homeowner. But in the hubbub of her home-remodeling project she didn't spot them in time. If only she had. "The financial dealing over this addition has been a nightmare," says Karen, who prefers to remain anonymous given the bad blood that still exists between her and the contractor who worked on her house.
Karen and her husband paid 40% of the cost up front (red flag number one) because the contractor said he needed money for materials. When she asked for receipts, bills and work orders for the subcontracted work, they never showed up (red flag number two). Then came calls from the concrete company demanding payment for a foundation that had been poured months earlier (big, fat red flag number three). Finally came a letter stating that the concrete firm was putting a lien on the house -- as is the right of subcontractors and suppliers who've not been paid, even if the customer has paid the general contractor for the work. "That sent me through the roof," says Karen.
Through the roof and into a not-very-select club of homeowners with gripes against contractors, a club that is swelling along with the $210-billion-a-year remodeling industry. The National Association of Home Builders projects that home remodeling will grow at a 13% rate this year, even as construction of new homes is expected to slow by 10%. Today, the average home is 32 years old, compared with 28 years old in 1993, and Americans are updating their 1970s-era houses to match current tastes.
Too often, though, renovation leads to frustration. Home-improvement contracting was the top category of consumer complaints in 2004, and it has ranked in the top three in each of the past five years, according to an annual survey by state and local consumer-protection agencies. The stakes can be enormous. "We're not talking about $15,000 additions -- we're talking $150,000, $200,000, $500,000 additions," says Minneapolis construction lawyer David Hammargren. "As the size of the projects has increased, the size of the problems has increased."
An unexpected mechanic's lien, such as the one Karen faced, is a common complaint. Other gripes include defective work, contractors who fail to complete work when promised or farm out too much of the work to unsupervised subcontractors, and crews that don't clean up the work site or that damage a homeowner's property.
Before storming off to the complaint department, ask yourself if you're at least part of the problem. Did you invite trouble by jumping for the lowest bid? "The low-price contractor has no way to fulfill his contract other than by cutting corners," says Bob Pomeroy, an estimator for Answer Heating & Cooling, in Freeland, Mich. Are you communicating clearly? "We've been told to do things, and then, when the husband -- usually it's the husband -- comes home, he says, "No way, I'm not paying for that,' " says Alan Hanbury, of House of Hanbury Builders, in Newington, Conn. "A lot of things come up in an eight-hour day. Designate one spouse as the official spokesperson."
Take precautions
A good contract is the best defense against disputes. But few are airtight, and some projects blow up anyway. When necessary, regulators, consumer-protection agencies and, as a last resort, lawyers can help you pick up the pieces.
Karen solved her problem creatively. After she threatened to picket the contractor's exhibit at a home show, he agreed to pay the disputed tab. She met the concrete subcontractor on the steps of the courthouse with a $3,600 check to head off a lien, which could have forced her to pay twice for the same work, clouded the title to her house and even caused her to lose her house to foreclosure.
In hindsight, the better solution would have been to demand receipts after paying for each subcontracted job. To protect yourself, have the builder acknowledge in writing that subcontractors and suppliers have been paid through the date on the check, and specifically note the work you've paid for. Another option is to make out checks jointly to the contractor and the subs (all of whom must endorse the check before it's cashed). Or you can pay a fee to have a third party make sure everyone is paid -- possibly the bank administering your construction loan. Before you get started, it never hurts to call suppliers and subs to ask about their dealings with the contractor. Be wary if the contractor hasn't worked well with the suppliers and subs in the past -- or hasn't worked with them at all.
How you pay a contractor is almost as important as how much. You never want the money paid to get ahead of the work done because then you have no leverage in a dispute. Spell out the payment schedule in the contract, beginning with the amount to be paid up front. Some states limit down payments to 10% of the contract price; others allow one-third down. When kitchen cabinets or other materials need to be ordered, you can tailor early payments to meet those out-of-pocket costs.
Periodic payments after the work starts should correspond to completed segments of the project -- foundation, framing, plumbing, electrical, drywall, flooring, all the way through finished carpentry and painting. You might tie payments to the cost of doing the work plus a percentage of the profit, or pay 10% to 15% after each milestone (assuming, of course, that the building inspector has signed off on all work that requires inspection). But the best way to ensure that work gets done when and how you want it is to leave a significant sum -- at least 10% -- to be paid only when the job is completed to your satisfaction.
Living with construction can be a nightmare. But instead of resenting the mess, craft a "broom clause" in the contract that assigns responsibility for cleanup or repair. That might have saved Diane Hicks's sanity. When Hicks hired Home Depot to remodel the kitchen in her condo on Pawley's Island, S.C., she was unprepared for what followed. "They left the cabinets in the living room for a month -- in dirty, filthy boxes on my brand-new carpet. There were nicks in the paint. And the granite guys dragged a slab across the carpet, burning a hole in it. They cut the granite inside the condo, and there was dust all over."
Home Depot repaired the carpet, but Hicks was unhappy with the finished project and received a partial refund. Says Home Depot spokesman Don Harrison: "We're responsible for more than 11,000 product installations daily. Unfortunately, it sounds like we let one of our customers down in this instance, and we regret it."
