Nancy Braam

Should I Refinance?

There are some rules of thumb about refinancing when the interest rate drops 2 percent. There are other guidelines too, but maybe you shouldn’t refinance at all – think about this:

We’ve been using home ownership wrong. The idea is that 30 years after you buy your home, it will be paid off and you will own it free and clear. If you get a 15 year mortgage or make bi-weekly payments, you’ll get it paid off much sooner. It used to coincide nicely with retirement. Now instead of getting our homes paid off -we are refinancing every 3 or 5 years to grab a lower interest rate. The problem with that is you go back to the start of the 30 years, again and again and again. How long does it take to pay off a loan with no end?

We get blasted with marketing at every turn. Take that dream vacation. Put your kid through college. Remodel. US Bank has an advertisement with a faucet on the side of a house and that’s exactly how we are using it. This is a big part of the reason some people are upside-down in their homes – they refinanced and spent the money. Now the house has depreciated and they just cooked up a recipe for disaster.

I talk to sellers all the time who say they are going to lose money selling their house because they will barely be able to pay off the mortgage. They aren’t losing money – they already spent their profit when they pulled extra money out of their house when they re-financed.

We’re an instant gratification society. We want to buy something big right now. We look at lowering our house payment a couple hundred dollars a month and that looks good. We figure we’ll be paying less interest and that’s good too, isn’t it? Maybe.

Before you refinance, figure out why. Is it to “pay-off” high interest credit cards? To lower your monthly payment? To take advantage of low interest rates?  Next, figure out what it’s costing you and when you’ll reach the break-even point. Sometimes that alone will render the idea ineffective.

A word about the credit cards. You are not paying them off - you’re just paying them off over 30 years. If you owed $10,000 at 18% interest and paid it off over 3 years, you’d pay $3014 in interest. The same $10,000 at 4% interest paid over 30 years would have you paying $7186 in interest! Over double.

If you decide to refinance, to counteract the extra years you are adding on, think about getting a shorter term, like a 15 year loan, or start bi-weekly payments or pay one extra payment each year (which is exactly the same). What if you banked the amount you save with the refinance? A couple hundred a month is $2400 a year. Ideally, you’d put that in your real estate investment account and save to buy more real estate for your retirement.

Just remember – there is more involved in refinancing than just the interest rate. Put “Owning my home free and clear.” back on your bucket list. It’s a worthy goal and one that will keep your golden years untarnished. You’ll never get there if you keep refinancing.

Carbon Monoxide Detectors Mandatory April 1st 2012

Did you know that Carbon Monoxide can kill you in a matter of minutes? In Washington state, 1000 people have died from carbon monoxide poisoning since 1990.

As of April 1st, sellers of single family homes, condos and mobile homes must install carbon monoxide detectors. So far this just applies to selling but in January 2013 it is likely that all homes will be required to have detectors.

Homes that have electric heat are not exempt and homes without attached garages are not exempt.

Bank owned properties are are exempt. Short sales where the seller is living in the house must comply.

New construction has been required to install detectors since January 2011.

The building code requires detectors outside each sleeping area, and on each floor. If all the bedrooms are upstairs, you must still install one on the main floor.

Detectors cost around $25 and may be battery operated.

Whether you are selling or not, why not protect yourself and your loved ones?

How To Spot A Grow Operation

Have you noticed anything suspicious in your rental or listing? Abundant security? Extra power? Growing equipment or medium? Here’s some tips on spotting a grow operation.

Foreigners are Buying Real Estate. Where, What & Why?

Reprinted from SesameCredit.com

Source: Realtor.org

French Flea Market Meets Driftwood Salvage – Design Trends For 2012

It means that most anything goes in 2012. With the housing market still in the dumps, many people are choosing to update their current home. Here are some tips from top designers.

Emphasis on contrasts… in textures, patterns and colors.

