Does your home offer any of the perks some buyers will pay more for?To understand how much your home is worth, you have to know what affects its value. The appraisal of a home value is an estimate tool for extrapolating the real market value of your home, based on existing home-related data and actual sales prices in your area. Thousands of data points correlate with home values and sale prices — some of which are obvious (like the condition of the home) and some that aren’t. Here are several surprising things that can affect either the existing value of your home or the price someone is willing to pay for it, all based on data. 1. Proximity to a Starbucks How far do you have to drive to get a Frappuccino? If the answer is “not that far,” you’re in luck. A 2015 Zillow report found that, between 1997 and 2014, homes within a quarter-mile of a Starbucks increased in value by 96 percent, on average, compared to 65 percent for all U.S. homes, based on a comparison of Zillow Home Value Indexdata with a database of Starbucks locations. To evaluate if this effect is isolated to Starbucks, the research team looked at another coffee hot spot (one with particular pull on the East Coast): Dunkin’ Donuts. The data showed that homes near Dunkin’ Donuts locations appreciated 80 percent, on average, during the same 17-year period — not quite as high as homes near a Starbucks, but still significantly above the 65 percent increase in value for all U.S. homes. 2. Blue kitchens and blue bathrooms Beyond America’s obsession with curb appeal, what’s inside your house counts a lot too — especially the colors you paint the rooms (particularly the kitchen). According to Zillow’s 2017 Paint Color Analysis, which examined more than 32,000 photos from sold homes around the country, homes with blue kitchens sold for a $1,809 premium, compared to similar homes with white kitchens. Blue is also a popular bathroom shade. The same analysis found that homes with pale blue to soft periwinkle-blue bathrooms sold for $5,440 more. Walls painted in cool neutrals, like blue or gray, can signal that the home is well cared for or has other desirable features. 3. Trendy features Joanna Gaines’ aesthetic is permeating more than just your YouTube search history. Zillow listings mentioning the shiplap queen’s favorite features — like barn doors and farmhouse sinks — sell faster and for a premium, according to a 2016 Zillow analysis of descriptions of more than 2 million homes sold nationwide. Listings with “barn door” in the description sold for 13.4 percent more than expected — and 57 days faster than comparable homes without the keyword. Meanwhile, listings touting “farmhouse sink” led to a nearly 8 percent sales premium. Sellers can use the listing descriptions to highlight trendy details and features that might not be noticeable in the photos. 4. How close you are to a city If you own a home in a major American metropolitan area, you’re most likely sitting on a significant (and rapidly appreciating) financial asset. Case in point: Home values in the New York, NY, metro area are worth $2.6 trillion, per a recent Zillow analysis. The average urban home is now worth 35 percent more than the average suburban home. Since 2012, the median home value in urban areas has increased by 54 percent, while the median home value in suburban areas is up just 38 percent. On Point Homevestments
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Your parents' rite of passage may not make sense for youWhen the Baby Boomer generation was venturing into adulthood, it was common to buy a “starter home” — a modest, small dwelling. As their families grew and careers advanced, they moved into bigger or better homes. Now, many people struggle to come up with the down payment for a first home. They may wonder if it’s smarter to wait and save more money so they can buy a home that makes more long-term sense, or go the other route, buying a starter home and planning to stay in it for more years. It’s a personal, practical and financial decision, but here are some pros and cons of buying a starter home. Pro: Build stability quicker Lots of lessons come from homeownership. It exposes you to a new set of decisions and circumstances. One surprise benefit that strikes most people is the stability they feel when they become homeowners. They might feel more grounded, and a part of a larger community. After making a few cosmetic changes to make a home “theirs,” many new homeowners find they enjoy nesting at home, having friends over, and enjoying their own space. Con: Buying twice means moving twice Think you’ll be ready to upgrade in just a few years? It might be more cost-effective to save and stretch for the larger house, so you can stay in it longer. Although mortgage rates are low, there are costs associated with buying and selling a home: title insurance, inspections, brokerage commission, along with a handful of loan fees. Plus packing up and moving twice can be expensive and exhausting. Some prefer to pick one house for the long haul. While staying put and continuing to rent may seem wasteful in