Karen and her husband paid 40% of the cost up front (red flag number one) because the contractor said he needed money for materials. When she asked for receipts, bills and work orders for the subcontracted work, they never showed up (red flag number two). Then came calls from the concrete company demanding payment for a foundation that had been poured months earlier (big, fat red flag number three). Finally came a letter stating that the concrete firm was putting a lien on the house -- as is the right of subcontractors and suppliers who've not been paid, even if the customer has paid the general contractor for the work. "That sent me through the roof," says Karen.
Through the roof and into a not-very-select club of homeowners with gripes against contractors, a club that is swelling along with the $210-billion-a-year remodeling industry. The National Association of Home Builders projects that home remodeling will grow at a 13% rate this year, even as construction of new homes is expected to slow by 10%. Today, the average home is 32 years old, compared with 28 years old in 1993, and Americans are updating their 1970s-era houses to match current tastes.
Too often, though, renovation leads to frustration. Home-improvement contracting was the top category of consumer complaints in 2004, and it has ranked in the top three in each of the past five years, according to an annual survey by state and local consumer-protection agencies. The stakes can be enormous. "We're not talking about $15,000 additions -- we're talking $150,000, $200,000, $500,000 additions," says Minneapolis construction lawyer David Hammargren. "As the size of the projects has increased, the size of the problems has increased."
An unexpected mechanic's lien, such as the one Karen faced, is a common complaint. Other gripes include defective work, contractors who fail to complete work when promised or farm out too much of the work to unsupervised subcontractors, and crews that don't clean up the work site or that damage a homeowner's property.
Before storming off to the complaint department, ask yourself if you're at least part of the problem. Did you invite trouble by jumping for the lowest bid? "The low-price contractor has no way to fulfill his contract other than by cutting corners," says Bob Pomeroy, an estimator for Answer Heating & Cooling, in Freeland, Mich. Are you communicating clearly? "We've been told to do things, and then, when the husband -- usually it's the husband -- comes home, he says, "No way, I'm not paying for that,' " says Alan Hanbury, of House of Hanbury Builders, in Newington, Conn. "A lot of things come up in an eight-hour day. Designate one spouse as the official spokesperson."
Take precautions
A good contract is the best defense against disputes. But few are airtight, and some projects blow up anyway. When necessary, regulators, consumer-protection agencies and, as a last resort, lawyers can help you pick up the pieces.
Karen solved her problem creatively. After she threatened to picket the contractor's exhibit at a home show, he agreed to pay the disputed tab. She met the concrete subcontractor on the steps of the courthouse with a $3,600 check to head off a lien, which could have forced her to pay twice for the same work, clouded the title to her house and even caused her to lose her house to foreclosure.
In hindsight, the better solution would have been to demand receipts after paying for each subcontracted job. To protect yourself, have the builder acknowledge in writing that subcontractors and suppliers have been paid through the date on the check, and specifically note the work you've paid for. Another option is to make out checks jointly to the contractor and the subs (all of whom must endorse the check before it's cashed). Or you can pay a fee to have a third party make sure everyone is paid -- possibly the bank administering your construction loan. Before you get started, it never hurts to call suppliers and subs to ask about their dealings with the contractor. Be wary if the contractor hasn't worked well with the suppliers and subs in the past -- or hasn't worked with them at all.
How you pay a contractor is almost as important as how much. You never want the money paid to get ahead of the work done because then you have no leverage in a dispute. Spell out the payment schedule in the contract, beginning with the amount to be paid up front. Some states limit down payments to 10% of the contract price; others allow one-third down. When kitchen cabinets or other materials need to be ordered, you can tailor early payments to meet those out-of-pocket costs.
Periodic payments after the work starts should correspond to completed segments of the project -- foundation, framing, plumbing, electrical, drywall, flooring, all the way through finished carpentry and painting. You might tie payments to the cost of doing the work plus a percentage of the profit, or pay 10% to 15% after each milestone (assuming, of course, that the building inspector has signed off on all work that requires inspection). But the best way to ensure that work gets done when and how you want it is to leave a significant sum -- at least 10% -- to be paid only when the job is completed to your satisfaction.
Living with construction can be a nightmare. But instead of resenting the mess, craft a "broom clause" in the contract that assigns responsibility for cleanup or repair. That might have saved Diane Hicks's sanity. When Hicks hired Home Depot to remodel the kitchen in her condo on Pawley's Island, S.C., she was unprepared for what followed. "They left the cabinets in the living room for a month -- in dirty, filthy boxes on my brand-new carpet. There were nicks in the paint. And the granite guys dragged a slab across the carpet, burning a hole in it. They cut the granite inside the condo, and there was dust all over."
Home Depot repaired the carpet, but Hicks was unhappy with the finished project and received a partial refund. Says Home Depot spokesman Don Harrison: "We're responsible for more than 11,000 product installations daily. Unfortunately, it sounds like we let one of our customers down in this instance, and we regret it."