“The basics get bolder: Over the last year, we’ve seen wood finishes getting lighter, rougher and unfinished. As a result, upholstered furniture is fighting back from beige! We are seeing a slow trend towards bright, colorful and bold patterned sofas and chairs. It’s not “grandma’s floral,” but rather rich velvets, silks and chintz with bold patterns and contrast.”  Kelli Ellis Interiors, Orange County, CA

“Layers of silky fabrics and luxurious wool, the combination of velvet and brick, stainless steel and wood design ideas create attractive contrasts.  Mixing decor accessories, made of natural stone and shiny plastic, metal, wood and fabrics are interesting home decorating ideas that add charm and unique character to contemporary interior design.”  Accord Staging – see their blog.

What’s happening on the color front? We continue with deep and bold colors.

“The dominant color is Grey. Warm Grey, Light Grey, Charcoal Grey. On walls, furnishings, window treatments, artwork, grey will be everywhere. Also coming on strong will be Yellow! In addition, know that Orange will still be hanging around; Purple is on its way out and Brown, which had a very long run, is gone.” Stephanie Henley (Stephanie coined the title phrase.)

Remember: Paint is still the cheapest improvement with the most impact. Fresh paint makes everything look new. Pick a  modern color scheme to make your home current.

Supersizing is still in…giant mirrors, large wall art, over-sized graphic scale. On a budget? Try stencils, framed posters or enlarged photographs.

If moving isn’t in the cards for you this year, remodeling and updating can make your current home your dream home.

A Word About Hiring Contractors Your Friends Recommend

Ellen trusts Rudy. In fact, they go to the same church. Ellen needs some work done on her house before she puts it on the market. Rudy recommends Mike. Mike has been a contractor for years.

First Ellen hires Mike do to some odds and ends inside the house and he does a fine job. When they discover the roof needs replacing, she hires Mike to do that also.

I met Mike. He talks the talk. He knows a bunch of the local builders and developers and we swap stories. He completes the work and Ellen pays him. All said and done, about $7500.

The house sells in the next couple of months and the purchaser prudently has a professional inspection. Much to our surprise, the inspector says the roof was “unprofessionally installed”. There were a lot of nails showing and the shingles weren’t even fully overlapped. The valleys were tarred. We had it inspected by a professional roofer and they said that basically it was a hack job done by someone who didn’t know what they were doing.

Since we told the buyer that we just installed a new roof, this made them understandably uneasy, and they were ready to walk.

Luckily, Ellen is a smart woman and knew that if the problem wasn’t remedied with this buyer, it would have to be remedied with the next, or any buyer. Besides, she paid for a new roof and a new roof she would get.

We had a new roof installed by a professional roofing company that warranties their work and saved the sale. In checking on Mike, we found that his contractor license expired in 2002 and naturally he isn’t bonded.

Mike’s story is that the roof was installed okay, although now he is not returning phone calls or emails, and he didn’t bother to talk to the inspector or the roofer. Maybe he thinks the problem has gone away. What do you think?

We are prepared to go to small claims court if he refuses to pay for the new roof. I think it’s a slam dunk win. I love small claim’s court.  I’ll keep you updated.

Moral: Don’t hire people to do expensive repairs who have no way to guarantee their work.

Update! Mike stepped up! After several months of nagging and being ignored, Mike paid the cost of the re-roof. Happy ending.

Why Smart Sellers Stage Vacant Houses

Look at the difference in this very nice home in Sudden Valley, Bellingham, WA.

The vacant rooms don’t tell you anything. You can’t tell how big, or small they are. There’s no warmth. There’s no allure. If you were a buyer, which house would you want to see?

Remember that now nearly 90% of ALL home buyers search for homes on the internet. You have to make this first important cut. Your vacant rooms won’t make anyone’s heart beat faster.

A few thoughts about staging vacant homes:

• Don’t use the old furniture you don’t want to take with you. Not the impression we’re going for.
• Hire a stager. They are well worth the money and run about $350 for a consultation where they can visit the house and chose pieces that will best enhance each area. There’s a monthly or quarterly charge for the furniture. It varies widely so you’ll have to check around.
• You don’t have to do the whole house. That would be ideal but it’s not entirely necessary. Do the living room, dining room and kitchen at a minimum. Get advice from the stager on this.
• Think of it as a way to make a buyer respond positively to the first impression of your house.
• Think of this simply as a cost of doing business. Your house is a product on the market and you have to help make it stand out. Pictures of it will be blasted everywhere – make the most of them.

