Each month, we publish a series of articles of interest to homeowners — money-saving tips, household safety checklists, home improvement advice, real estate insider secrets, etc. Whether you currently are in the market for a new home, or not, we hope that this information is of value to you. Please feel free to pass these articles on to your family and friends.
Buying a home may be a dream, but the initial purchase is only the introduction to that dream. There’s always something about your house that could be a little better, a little closer to perfect. Now, with a little planning, you can bring your home closer to your dream of perfection. Many home improvement projects begin with someone in the household saying, “Wouldn’t it be nice …?” What follows may be a wish for a remodeled kitchen or a room addition with space to accommodate every family member’s needs. However, reality usually intrudes upon this daydream: There’s only so much money and so much space. The trick is turning your dreams into reality.
Also This Month…
When you analyze successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agents negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.
You may be considering help from a financial planner for a number of reasons, whether it’s deciding to buy a new home, planning for retirement or your children’s education, or simply not having the time or expertise to get your finances in order. Whatever your needs, working with a financial planner can be a helpful step in securing your financial future.
Home Improvement Tips to Increase the Value of Your Home
Buying a home may be a dream, but the initial purchase is only the introduction to that dream. There’s always something about your house that could be a little better, a little closer to perfect. Now, with a little planning, you can bring your home closer to your dream of perfection.
Reasoning Your Redo
Many home improvement projects begin with someone in the household saying, “Wouldn’t it be nice …?” What follows may be a wish for a remodelled kitchen or a room addition with space to accommodate every family member’s needs. However, reality usually intrudes upon this daydream: There’s only so much money and so much space. The trick is turning your dreams into reality. Start by evaluating your needs. Most homeowners consider home improvements for one of these reasons.
- You need to update the out-of-date. If your kitchen still sports appliances and decor from decades past, now may be the time to make it current.
- You need to replace fixtures or appliances. Sometimes a home improvement project grows out of an immediate need to replace broken or inefficient fixtures. If the sink, tub or toilet has to be replaced, many people take the opportunity to refurbish the entire bathroom.
- You’re selling your home. You want to be sure you’ll get top dollar from the sale of your home, and that may be the rallying cry for some home improvement projects.
- You’re staying put. You thought about moving, but now you realize that improving your present home is a better option.
- Your family has grown and you need more space.
Improving to Move or Improving to Stay
You need to evaluate your plans carefully if you’re improving your home to put it on the market. Cutting corners could hurt rather than help your prospects, but you don’t want to go overboard either. Potential buyers may not want to pay for the extras you have included, such as a hot tub or pool. It’s best to keep changes simple.
Also keep in mind that people viewing your house may not share your tastes and therefore won’t necessarily appreciate the time and effort you put into finding just the right shade of green paint for the walls.
Improving to sell is easier if you mentally put yourself on the other side of the proverbial fence: What is important to the home buyer? Here’s a list of remodeling projects that buyers are likely to find valuable:
- Adding or remodeling a bath
- Improving the kitchen
- Adding a new room
- Adding a bedroom
- Adding or enclosing a garage
If you’re remodeling in order to stay in your home, you still need to avoid over improving it. You’ll probably sell someday, and even if your house is the best on the block, you may have a hard time convincing buyers to pay extra for the things you found so important. Keep the value of other homes in the area in mind whenever you consider improvements. Your home’s value should be no more than 20% above the average. That means a $10,000 kitchen improvement project might be a better idea than a $10,000 hot tub, especially if no other homes in your area have hot tubs.
Unfortunately, some home improvement projects get started because something is broken. A leaky plumbing fixture may be the first step to a major bath remodeling. After all, if the tub has to be replaced, why not do the whole room?
While that’s certainly one reason to remodel, you’ll generally want to avoid basing your home improvement projects on immediate need. Proper maintenance will help to minimize problems. Go over every part of your home at least once a year. Check out the roof, plumbing, electrical wiring, etc. As soon as you notice a problem, fix it. Early attention to repairs will help you avoid a larger expense later on. Remember maintenance does not add to the value of your home. Repairs, generally, are not improvements but necessities.
Let’s face it, home projects can be expensive. You may be tempted to tackle them yourself as a way to save money. For small projects, that may be a smart move. You don’t have to wait for someone else to fit your house into their schedule, and you can take pride in doing the work yourself. Unless you’re particularly handy, however, large home improvement projects are better left to the pros. If you’re remodeling the kitchen, ask yourself if you can handle the plumbing, electrical and carpentry work. And don’t forget that you need to finish it all quickly, because in the meantime you’ll be without a kitchen and eating out can be costly. Keep in mind, do-it-yourself jobs generally take more time and you’re responsible for obtaining the necessary permits and inspections.
Hiring people who have experience can save you money and time, too. For example, these professionals can help you get a custom look using stock products, and that can be a significant savings. Getting something done right–the first time–will give you value that lasts for years.