Monday, October 13, 2008
How to Avoid a Bad Co-op or Condo
Co-ops and condos can be a good option for first-time home buyers. They are also attractive alternatives for people who own a house but want to downsize because they don't need the space anymore. But while co-ops and condos generally cost less than free-standing houses and require less upkeep, there are still some potential pitfalls.
First, some definitions: When you buy a condominium, you get a deed and title to an apartment and contribute funds for the upkeep of common property such as the grounds, building exterior, lobby and elevators. Condo owners pay real estate taxes and in general can rent or sell as they wish.
With a co-op, you are buying stock in the company that owns a building. You don't actually own any real property, but the stock entitles you to a lease for a unit in the building. As with a condo, you contribute funds for the upkeep of common grounds, but your monthly fees also cover the real estate taxes and insurance for the building, among other things. Co-op boards also can restrict your ability to sublet your unit.
In either case, you are living at close quarters with other people in the building and may be subject to rules and policies you don't like, such as no pets or mandatory carpeting. Just as important, you will be co-mingling your finances with everyone else in the building, since co-op and condo owners may have to foot the bill if their neighbors fail to pay their monthly fees. It can also be harder for you to sell your unit if others in the building default on their mortgages.
For this reason, lenders take a close look at the ownership structures and finances of co-ops and condos -- and you should, too.
Ed Fusco, an attorney based in the Park Slope section of Brooklyn, N.Y., says, "Banks ... want evidence that the sponsor doesn't have a controlling interest and also that the building is owner-occupied. Often, in a new conversion, the units aren't completely sold and banks will put restrictions of loans."
For example, he says, a bank would be reluctant to finance the purchase of an apartment in a 25-unit building if only two units are sold and the rest are in the hands of the sponsor, since these remaining units might eventually be rented, rather than sold.
Fusco says this dates back to the last real estate downturn in the 1980s. Back then, sponsors who owned too many units and got into financial trouble often stopped paying the maintenance, causing the building to default on the underlying mortgage. When the underlying mortgage gets foreclosed, then everyone in the building stands to lose his or her apartment, including the banks that have those apartments as collateral.
These days, in many new conversions, the sponsor will approach banks and make deals upfront. Many times applicants can get a mortgage anywhere they want but must at least apply for one with the lender specified in the building's offering plan.
If you're buying a co-op, getting a mortgage is just the first step; you may also need to be approved by the co-op board. Even in today's market, when many banks are tightening their lending criteria, getting past the co-op board can be much tougher.
Barbara Fox, a Manhattan-based real estate broker, cautions, "Buying an apartment, and in particular a co-op in New York, is a cumbersome and personally invasive process. Your net worth and investments are stripped down to almost the penny."
Fox says that while other cities have co-ops, New York instituted a system that is "similar to joining a private club. Early on, when the co-op concept came into focus, the people who were living in these very expensive apartments wanted to be able to know that they could control who was living next door to them."
But another reason for the scrutiny is that "the board needs to know that a buyer will be a constructive entity; most important to the board is the status of your finances."
Jonathan Raboy, real estate agent at Citi-Habitats, tell the story of a client who was unable to buy an apartment on Manhattan's West Side because the co-op board -- not the bank -- felt his finances didn't pass muster. "The board there required an extremely low debt-to-income ratio, and although my client was a professional and had a good ratio, it at the time was more than this board would have liked to see," he says. Before his client could satisfy the board, another prospective buyer came along and outbid him.
Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.
Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."
In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."
Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatement's, which can keep your real estate taxes down for a certain number of years.
First, some definitions: When you buy a condominium, you get a deed and title to an apartment and contribute funds for the upkeep of common property such as the grounds, building exterior, lobby and elevators. Condo owners pay real estate taxes and in general can rent or sell as they wish.
With a co-op, you are buying stock in the company that owns a building. You don't actually own any real property, but the stock entitles you to a lease for a unit in the building. As with a condo, you contribute funds for the upkeep of common grounds, but your monthly fees also cover the real estate taxes and insurance for the building, among other things. Co-op boards also can restrict your ability to sublet your unit.
In either case, you are living at close quarters with other people in the building and may be subject to rules and policies you don't like, such as no pets or mandatory carpeting. Just as important, you will be co-mingling your finances with everyone else in the building, since co-op and condo owners may have to foot the bill if their neighbors fail to pay their monthly fees. It can also be harder for you to sell your unit if others in the building default on their mortgages.
For this reason, lenders take a close look at the ownership structures and finances of co-ops and condos -- and you should, too.
Ed Fusco, an attorney based in the Park Slope section of Brooklyn, N.Y., says, "Banks ... want evidence that the sponsor doesn't have a controlling interest and also that the building is owner-occupied. Often, in a new conversion, the units aren't completely sold and banks will put restrictions of loans."
For example, he says, a bank would be reluctant to finance the purchase of an apartment in a 25-unit building if only two units are sold and the rest are in the hands of the sponsor, since these remaining units might eventually be rented, rather than sold.
Fusco says this dates back to the last real estate downturn in the 1980s. Back then, sponsors who owned too many units and got into financial trouble often stopped paying the maintenance, causing the building to default on the underlying mortgage. When the underlying mortgage gets foreclosed, then everyone in the building stands to lose his or her apartment, including the banks that have those apartments as collateral.