the short term, it might be a more strategic move. Pro: Build equity sooner Although not the guarantee it was a generation ago, odds are good that when you get into your first home, you can realize some equity. If you can commit to at least five to seven years, there’s a chance you can come out well ahead. By making improvements that add value, you can take the equity you’ve built and apply it as a down payment on the next home. In essence, the starter home might help you purchase your dream home. Con: You may spend more than you planned There are soft costs to home ownership. Property taxes and mortgage payments aren’t the only expenses to owning. You’ll need to furnish your new home, purchase window coverings, and pay for landscaping improvements. You’ll likely want to paint, refinish the floors, or change the carpet before moving in. And, you’ll surely make mistakes along the way by hiring the wrong contractor, making a poor landscaping decision, or mistakenly waiting to install the new AC condenser. Some parts of homeownership are trial and error. It adds up. You might be better off avoiding those expenses by renting and saving for your long-term home. Pro: Start realizing the tax benefits When you own a home, the interest portion of your monthly mortgage payment can be written off, dollar for dollar against your income. If you spend $1,000 per month on mortgage interest, at the end of the year, you can deduct $12,000 off your taxes. When you pay rent, the money goes to your landlord, and that’s it. The sooner you own, in theory, the faster you can save some money — perhaps toward your next home. Con: Homeownership isn’t a sure thing The world moves at a faster pace today, and that affects home values. Just a generation ago, people stayed closer to home, got married earlier, stayed married forever, and kept the same job through retirement. Today, people choose to stay single longer, and may even purchase their starter home solo. Divorce rates are higher, the global economy moves people all over the world for work, and we prefer to stay more mobile. That means homeownership may not be part of the equation. What happens if you buy your starter home and then get a job transfer, divorce, or the opportunity of a lifetime to live abroad? You might be stuck being an accidental landlord or selling your home at a loss. It’s up to you If you play your cards right, you can get into the starter home sooner rather than later and make a smart financial decision. If you buy the right first house, are open to building sweat equity, and plan to hang out there for five to seven years, there’s a good chance that you’ll have made a smart move. This decision will enable you to get into a larger home, in a better neighborhood or school district, or maybe just your dream home. Homeownership is a personal choice, and there is no one path to take. Stick within your comfort zone, and always go with your gut On Point HomevestmentsShopping for a home has evolved over the years. Here's what you need to know about the new generation of buyers.For years we’ve seen the shift in Baby Boomers ditching their large suburban homes for the excitement of urban life. And we’re noticing the reverse from millennials: leaving behind small spaces along with the hustle and bustle of the city. They’re open to a new world of suburban living, with single-family homes, more storage and closet space, and some outdoor space all their own. These millennials, born between the mid ’80s and the late ’90s, came of age in a shifting cultural and social environment. Their experiences aren’t the same as their Baby Boomer parents, and as such, their preferences differ from those of their parents, who bought a generation ago. Here are some real estate considerations to help you sell to millennial buyers. Millennials are busy Today’s young people work long hours, and they want to spend the free time they have with friends and family. They’re also more transient than their parents’ generation. So, when it comes to real estate, many of them seek turn-key homes for quick and easy move-in. They can’t fathom taking the time to undertake renovating a bathroom or kitchen. No matter how great the opportunity, many of today’s buyers aren’t interested in painting or “making it their own” as our parents did when they moved into homes they planned on living in for 30 years or more. Home searching is like dating Millennials grew up attached to their phones. They hail a car and order food with their fingertips. And now, instead of meeting at a bar, they date with their thumbs. Swipe right for the potential mate, or reject them by swiping left. When it’s time to buy a home, their experience is much the same, thanks to smartphones and real estate apps. As a home seller, you and your agent must invest an incredible amount of time and money on your home’s photo shoot. If you don’t, you may never get a first “date” with your prospective suitor. If the buyer isn’t drawn to your photos, they’re on to the next place. Bigger is no longer better In the ’80s, a McMansion with quadruple master closets, oversized