What To Expect When You're Expecting A New Home

YOURNEWSPAPER.COM/HOMES

AD / SPONSORSHIP

Make the most of your home investment iStock Photo

Ask Our Broker

Clean counters, neutral colors and the elegant furnishings may catch your eye, but don’t let them distract you from the reality of living in a home

I live in an up-and-coming polo/equestrian community. Is it wise to invest in the land?

BY BARBARA BALLINGER CTW Features

Q: I live near an area that has

largest investments you’ll make in your lifetime, says Ray.“For this reason, it’s critical that you research a range of builders, conduct interviews, obtain references and make sure you feel comfortable spending the next several months working with them.” Indeed, depending on the customization, size and level of detail required, the construction process itself can span anywhere from approximately four months for a tract home up to 18 months or longer for a one-of-a-kind custom residence. “It actually takes a shorter amount of time to build today, as many materials come pre-assembled and ready to install, whereas years ago materials were assembled and even made on site,” says Fernanda Forman, managing director at Bond New York in New York City. Nevertheless, it’s important to brace yourself for unexpected delays and costs, says Beth Lindahl, associate principal and project manager at Orren Pickell Designers & Builders, Lincolnshire, Ill. “Unforeseen factors like soil or water issues, new framing conditions and weather are typically the most problematic,” Lindahl says.“If it rains for many weeks, for example, this will slow down framing.” Change orders, inspections, labor and lead time for special materials also can extend the construc-

IN RECENT YEARS, staging has become an increasingly popular practice to help homeowners sell their houses – often faster and for higher prices than they would have without cleaning, de-cluttering and rearranging. The strategy has attracted enormous attention in the media, with a number of TV shows informing viewers how to mimic professional stagers’ efforts of taking too-busy or overly personalized rooms, as well as empty ones, and making them into universally appealing, neutralized spaces that more buyers can imagine themselves living in. But not all practitioners and brokers are thrilled.A report by the National Association of Exclusive Buyer Agents said that some common staging practices can influence a buyer in purchasing the wrong home or one with defects. “The whole intent of staging is to get the buyer emotionally involved with the home,” says Jon Boyd, the 2007 president of NAEBA.“Our member agents want homebuyers to see things logically.There’s nothing philosophically wrong with staging, but buyers and others need to be able to see past the staging.” When NAEBA surveyed its brokers and practitioners last August, 82 percent of respondents stated that buyers were likely to be distracted from important issues when viewing a staged home.Among some problems, the survey found, were sellers using small furniture to make a room appear larger, and covering up real problems by using rugs atop damaged floor or curtains to conceal rotted window sills. In short, buyers sometimes focused on pretty furnishings they thought they were buying rather than the home itself. E.Adrienne Van Dooren, author of “The House That Faux

See NEW HOMES Page 2

See GREAT FIND Page 2

been dubbed the new Polo Capital of the World. It has some expensive horse farms plus equestrian communities, polo farms, etc. Prices have been going up like crazy around there. I’m very interested in getting into this market, if not to live, just to invest in some property. I have a low budget (under $100,000) and the prices run approximately $10,000 to $15,000 an acre. Is this a good place to buy investment property? Should I buy a lot in a community/subdivision (usually two to 10 acres) and just hold on to it (and pay homeowner’s dues) or buy undeveloped property and just wait?

A: There is insufficient information to discuss a particular community or property, but let’s look at the general concept of buying land. You have a limited number of dollars. If you buy land you will lose the interest you now earn on your cash, and if you finance you will have monthly mortgage costs. In addition, with raw land you will face property tax and insurance expenses. At the very least, look at your local rental market. Would it make sense to consider rental properties? What about buying a two- to four-unit property, living in one unit and renting out the rest? With rental property you get income and depreciation and if you live in one unit you can get owner-occupant financing. Speak with local lenders and brokers for specifics.

Q: Is the Supreme Court going to revise or reverse its Kelo (eminent domain) decision? In my state, property seizures by government are a problem because owners are not being paid fairmarket value.

A: The “taking” clause of the Fifth Amendment permits government to acquire private property for “public use” but only with “just compensation” for the property owner. For instance, when a new road is being built, government must have some way to acquire property along the route.As to the road, it is plainly for public use. The 2005 Kelo decision involved property owners and the city of New London, Conn.The city governSee ASK OUR BROKER, Page 2

LOOKING BEYOND THE STAGING

Extreme Expectations: Home Edition What to Expect When You’re Expecting a New Home BY CHARLES SCUTT CTW Features