These days, in many new conversions, the sponsor will approach banks and make deals upfront. Many times applicants can get a mortgage anywhere they want but must at least apply for one with the lender specified in the building's offering plan.
If you're buying a co-op, getting a mortgage is just the first step; you may also need to be approved by the co-op board. Even in today's market, when many banks are tightening their lending criteria, getting past the co-op board can be much tougher.
Barbara Fox, a Manhattan-based real estate broker, cautions, "Buying an apartment, and in particular a co-op in New York, is a cumbersome and personally invasive process. Your net worth and investments are stripped down to almost the penny."
Fox says that while other cities have co-ops, New York instituted a system that is "similar to joining a private club. Early on, when the co-op concept came into focus, the people who were living in these very expensive apartments wanted to be able to know that they could control who was living next door to them."
But another reason for the scrutiny is that "the board needs to know that a buyer will be a constructive entity; most important to the board is the status of your finances."
Jonathan Raboy, real estate agent at Citi-Habitats, tell the story of a client who was unable to buy an apartment on Manhattan's West Side because the co-op board -- not the bank -- felt his finances didn't pass muster. "The board there required an extremely low debt-to-income ratio, and although my client was a professional and had a good ratio, it at the time was more than this board would have liked to see," he says. Before his client could satisfy the board, another prospective buyer came along and outbid him.
Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.
Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."
In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."
Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatement's, which can keep your real estate taxes down for a certain number of years.
Friday, October 10, 2008
Greenspan Sees Housing Recovery in First Half of 2009
Oct. 10 (Bloomberg) -- Former U.S. Federal Reserve Chairman Alan Greenspan wrote in an article for Emerging Markets newspaper that the U.S. housing market will recover in the first half of 2009.
``The recent slowing in the rate of decline in U.S. home prices is the first positive note in this now yearlong trauma,'' Greenspan wrote in the article for Emerging Markets, a publication issued for this weekend's Group of Seven and International Monetary Fund meetings in Washington.
``More conclusive signs of pending home price stability are likely to become visible in the first half of 2009,'' he wrote.
The credit-market freeze will eventually thaw as ``frightened investors take tentative steps towards reengagement with risk,'' the former Fed chairman said, without specifying a time frame. He praised the actions of governments in buying up toxic assets and recapitalizing banks.
Treasury Secretary Henry Paulson is pursuing a Congress- approved $700 billion rescue plan and the government may buy stakes in several banks within weeks. Iceland's government seized the island's top three banks this week after the banking system imploded. The U.K. government agreed to invest 50 billion pounds ($87 billion) Oct. 8 to boost capital in the nation's banks to unlock credit markets.
``The recent slowing in the rate of decline in U.S. home prices is the first positive note in this now yearlong trauma,'' Greenspan wrote in the article for Emerging Markets, a publication issued for this weekend's Group of Seven and International Monetary Fund meetings in Washington.
``More conclusive signs of pending home price stability are likely to become visible in the first half of 2009,'' he wrote.
The credit-market freeze will eventually thaw as ``frightened investors take tentative steps towards reengagement with risk,'' the former Fed chairman said, without specifying a time frame. He praised the actions of governments in buying up toxic assets and recapitalizing banks.
Treasury Secretary Henry Paulson is pursuing a Congress- approved $700 billion rescue plan and the government may buy stakes in several banks within weeks. Iceland's government seized the island's top three banks this week after the banking system imploded. The U.K. government agreed to invest 50 billion pounds ($87 billion) Oct. 8 to boost capital in the nation's banks to unlock credit markets.
Thursday, October 9, 2008
Things to Consider When Interviewing Property Management Companies
Lately, a bunch of people have been asking about what to look for when picking a property manager. Its a great question, and I’ll try to cover a few important points. I’m going to ask more questions then I’ll answer, but these are questions you’ll want to keep in mind when interviewing managers.
1 - Cost: Managers generally charge a monthly fee to watch and maintain your property. Those fees can range from a minimum $800 to $11-$13 "per door" charge. Obviously, you should look the company that charges less in comparison to the amount of services they provide.
2 - Communication: For me, communication with a manager is of the utmost importance. I need someone who uses email, and is responsive to both the telephone and email. If I don’t get a response back in a timely manner, it is time to walk. In addition, you need someone who can deal with you and your idiosyncrasies, some of us are needier then others. You want to let companies know up front where you stand, and make sure they’re willing to be flexible for you.
3 - Termination of your Agreement: In the event that your “relationship” does not work out, you want to know up front what exactly it will take to terminate your agreement. Is there a charge for breaking your contract? Penalties?
4 - Repairs and Maintenance: Does the company have their own maintenance crew, or do they contract out to a handyman? How much do they bill out at? Can they handle all kinds of repairs? What happens if they can’t do something? Do they have other contractors that they work with?
In addition, you probably want to have a maximum that the company can spend without contacting you. Generally, I will allow my managers to do what they need to as long as it is for something under $500. I must confirm any expenses over that. If you are a bit more of a control person, you can also request invoices/receipts for expenses.