Word-of-mouth is a good way to start looking for home improvement specialists. Check with friends, business associates and neighbors for recommendations. Always ask for at least three references – and check them out. Check, too, with your local chapter of the Better Business Bureau or Chamber of Commerce. You can find the number in the community services section of your telephone book. Make sure everyone is in agreement about design, schedule and budget. Get the details down in writing in a signed contract. You’d also be wise to check on professional certifications and licenses, where required, and insist that any contractors you hire are fully insured and bonded. Contact your town or city Building Department for information. In particular, make sure contractors carry workers’ compensation insurance so that if any workers are injured on the job, you won’t be held liable. Ask for a copy of their insurance certificates. Also make sure that you or the contractor secure any necessary permits before beginning the work. Contact your local Planning and Zoning Commission for information.
Here’s a quick overview of some of the pros you may work with in remodeling your home:
Architect: These professionals design homes or additions from the foundation to the roof. If you’re planning structural changes–adding or taking out walls, for example–or anticipate a complex design, you’ll probably want an architect. You may pay an hourly fee or a flat fee. Be sure to get an estimate of the total cost: It can take 80 hours or more to draw up plans for a major remodeling project.
Contractor: This person oversees the nuts-and-bolts aspects of your home improvement project, such as hiring and supervising workers, getting permits, making sure inspections are done as needed and providing insurance for work crews. You may wish to get proposals from one or more reputable contractors, based on specific details of your project. Be sure each contractor bids on exactly the same plan for comparison purposes. Once you’ve chosen a contractor, make sure your contract specifies that you will pay in several stages. It’s customary to pay one third when the contract is signed so that the contractor can buy supplies. The number and timing of other payments depends on the size of the job, but do not make final payment until all work is successfully completed, inspected and approved.
Interior Designers: These specialists offer advice on furnishings, wall coverings, colors, styles and more. They can help save you time (by narrowing down selections) and money (from the professional discounts they might receive). When meeting with an interior designer, be sure to talk about your personal style and preferences. Expect to pay anywhere from $50 to $150 per hour, or you may negotiate a flat fee of perhaps 25% of the total project cost.
Depending on the scope of your home improvement plans, finding funding may be a project itself. If the project is small, you may be able to save for it from your regular household budget. For larger projects, you’ll probably need to borrow money. If you participate in a 401(k) or 403(b) plan at work, you may be able to get a short-term loan from your account. To find out if this option is available to you and to learn about any tax implications, talk to your benefits administrator. Another possibility is borrowing against the cash value of your life insurance policy. If you’re interested in finding out more about this type of loan, talk to your life insurance agent.
To take out other types of home improvement loans, head to your local bank, savings and loan, or credit union. Compare interest rates, repayment options and penalties from lending institutions before deciding on one of the following options:
Second mortgage: This is a loan against the equity in your home. It is, in essence, an additional mortgage. Typically, financial institutions will let you borrow up to 80 percent of the appraised value of your home, minus the balance on your original mortgage. For example, if your home is appraised at $100,000 and your current mortgage balance is $70,000, you may be able to borrow $10,000 by way of a second mortgage. You may also incur all the fees normally associated with a mortgage – closing costs, title insurance and processing fees. Talk to your tax advisor about whether the interest on a second mortgage may be tax-deductible.
Refinancing: This involves paying off your old loan and taking out a new mortgage on your home. To refinance, generally you’ll need to have equity in your home, a solid credit rating and a steady income. You’ll incur all the closing costs that go along with getting a new mortgage, so unless you’re doing extensive remodeling and can get a mortgage interest rate at least two points less than you’re currently paying, this type of loan may not be for you.
Home Equity Line of Credit: Like a second mortgage, a home equity loan lets you tap up to about 80 percent of the appraised value of your home, minus your current mortgage balance. Since it’s set up as a line of credit, you won’t be charged interest until you make a withdrawal, but you will have to pay closing costs. You can make withdrawals gradually as you start paying contractors and suppliers. The interest rate charged is usually variable and may be based on the outstanding balance. Make sure you understand the terms of the loan. If, for example, your loan stipulates that you need to pay interest only for the life of the loan, you’ll have to pay back the full amount borrowed at the end of the loan period or you could lose your home. The interest on home equity loans may be deductible; talk to your tax advisor.
Unsecured Loan: Although the interest rates charged are often higher and you generally will not be able to get a tax deduction for the interest paid, the costs of obtaining an unsecured loan are usually lower. The relative ease of obtaining this type of loan makes it popular for small projects costing $10,000 or less. The lender will evaluate your application based on credit history and income.
Be House Smart: You’ll be happiest with the outcome of a home improvement project if you plan carefully and do your homework. Armed with the information in this pamphlet and a realistic idea of your needs and budget, you’ll find your home getting closer to your dream of perfection.
Homebuyers: How To Save Thousands of Dollars When You Buy
“When you analyze those successful homebuyers who have the experience to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge.”
If you’re like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to purchase this home for the lowest possible price.
When you analyze those successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agents negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.
These Steps Will Help You Save Thousands When You Buy a Home
Make sure you know what you want . . . As simple as this sounds, many home buyers don’t have a firm idea in their heads before they go out searching for a home. In fact, when you go shopping for a place to live, there are actually two homes competing for your attention: the one that meets your needs, and the one that fulfills your desires. Obviously, your goal is to find one home that does both. But in the real world, this situation doesn’t always occur.