Jacuzzi tubs, formal rooms, and large basements were a sign of success, and coveted by home buyers. Today, millennials want smaller and simpler homes on smaller parcels. Bigger houses or any land more than half an acre equals more work and maintenance to these first-time buyers, accustomed to the easy life. You can’t make your home smaller, but if you are serious about selling and want to account for this trend, your price will need to meet the market. Location matters more than ever Millennial buyers want the urban experience, as best as they can get, in the ‘burbs. This means homes that are walking distance to a village or town, near the train, and in bustling neighborhoods are among the most popular. While being away from town, secluded, and with more land was a status symbol in the ’80s, it’s a deal killer today. Unfortunately, you can’t move your home to a better location — but you can adjust your price to meet the market. If you’re a Boomer selling a long-time family home now or in the future, and the millennial is your potential buyer (think: customer), you need to adjust your mindset to meet theirs. You can’t assume that anything related to your original home search applies today. Get ahead of it, or your home may spend many months (or even years) on the market. On Point HomevestmentsDoes your home offer any of the perks some buyers will pay more for?To understand how much your home is worth, you have to know what affects its value. The Zestimate home value is Zillow’s tool for extrapolating the real market value of your home, based on existing home-related data and actual sales prices in your area. Thousands of data points correlate with home values and sale prices — some of which are obvious (like the condition of the home) and some that aren’t. Here are several surprising things that can affect either the existing value of your home or the price someone is willing to pay for it, all based on data. 1. Proximity to a Starbucks How far do you have to drive to get a Frappuccino? If the answer is “not that far,” you’re in luck. A 2015 Zillow report found that, between 1997 and 2014, homes within a quarter-mile of a Starbucks increased in value by 96 percent, on average, compared to 65 percent for all U.S. homes, based on a comparison of Zillow Home Value Index data with a database of Starbucks locations. To evaluate if this effect is isolated to Starbucks, the research team looked at another coffee hot spot (one with particular pull on the East Coast): Dunkin’ Donuts. The data showed that homes near Dunkin’ Donuts locations appreciated 80 percent, on average, during the same 17-year period — not quite as high as homes near a Starbucks, but still significantly above the 65 percent increase in value for all U.S. homes. 2. Blue kitchens and blue bathrooms Beyond America’s obsession with curb appeal, what’s inside your house counts a lot too — especially the colors you paint the rooms (particularly the kitchen). According to Zillow’s 2017 Paint Color Analysis, which examined more than 32,000 photos from sold homes around the country, homes with blue kitchens sold for a $1,809 premium, compared to similar homes with white kitchens. Blue is also a popular bathroom shade. The same analysis found that homes with pale blue to soft periwinkle-blue bathrooms sold for $5,440 more. Walls painted in cool neutrals, like blue or gray, can signal that the home is well cared for or has other desirable features. 3. Trendy features Joanna Gaines’ aesthetic is permeating more than just your YouTube search history. Zillow listings mentioning the shiplap queen’s favorite features — like barn doors and farmhouse sinks — sell faster and for a premium, according to a 2016 Zillow analysis of descriptions of more than 2 million homes sold nationwide. Listings with “barn door” in the description sold for 13.4 percent more than expected — and 57 days faster than comparable homes without the keyword. Meanwhile, listings touting “farmhouse sink” led to a nearly 8 percent sales premium. Sellers can use the listing descriptions to highlight trendy details and features that might not be noticeable in the photos. 4. How close you are to a city If you own a home in a major American metropolitan area, you’re most likely sitting on a significant (and rapidly appreciating) financial asset. Case in point: Home values in the New York, NY, metro area are worth $2.6 trillion, per a recent analysis. The average urban home is now worth 35 percent more than the average suburban home. Since 2012, the median home value in urban areas has increased by 54 percent, while the median home value in suburban areas is up just 38 percent. On Point HomevestmentsStaging, curb appeal updates, and closing costs add up.Selling a home not only takes time, but also costs money. To help with budgeting, Zillow and Thumbtack identified several common — but often overlooked — seller expenses. From closing costs to home prep projects like carpet cleaning, U.S. homeowners can expect to spend more than $15,000 on these extra or hidden costs to sell the median home, according to Zillow and