5 - Monthly Statements: Does the company send out monthly or quarterly statements. I wouldn’t deal with anyone that does not provide monthly income/expense statements.
6 - Evictions: How does the company handle evictions? What are the costs to evict?
7 - Yard Work: How much do they bill yard work out at? Landscaping? Do they handle snow removal? Mow lawns? How much does each cost?
8 - Reserves: What kind of reserve does the company require? The reserves are used in case anything comes up. Most managers will require a certain amount.
9 - Accounting: When will the manager mail your financials to you? Beginning of the month? State laws usually dictate accounting rules for managers, but you want to know all of this up front.
The bottom line is you want to find a property management company that you feel comfortable with. Look for a company that is going to listen to your needs and respond to those needs efficiently. This an important decision for your property, so make sure you make an informed and intelligent choice.
1 - Cost: Managers generally charge a monthly fee to watch and maintain your property. Those fees can range from a minimum $800 to $11-$13 "per door" charge. Obviously, you should look the company that charges less in comparison to the amount of services they provide.
2 - Communication: For me, communication with a manager is of the utmost importance. I need someone who uses email, and is responsive to both the telephone and email. If I don’t get a response back in a timely manner, it is time to walk. In addition, you need someone who can deal with you and your idiosyncrasies, some of us are needier then others. You want to let companies know up front where you stand, and make sure they’re willing to be flexible for you.
3 - Termination of your Agreement: In the event that your “relationship” does not work out, you want to know up front what exactly it will take to terminate your agreement. Is there a charge for breaking your contract? Penalties?
4 - Repairs and Maintenance: Does the company have their own maintenance crew, or do they contract out to a handyman? How much do they bill out at? Can they handle all kinds of repairs? What happens if they can’t do something? Do they have other contractors that they work with?
In addition, you probably want to have a maximum that the company can spend without contacting you. Generally, I will allow my managers to do what they need to as long as it is for something under $500. I must confirm any expenses over that. If you are a bit more of a control person, you can also request invoices/receipts for expenses.
5 - Monthly Statements: Does the company send out monthly or quarterly statements. I wouldn’t deal with anyone that does not provide monthly income/expense statements.
6 - Evictions: How does the company handle evictions? What are the costs to evict?
7 - Yard Work: How much do they bill yard work out at? Landscaping? Do they handle snow removal? Mow lawns? How much does each cost?
8 - Reserves: What kind of reserve does the company require? The reserves are used in case anything comes up. Most managers will require a certain amount.
9 - Accounting: When will the manager mail your financials to you? Beginning of the month? State laws usually dictate accounting rules for managers, but you want to know all of this up front.
The bottom line is you want to find a property management company that you feel comfortable with. Look for a company that is going to listen to your needs and respond to those needs efficiently. This an important decision for your property, so make sure you make an informed and intelligent choice.
Wednesday, October 8, 2008
Tenant Screening
The alarm clock goes off, and it’s a beautiful morning…but you don’t want to get out of bed. You’re chasing a tenant for delinquent rent. Looking back, you remember that you had a pretty good feeling about this tenant in the interview, so what happened? What information could you have gathered, or had them provide, that could have avoided this situation? A few of the best practices for tenant screening can help us:
Get the Real Identification Information – By far, the best ID is a state driver’s license. If they drove into the parking lot, don’t listen to excuses. Expired driver’s licenses are a red flag. It could be from a previous state of residence, and they don’t want you to know their current information.
Get Plenty of Contact Information – Whether they call Mom on Mother’s Day or not, you want her phone number and address. She’ll always know how to reach them, even if they skip on your rent. Getting employers, friends and family contact information is proper and important. When you can, get cell phone numbers, because they change them less often than home phones. Be a C.S.I. detective and you might catch them through cell phone GPS!
Employment & rental references – Another item on your rental application is employment. Get past employers’ names and contact information. Verify job income. If the employer doesn’t want to give you an income figure, give them a range to which they can agree. If self-employed, get their tax return. Really check out rental references. If they left holes in the walls and floor stains in a previous apartment, you want to know.
Credit and background checks – A credit check is the next step, as you need to know if they pay their bills, or if there is a history of bankruptcy or suits for unpaid rents. If they have a criminal record, you may want to think twice about renting to a tenant who’s been jailed for apartment burglary.
Cover Yourself With Adequate Deposits & Payment Security – Just because the college student is likable, it doesn’t mean they’ll be able to consistently pay rent. You may need to require a parent or other relative to sign as a guarantor for rent payments. If Dad won’t sign, you don’t need to adopt them.
Peace of mind in getting your rent and a vacated unit in good condition lies in deposits. Many states have laws about how much you can require in rental, security and pet deposits, so check yours. Within the law, get deposits in amounts that will allow you to sleep at night. If first and last month rent seems necessary, get it without a second thought. If they have a dog you’d call Godzilla, maybe some extra pet deposit might be wise.
When that alarm goes off in the morning, you want to jump out of bed ready to have a great day. Doing tenant screening the right way can help make that happen.