When you’re looking at homes, you’ll find that you fall in love with one or another home for entirely different reasons. Is it better to buy the 4 bedroom home with room for your family to grow, or the one with the big eat in kitchen that romances you with thoughts of big weekend family brunches? What’s more important: a big backyard, or proximity to your child’s school? Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn’t meet their needs.
Don’t shop with stars in your eyes: satisfy your needs first. If you’re lucky, you’ll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.
Find out if your agent offers a “Buyer Profile System” or “Househunting Service”, which takes the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an ongoing basis. A program like this helps homeowners take off their rose colored glasses and, affordably, move into the home of their dreams.
To help you develop your homebuying strategy, use this form:
What do I absolutely NEED in my next home:
What would I absolutely LOVE in my next home:
How Sellers Set Their Asking Price
For you to understand how much to offer for a home you’re interested in, it’s important for you to know how sellers price their homes. Here are 4 common strategies you’ll start to recognize when you begin to view homes:
1. Clearly Overpriced:
Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to over inflate the value of your home. This is done far too often, with many homes that are priced 10- 20% over their true market value.
This is not in your best interest, because in most cases the market won’t be fooled. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks:
- your home is likely to be labelled as a “troubled” house by other agents, leading to a lower than fair market price when an offer is finally made
- you have been greatly inconvenienced with having to constantly have your home in “showing” condition . . . for nothing. These homes often expire off the market, forcing you to go through the listing process all over again.
2. Somewhat Overpriced:
About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there’s a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you both in terms of time on the market and ultimate price received
3. Priced Correctly at Market Value
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time frame and very close to the asking price.
4. Priced Below the Fair Market Value
Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast – usually in a few days – at, or above, the asking price. Be cautious that the agent suggesting this method is doing so with your best interest in mind.
10 Questions To Ask When Choosing A Financial Planner
These questions will help you interview and evaluate several financial planners to find the one that’s right for you. You will want to select a competent, qualified professional with whom you feel comfortable, one whose business style suits your financial planning needs. An interview checklist has been included for your convenience.
1. What experience do you have?
Find out how long the planner has been in practice and the number and types of companies with which she has been associated. Ask the planner to briefly describe her work experience and how it relates to her current practice. Choose a financial planner who has a minimum of three years experience counseling individuals on their financial needs.
2. What are your qualifications?
The term “financial planner” is used by many financial professionals. Ask the planner what qualifies him to offer financial planning advice and whether he holds a financial planning designation such as the Certified Financial Planner mark. Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. Determine what steps the planner takes to stay current with changes and developments in the financial planning field. If the planner holds a financial planning designation, check on his background with the CFP Board or other relevant professional organizations.
3. What services do you offer?
The services a financial planner offers depend on a number of factors including credentials, licenses and areas of expertise. Financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or Federal authorities. Some planners offer financial planning advice on a range of topics but do not sell financial products. Others may provide advice only in specific areas such as estate planning or on tax matters.
4. What is your approach to financial planning?
Ask the financial planner about the type of clients and financial situations she typically likes to work with. Some planners prefer to develop one plan by bringing together all of your financial goals. Others provide advice on specific areas, as needed. Make sure the planner’s viewpoint on investing is not too cautious or overly aggressive for you. Some planners require you to have a certain net worth before offering services. Find out if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.
5. Will you be the only person working with me?
The financial planner may work with you himself or have others in the office assist him. You may want to meet everyone who will be working with you. If the planner works with professionals outside his own practice (such as attorneys, insurance agents or tax specialists) to develop or carry out financial planning recommendations, get a list of their names to check on their backgrounds.
6. How will I pay for your services?
As part of your financial planning agreement, the financial planner should clearly tell you in writing how she will be paid for the services to be provided. Planners can be paid in several ways:
- a salary paid by the company for which the planner works. The planner’s employer receives payment from you or others, either in fees or commissions, in order to pay the planner’s salary.
- fees based on an hourly rate, a flat rate, or on a percentage of your assets and/or income.
- commissions paid by a third party from the products sold to you to carry out the financial planning recommendations. Commissions are usually a percentage of the amount you invest in a product.
- a combination of fees and commissions whereby fees are charged for the amount of work done to develop financial planning recommendations and commissions are received from any products sold. In addition, some planners may offset some portion of the fees you pay if they receive commissions for carrying out their recommendations.
7. How much do you typically charge?
While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs would include the planner’s hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.
8. Could anyone besides me benefit from your recommendations?
Some business relationships or partnerships that a planner has could affect her professional judgment while working with you, inhibiting the planner from acting in your best interest. Ask the planner to provide you with a description of her conflicts of interest in writing. For example, financial planners who sell insurance policies, securities or mutual funds have a business relationship with the companies that provide these financial products. The planner may also have relationships or partnerships that should be disclosed to you, such as business she receives for referring you to an insurance agent, accountant or attorney for implementation of planning suggestions.
9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
Several government and professional regulatory organizations, keep records on the disciplinary history of financial planners and advisers. Ask what organizations the planner is regulated by, and contact these groups to conduct a background check.
10. Can I have it in writing?
Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.