Your effort counts. Showing your house off, means good pictures. It’s hard to take a great picture of a vacant room.

The 5 Most Important Tips To Negotiating Real Estate Deals

Are Americans Wimpy Negotiators?

In the international arena of negotiation, Americans are considered wimps because we believe in fairness, so we tend to “split the difference” a lot. In many cultures, fairness is not in play at all…which is another whole story. Splitting the difference is not negotiating and the only time you should do that is when the price difference has been whittled down to a puny amount and negotiations have faltered.

This is straight from the top negotiators. Some of it is common sense.

1. Know the strength of your Plan B option. That means, what will you do if you don’t make this deal work? You’ve heard it said that the person most willing to walk away has the most power.

• If you are a buyer and have three other houses you like, you have a strong Plan B and therefore can negotiate from a position of strength. If you have 3 days to find a house or you will be in the street, your Plan B is not so strong.
• If you are a seller and you’ve already made an offer on another house – not much strength. If you have multiple offers – you are in a strong position to negotiate.

2. Inventory your bargaining chips.

• People tend to think only in terms of price, but there is a lot more. For buyers – maybe the seller would like 3 weeks to move out or they really love their refrigerator. Think about giving them that to get the price you want.
• Sellers can negotiate appliances, lawn mowers, extended closings or the deck furniture.
• Earnest money, title company, closing date, performance dates are all negotiating points you can use. Read the rest of this entry »

Can’t Make Your House Payments? Don’t Move Out!

Why are so many short sale houses vacant? Someone needs to explain this to me. If you can’t afford to make your house payments,
what sense does it make to move and pay rent?

There are only two reasons to move: 1) Job transfer.2) Medical problems that make living in the house unrealistic.

Some owners feel if they can’t make the payment, they should leave. In reality, that doesn’t help anyone. It’s not like the bank
can rent it out and re-coup some money. They can’t because they don’t own it. You’ve heard the stories – it can take a year to actually foreclose your house. And there it sits in the meantime, vacant, and you pay rent.

Stay Put! It’s a bad situation all the way around, but don’t make it worse. Use the time to plan and re-group. Use the “extra” money from not paying your house payment to pay down high interest rate credit cards and catch up on other bills. At the same time maintain the house and yard. Get the house on the market to find a buyer. Cooperate with the sales effort by keeping the house clean and available for showings on short notice.

Have your short sale packet ready to go, updating it monthly. Go to your bank’s website and root around for the short sale information. Most banks have a list of what they want to see.

It’s sad that you are upside down and it’s come to this. But don’t panic and move out – it is not in your best interest. Contact me if you want to talk. Confidentiality is promised.

What Are Valid Expenses For Investment Real Estate?

When you are looking to buy real estate as an investment, one of the most important numbers you need to know is the Net Operating Income or NOI. That is the actual income after expenses (not including the mortgage payment).

Here are the some common expenses:

• Property Taxes
• Insurance
• Management Fees
• Utilities paid by the owner
• Repairs
• Maintenance
• Advertising
• Supplies
• Lawn care
• Cleaning & Janitorial
• Legal and accounting
• Licensing
• Vacancy

Sellers love to leave out Management Fees, repairs, maintenance and especially vacancy rates.  In fact, it is quite common when you look at an investment property listing, the only fees the sellers include are Taxes, Insurance and Utilities. Then they work the Cap Rate or Cash on Cash return based on the NOI that is not realistic. They argue that you might do your own management or yard care. I say, if you do, you should be paid for it by a larger bottom line. These are valid and standard expenses and should be included to determine a realistic value.

It’s important for you to work your own numbers and determine your own Cap Rate and Cash on Cash return. Ask for the seller’s last couple years of his or her Schedule E. This is what expenses they deduct on their taxes. Granted, there are some write-offs for taxes that you aren’t going to use to determine an offer price, like travel expenses if the seller lives out of the area or depreciation. The most important item on the Schedule E is the true Gross Income. Don’t just take the seller at their word when they say, “It’s always rented.” The Schedule E will also show you what they are spending on repairs, lawn care, cleaning, etc.

There is no substitute for doing your own investigation! If you need help, contact me.