Get the Real Identification Information – By far, the best ID is a state driver’s license. If they drove into the parking lot, don’t listen to excuses. Expired driver’s licenses are a red flag. It could be from a previous state of residence, and they don’t want you to know their current information.
Get Plenty of Contact Information – Whether they call Mom on Mother’s Day or not, you want her phone number and address. She’ll always know how to reach them, even if they skip on your rent. Getting employers, friends and family contact information is proper and important. When you can, get cell phone numbers, because they change them less often than home phones. Be a C.S.I. detective and you might catch them through cell phone GPS!
Employment & rental references – Another item on your rental application is employment. Get past employers’ names and contact information. Verify job income. If the employer doesn’t want to give you an income figure, give them a range to which they can agree. If self-employed, get their tax return. Really check out rental references. If they left holes in the walls and floor stains in a previous apartment, you want to know.
Credit and background checks – A credit check is the next step, as you need to know if they pay their bills, or if there is a history of bankruptcy or suits for unpaid rents. If they have a criminal record, you may want to think twice about renting to a tenant who’s been jailed for apartment burglary.
Cover Yourself With Adequate Deposits & Payment Security – Just because the college student is likable, it doesn’t mean they’ll be able to consistently pay rent. You may need to require a parent or other relative to sign as a guarantor for rent payments. If Dad won’t sign, you don’t need to adopt them.
Peace of mind in getting your rent and a vacated unit in good condition lies in deposits. Many states have laws about how much you can require in rental, security and pet deposits, so check yours. Within the law, get deposits in amounts that will allow you to sleep at night. If first and last month rent seems necessary, get it without a second thought. If they have a dog you’d call Godzilla, maybe some extra pet deposit might be wise.
When that alarm goes off in the morning, you want to jump out of bed ready to have a great day. Doing tenant screening the right way can help make that happen.
Tuesday, October 7, 2008
A Landlord's Most Important Decision Is?
The most important decision any landlord makes is deciding who
can live in their property. Who will you, as the owner, allow to
live in your investment? This decision is so vital to the
profitability of any property investment business and affects
the business on so many levels that it's amazing that some
landlord don't have a formalised procedure to protect themselves
from making bad decision.
Let's think about what we're actually doing when we rent a
property. Instead of thinking of the property as a monthly
income generator think of it as a pile of cash. Cash you have
tied up in the deposit and purchasing costs. Cash you hope to
gain a regular income from through renting and more cash that
you'll receive if you sell the property and realise your capital
gains. (Assuming house prices have risen since you purchased).
If you include in this the value you place on your time spend
finding the property, buying and arranging the rental then we
have a very serious investment on our hands indeed.
Now, imagine all that money in real, tangible terms, stacked up
in a room in the house and then consider we hand over the keys
to someone and say, "See you next year". Now we can begin to see
how important it is to select the right tenant. Of course, I'm
being dramatic and we do have legal safe guards but I hope that
by considering your investment in terms of hard cash (like a
professional investor) then you'll treat the question of
occupancy very seriously.
There's more to it than just financials. Not only are we
trusting the tenant to look after our investment but we're also
investing our free time with them. What do I mean? If we are
managing the property ourselves and not using a letting agent
then we have made a serious commitment in time to look after
that tenant. If you have a tenant who does not appreciate your
property or does not treat it with care and respect then you run
the risk of losing your evening and weekends in maintenance and
management tasks. What about rent collection? An unreliable
tenant who does not pay on time creates stress and worry. Legal
protection lets us all sleep better at night but the
practicalities of recouping money and legal costs are a headache
we do not need and one that's very avoidable.
can live in their property. Who will you, as the owner, allow to
live in your investment? This decision is so vital to the
profitability of any property investment business and affects
the business on so many levels that it's amazing that some
landlord don't have a formalised procedure to protect themselves
from making bad decision.
Let's think about what we're actually doing when we rent a
property. Instead of thinking of the property as a monthly
income generator think of it as a pile of cash. Cash you have
tied up in the deposit and purchasing costs. Cash you hope to
gain a regular income from through renting and more cash that
you'll receive if you sell the property and realise your capital
gains. (Assuming house prices have risen since you purchased).
If you include in this the value you place on your time spend
finding the property, buying and arranging the rental then we
have a very serious investment on our hands indeed.
Now, imagine all that money in real, tangible terms, stacked up
in a room in the house and then consider we hand over the keys
to someone and say, "See you next year". Now we can begin to see
how important it is to select the right tenant. Of course, I'm
being dramatic and we do have legal safe guards but I hope that
by considering your investment in terms of hard cash (like a
professional investor) then you'll treat the question of
occupancy very seriously.
There's more to it than just financials. Not only are we
trusting the tenant to look after our investment but we're also
investing our free time with them. What do I mean? If we are
managing the property ourselves and not using a letting agent
then we have made a serious commitment in time to look after
that tenant. If you have a tenant who does not appreciate your
property or does not treat it with care and respect then you run
the risk of losing your evening and weekends in maintenance and
management tasks. What about rent collection? An unreliable
tenant who does not pay on time creates stress and worry. Legal
protection lets us all sleep better at night but the
practicalities of recouping money and legal costs are a headache
we do not need and one that's very avoidable.