I

f you’ve made the decision to have a new home built from the ground up, be prepared to feel a bit like an expectant parent.You’ll want to monitor progress by checking in for regular visits with the professionals.The delivery date can come earlier or later than anticipated.And you’re bound to feel a range of emotions during the waiting period – from giddy excitement to nail-biting uncertainty. But, as with a pregnancy, so long as you head into the new-home building process well informed and with realistic expectations, you can count on a more satisfying and less stressful experience, say the experts. For starters, it’s crucial to select the right builder for the job. Many buyers opt to have a semi-custom (tweaked from a set floor plan) or completely custom home built on an infill or teardown site of their choosing, or they choose to erect a new home in a subdivision or development where the builder is featured.Wherever your chosen location, be sure to choose a reputable builder known for quality craftsmanship that meets your budget and shares your vision for the finished product, says Michael Ray, principal of The Housing Group,Atlanta. “Building a new-construction home is one of the

AD / SPONSORSHIP

STAGING Keep your eyes peeled CONTINUED FROM PAGE 1 Built” (East Cambridge Press, 2007), found that she was taken in by staging.The prior owners of her home had covered an uneven dirt/mortar floor with heavy wool carpet and concealed crumbling plaster with wallpaper, and she never questioned what was underneath. Once the carpet was removed, mold came into view. Correcting the problems cost her $8,000 and delayed her move-in date. Her advice:“Don’t get carried away by the staging.” A conscientious practitioner – or another pair of eyes – can help keep potential buyers focused on the house, even when the emotional connection is powerful. Gloria Roesch of New Idea Realty in Council Bluffs, Iowa, had a client who fell in love with a home because of the staging. “They had taken an empty house and brought in everything – leather sofas, a nice fluffy throw on the sofa, beautiful dining room table and great paint colors,” she says.“I had to tell them,‘Let’s look at the house.’They said,‘We love it this way,’ but I reminded them they weren’t buying the furniture and instructed them to notice the

NEW HOMES CONTINUED FROM PAGE 1 tion period from a couple of weeks to a few months, Forman says. Additionally,“with the credit crunch happening, many otherwise financially sound developers and builders are experiencing shortness of capital funds, resulting in either delays or unfulfilled obligations,” says Forman.“It’s important for buyers to be very vigilant and stay on top of the process, particularly if things seem to not be going as they had previously or if major deadlines or timelines are missed.” Keeping an eye fixed on expenses is important, too, as cost overruns are not uncommon with new construction, says Lindahl. Some clients may spend as much as 20 percent more than their original budget, she says, with the average being around 5 percent. During construction, communicating regularly with the builder and keeping tabs on the progress of your future home is a must,

old windowpanes sealed with duck tape and the missing washer-dryer hookup.They might have bought the house with a different agent.” And, of course, a seller’s disclosure statement should detail any and all problems, even if they’re not visibly apparent, says Barbara Wulfing, a practitioner with Janet McAfee Inc. in St. Louis. Nevertheless, some buyers get fooled, distracted or simply haven’t been through the buying process enough to know all do’s and don’ts. First-time buyers and single homebuyers are particularly vulnerable, the report found. Also, many don’t grasp that staging, no matter how fabulous, can’t add square footage, improve location, enhance the quality of fixtures or construction, change a floor plan, alter views or a neighborhood, or increase the appraised value, says Boyd. “The good news for many buyers is that the downturn in sales has led more sellers to focus on the condition of their homes and make appropriate upgrades and repairs before selling,” says Dan Steward, president of Pillar to Post Home Inspection,Tampa, Fla. “We’ve seen a significant increase in sellers conducting pre-list home inspections in preparation to sell,” he says. Here are some additional tips to help buyers place staging in

proper perspective: • Focus on the house’s structure. Remember, you’re buying the house, not its furniture, says Christopher P. Ramey of The Florida Luxury Marketing Council in Coral Gables, Fla. Once the house is sold, the furniture and lighting usually go with it.You get the floors, walls, ceiling, says NAEBA’s Boyd. • Be a bit paranoid regarding a staged listing, says Ramey.Take the attitude that any rug, chair, artwork may hide something.“I’ve seen people place rugs strategically to hide broken ceramic floor tiles. It may not even be done deliberately, but the homeowner doesn’t want to look at broken tiles,” he says. • Try not to get emotionally wrapped up in décor, even if you love it.“Staging can trigger an emotional response and cause the uneducated buyer to become distracted,” says Craig Ackerman, owner of Ackerman Realty Group in San Francisco. Haley Hwang, a sales associate with Coldwell Banker Residential Brokerage in Glenview, Ill., counsels buyers to look at the reality – the home’s location, lot size, floor plan and whether the overall condition is something they want to live with. • If you love the looks, duplicate them.“You can take a photo and reproduce the look in the house you buy,” Boyd says.