Monday, October 6, 2008
Give Renters What They Want Most at Home: Safety & Security
The people have spoken. The top two features people look for in housing are security and fire safety, says a study by the Bethesda-based Society for Fire Protection.
The study says 43% of those polled answered with one of those two categories as the most important. With such overwhelming numbers behind security and fire safety, landlords should pay close attention. Chris Jelenewicz, an engineering program manager with SFPE, says landlords can, and often should, make simple changes that will have a high impact on both security and fire safety.
“When security and fire protection aren’t coordinated, it can lead to devastating affects,” Jelenewicz says. “It can be an issue at any property, really.”
Among the simplest improvements a landlord can make is ensuring all exits to a building are clear of obstructions/ blockages of any kind. This can include plants, stored equipment, etc.
Jelenewicz says it is shocking how many buildings, especially high-rise buildings with auxiliary staircases, use areas such as back staircases to store boxes and random items occasionally needed on site.
Another somewhat easy fix it is arming auxiliary doors with alarms, so they can not be accessed to enter the building and only will be used as exits in emergencies. A similar renovation would be installing technology that forces a 10-second delay before a door will open in a low-traffic part of a building. Jelenewicz calls the measure a key new crime deterrent.
“If someone stealing a TV or a laptop in that situation, they’ll likely drop it and leave [through a more accessible/ more public exit], says Jelenewicz.
If the landlord is involved in building or overhaul of a rental property, it would behoove him/her to consult a fireprevention engineer during the design phase to make sure new safety issues aren’t being created, says Jelenewicz. Remember, spending money up-front could save a lot more money down the road.
The study says 43% of those polled answered with one of those two categories as the most important. With such overwhelming numbers behind security and fire safety, landlords should pay close attention. Chris Jelenewicz, an engineering program manager with SFPE, says landlords can, and often should, make simple changes that will have a high impact on both security and fire safety.
“When security and fire protection aren’t coordinated, it can lead to devastating affects,” Jelenewicz says. “It can be an issue at any property, really.”
Among the simplest improvements a landlord can make is ensuring all exits to a building are clear of obstructions/ blockages of any kind. This can include plants, stored equipment, etc.
Jelenewicz says it is shocking how many buildings, especially high-rise buildings with auxiliary staircases, use areas such as back staircases to store boxes and random items occasionally needed on site.
Another somewhat easy fix it is arming auxiliary doors with alarms, so they can not be accessed to enter the building and only will be used as exits in emergencies. A similar renovation would be installing technology that forces a 10-second delay before a door will open in a low-traffic part of a building. Jelenewicz calls the measure a key new crime deterrent.
“If someone stealing a TV or a laptop in that situation, they’ll likely drop it and leave [through a more accessible/ more public exit], says Jelenewicz.
If the landlord is involved in building or overhaul of a rental property, it would behoove him/her to consult a fireprevention engineer during the design phase to make sure new safety issues aren’t being created, says Jelenewicz. Remember, spending money up-front could save a lot more money down the road.
Resident Feedback - Turning Negatives Into Positives
No matter how expansive a company’s efforts toward improving resident experience may be, resident feedback is the most efficient means of evaluating a community’s overall viability.
Resident feedback is essential to maintaining a viable apartment community. Whether it’s a four-unit apartment building or a 25,000-unit, nationwide portfolio, properly addressing resident concerns should play an integral role in any property manager’s strategic plan.
Unfortunately, while resident feedback is undoubtedly a valuable tool, the vast majority of it is negative because a satisfied resident is typically a quiet resident. The true challenge exists in communicating openly with these residents, addressing their issues and continuously searching for ways to improve the resident experience through information gathering.
Keeping it Personal
While access to new technologies and up-to-date research materials has significantly bolstered property managers’ communication capabilities, the most effective means of resident communication remains one-on-one dialogue.
Despite the expansive size of the community and the potentially high number of resident concerns, taking the time to listen and respond to residents’ issues through interpersonal communication will foster goodwill among the resident population and increase residents’ confidence in their property management firm.
Resident feedback is essential to maintaining a viable apartment community. Whether it’s a four-unit apartment building or a 25,000-unit, nationwide portfolio, properly addressing resident concerns should play an integral role in any property manager’s strategic plan.
Unfortunately, while resident feedback is undoubtedly a valuable tool, the vast majority of it is negative because a satisfied resident is typically a quiet resident. The true challenge exists in communicating openly with these residents, addressing their issues and continuously searching for ways to improve the resident experience through information gathering.
Keeping it Personal
While access to new technologies and up-to-date research materials has significantly bolstered property managers’ communication capabilities, the most effective means of resident communication remains one-on-one dialogue.
Despite the expansive size of the community and the potentially high number of resident concerns, taking the time to listen and respond to residents’ issues through interpersonal communication will foster goodwill among the resident population and increase residents’ confidence in their property management firm.
Local Governments May Insist on Landlord Participation
On June 9, the United States Supreme Court refused to hear the case of Glenmont Hills Assoc vs. Montgomery County, Maryland, a case that addressed whether state and local governments have the authority to mandate participation in the Section 8 Housing Choice Voucher even though it is voluntary under federal law.
As a result, the lower court ruling will stand. The findings in that case concluded that Montgomery County's ordinance was not preempted by federal law and that the landlord had violated the ordinance by refusing to participate in the Section 8 program. The California Apartment Association has filed a motion to file an amicus brief in the Supreme Court case.
So what does this mean for California? Currently, California state law does not specifically mandate rental property owners' participation in the Section 8 program. California's definition of "source of income" contains language that is intended to exclude Section 8 vouchers, so that the program remains voluntary for landlords. The law provides:
"Source of income" is defined as "lawful, verifiable income paid directly to a tenant or paid to a representative of a tenant. For purposes of this section, a landlord is not considered a representative of a tenant." (Government Code Section 12955 (p)(1))
California's Department of Fair Employment and Housing agrees that the Section 8 program's rent subsidies are not included in California's definition of source of income. According to the Department, "Source of income is defined in the law as 'lawful verifiable income paid directly to a tenant or a representative of a tenant.' Section 8 is a federal program providing rental subsidies for individuals who meet certain financial criteria paid directly to a landlord and, as such, it is not included in the definition of source of income."
Alternatively, some cities in California do prohibit owners from discriminating against individuals who hold Section 8 vouchers. None of these local laws, however, have been tested as to their conflict with California state law.
Thursday, October 2, 2008
Introduction To Absolute Property Management
Our company's mission is to provide the highest quality, cost effective management services your homeowners or condominium association deserves. If you have a new community, we can set you up with everything you will need, without any headaches. We also specialize in assisting condominium and homeowners associations which may be in financial or other difficulty as the result of poor service from a prior management company. That is, in fact, how Absolute Property Management came to exist.
There are many qualities that are important to a company's success. At Absolute Property Management, Inc. we believe the most important is the guiding philosophy that forms the character of our organization. Absolute Property Management Inc. has a written philosophy that guides our organization and our business relationships. Every person in the Absolute Property Management, Inc. organization knows our philosophy and is accountable for insuring that these standards are consistently maintained. We also encourage all of our business partners to hold us accountable for maintaining these standards by informing us if we ever fail to meet these commitments.
HONESTY
Honesty is the foundation for all activities of the Company.
Absolute Property Management, Inc. personnel will be honest and ethical in all of their activities.
Absolute Property Management, Inc. personnel will not lie or distort the truth regardless of the consequences.
Honest mistakes will happen. We will acknowledge a mistake and correct it to the extent possible.
RESPECT
We will show respect for each and every person with whom we come in contact while performing our duties.
CUSTOMER SERVICE
Our commitment is to provide outstanding service to our customers.
We will promptly and courteously respond to all phone calls or other inquiries.
We will meet our commitments and follow through on all of our responsibilities.
We will continually update our knowledge and professional training to maintain the skills necessary for the highest level of service to our clients.
TEAMWORK
We will support and help one another.
ATTITUDE
We will be courteous and friendly at all times.
We will strive to have fun and enjoy our work.The owner and founder of our company was deeply frustrated by the treatment they received as a board member dealing with their association’s management company. They never answered the phone, they let the grounds and facilities deteriorate, they were frivolous with funds, major projects (i.e. hurricane repairs) never got completed, etc.
There are many qualities that are important to a company's success. At Absolute Property Management, Inc. we believe the most important is the guiding philosophy that forms the character of our organization. Absolute Property Management Inc. has a written philosophy that guides our organization and our business relationships. Every person in the Absolute Property Management, Inc. organization knows our philosophy and is accountable for insuring that these standards are consistently maintained. We also encourage all of our business partners to hold us accountable for maintaining these standards by informing us if we ever fail to meet these commitments.
HONESTY
Honesty is the foundation for all activities of the Company.
Absolute Property Management, Inc. personnel will be honest and ethical in all of their activities.
Absolute Property Management, Inc. personnel will not lie or distort the truth regardless of the consequences.
Honest mistakes will happen. We will acknowledge a mistake and correct it to the extent possible.
RESPECT
We will show respect for each and every person with whom we come in contact while performing our duties.
CUSTOMER SERVICE
Our commitment is to provide outstanding service to our customers.
We will promptly and courteously respond to all phone calls or other inquiries.
We will meet our commitments and follow through on all of our responsibilities.
We will continually update our knowledge and professional training to maintain the skills necessary for the highest level of service to our clients.
TEAMWORK
We will support and help one another.
ATTITUDE
We will be courteous and friendly at all times.
We will strive to have fun and enjoy our work.The owner and founder of our company was deeply frustrated by the treatment they received as a board member dealing with their association’s management company. They never answered the phone, they let the grounds and facilities deteriorate, they were frivolous with funds, major projects (i.e. hurricane repairs) never got completed, etc.
541 S. State Rd. 7 #12 • Margate, FL 33068
Phone 954.984.8200 Fax 954.984.4211
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