• Be sure your salesperson or broker pays close attention.“I’ve developed my X-ray vision,” says Max Dobens, associate broker with Prudential Douglas Elliman in New York.“I look through the fluff and see all that’s really there and point out things. I believe in a long-range relationship and hoping some day to be able to sell the place, which will be harder if there are problems.”A good buyer’s agent must be constantly on the lookout for the disguise, pointing out anything and everything that the seller may be hiding, adds Barb St.Amant of Harry Norman, Realtors,Atlanta. • Be sure your salesperson keeps their emotions in check. Saying,“It’s beautiful” can be a disservice since it helps hook them emotionally, Roesch says. • Read between a disclosure’s lines.“Sellers are required to reveal defects in a written disclosure – it’s the law,” says Moore. • Hire a reputable inspector.A home inspector should peel back carpeting and look at windows to be sure what’s adequately installed or if there’s a leak in the shower pan, says Moore. • Always exercise your right for a final walkthrough.With photos and carpeting removed, you can see how good – or bad – the house is,Ackerman says.

says Laura Meyer, a real estate attorney in Los Angeles. “With a project as big as the building of a new home, it is reasonable to expect communication about how the job is progressing on a weekly basis,” she says.“If you’re dealing with a design/build firm, you should probably talk to the lead contractor or construction supervisor.There also are times when there are multiple people involved – an architect, contractor and perhaps a designer – and you may have developed more of a rapport with one person or another. But if there are concerns that aren’t easily resolved, it’s imperative to communicate with the party with whom you have the construction contract.” If there are any serious disagreements, such issues your contractor will not resolve,“then you may need to consult with an attorney,” Meyer says. If you want to visit the job site, keep in mind that different companies have different policies about this, depending on insurance and other restrictions, says Lindahl.

Janice Leis, associate broker of Bocadelphia Real Estate, Boca Raton, Fla., recommends arranging a construction site visit with the builder and having a representative from the company join you during the visit.“Or you can hire an engineer to check on each step of the new construction,” she says. When visiting the site or talking with the builder, however,“do not be annoying,” Leis says.“The more you pester the builder or his crew, the less likely you are to get a timely response.Write down your questions or e-mail them so you have documentation of the time of the query as well as the response.” If you also have an existing home to sell, it’s important to carefully consider the timing of that transaction, says Meyer. “Some buyers will need to pull out the equity from their old home to finance the construction costs for a new home and may want to make sure the old home is sold before they get into a contract for a new one,” she says. “Other buyers can handle the costs and don’t want the

upheaval of having to rent a place or live with family or friends before the new home is ready. In this market, though, one has to keep in mind that, on average, homes are taking much longer to sell than when the market was at its peak.The conservative approach from a financial standpoint is to sell first.” Lastly,“buyers should closely consider the living conditions they will encounter,” says Daniel Greenspun of Wagner Real Estate, Inc., Philadelphia.“While many owners find it advantageous to get in early on a new housing development when the price is affordable, what they are not considering is living in a neighborhood that could be under construction for the next few years. For some, the money gained in increased property value far outweighs any inconvenience of building-material debris, earlymorning construction noise and eyesores like waste containers and portable toilets that may surround their new home.”

© CTW Features

© CTW Features

AD / SPONSORSHIP

Ask Our Broker CONTINUED FROM PAGE 1

ment condemned private property and then re-sold the property to private developers, an arrangement that the Supreme Court accepted on the grounds that there was a justifiable “public purpose.”What was that public purpose? Increasing the local tax base. Writing in dissent, Justice Sandra Day O’Connor said that with the Kelo decision “the Court abandons this long-held, basic limitation on government power. Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner.” The Kelo decision created immediate controversy. Many states, as well as the federal government, enacted legislation that effectively limits or reverses the Kelo decision.Why? Because under Kelo a politically connected developer who could not purchase a home on the open market effectively could have it bought by a pliant local government and then re-sold to him. The Supreme Court works in a deliberate manner, and it may be years before the Kelo decision is reconsidered. Until then, the debate is a political matter and you are best served speaking with elected officials at all levels of government to voice your views.

Q: An investment property bought a few years ago has become a terrible problem. I can’t rent it, the price drops every month and the mortgage cost is set to escalate. I’m over 60, own my house free and clear, and I don’t want to fool with the investment property any longer. What can I do?

A: If you’re age 62 or older you may be able to get a reverse mortgage on your current residence. If sufficient, the money from the reverse loan can then be used to pay off the investment mortgage. Since a reverse mortgage does not require monthly cash payments, the investment unit could be rented at a below-market rate until (hopefully) the market improves. Or don’t rent the investment property. Instead, get a broker to sell it and then use the proceeds from the sale to pay off some or all of the reverse financing. Since a sale might take some time, it will be easier to hold the property if you don’t have to face the monthly cost of a mortgage. In other words, consider the use of a reverse mortgage to buy time, reduce cash flow and make the best of a difficult situation. For details, speak with reverse-mortgage lenders and also get an attorney who specializes in elder law to help with the decision making before you sign any paperwork. © CTW Features Need real estate advice? Peter G. Miller, author of “The Common-Sense Mortgage,” would love to hear from you. Send your questions to [email protected]. Due to the volume received, not all letters may be answered.