Thumbtack’s Hidden Costs of Selling Analysis. Closing costs The two largest closing costs are agent commissions and, in most states, sales or transfer taxes. Nationally, sellers spend $12,532 for both closing costs on the median home. Sellers should also prepare for a variety of other smaller closing costs, including title insurance and escrow fees. Home prep costs Most sellers will complete at least one home improvement project before listing. While some sellers prefer to complete these projects themselves, those who outsource can expect to spend more than $2,650 nationally to cover staging, carpet cleaning, interior painting, lawn care and house cleaning — five of the most popular seller home prep projects. Location, location, location As with all things real estate, these extra costs can vary significantly by region. In San Francisco, homeowners can pay more than $55,000 on the median home to cover these combined closing costs and maintenance expenses — the highest among the markets analyzed. Compare that to Cleveland, OH where home sellers pay just over $10,000 for the same costs. Estimating profit Even though selling a home costs money, most (73 percent) of sellers are still satisfied with the transaction, according to the Zillow Group Report on Consumer Housing Trends. To estimate potential profit, sellers who have claimed their home on Zillow can use Zillow’s Sale Proceeds Calculator. It factors in the home’s sale price, mortgage balance and agent commissions, along with other common seller fees. On Point HomevestmentsThe last thing potential buyers want to hear is that we are currently in the midst of a seller’s market. However, we'd argue that there’s no cause for concern. There is absolutely a viable exit strategy in any market, regardless of whether or not it favors homeowners. The key is to maintain a level head and analyze the data in front of you. If for nothing else, it’s entirely possible to run a lucrative real estate investing career in a market that appears to favor only sellers; you just need to know how to work with what you are given. Seller’s Market Definition A seller’s market is the direct result of economic indicators that benefit homeowners more than the buyers they intend to work with. In its simplest form, however, a seller’s market is exactly what it sounds like: a real estate market whose scales are tipped in favor of those who currently own property. Perhaps even more specifically, a seller’s market is nothing less than a best case scenario for homeowners, which begs the question: Outside of the actual condition of a marketplace, what are the specific characteristics of a seller’s market? What factors actually give the edge to homeowners? Better yet, what’s it all mean for the whole of the real estate landscape? The vast majority of people understand the concept of a seller’s market (it’s relatively simple), but fewer have an intimate knowledge of why a particular market would benefit sellers over buyers. Fortunately, the fundamental concept behind a seller’s market isn’t all that difficult to grasp either; it can be broken down into one important principle: supply and demand. If for nothing else, a seller’s market is “a market condition characterized by a shortage of goods available for sale, resulting in pricing power for the seller. A seller’s market is a term commonly applied to the property market when low supply meets high demand,” according to Investopedia. When demand meets a shortage of inventory, the homes that are available for sale become inherently more valuable. In other words, when more buyers are competing over fewer properties, it’s likely that the homeowners are at a distinct advantage. The competition simultaneously allows owners to increase asking prices without risking the loss of interest. Therefore, it’s safe to assume a seller’s market coincides with everything buyers would rather avoid: higher prices, more competition and a much faster pace. The Differences Between A Buyer’s And Seller’s Market Anytime supply can’t keep up with demand, sellers will reap the rewards, inevitably resulting in a seller’s market. The more inventory levels are depleted, the more buyers will be willing to pay when they find a house that meets their criteria. Consequently, a buyer’s market occurs when there are more than enough homes to satiate demand. The ratio of buyers to available inventory will actually work in favor of buyers in a buyer’s market. When inventory levels are comparatively high to the amount of people looking to purchase a house, history suggests sellers will compete over shoppers that are awarded several options. Therein lies the single most important differences between a buyer’s and seller’s market: supply and demand. It is worth noting, however, that the housing market is nothing, if not self-aware. The same pendulum that can swing in favor of sellers will eventually course correct to offset the resulting imbalance and, in turn, over-correct to the point in which a buyer’s market is eventually realized. The housing market is, after all cyclical. Each seller’s market will eventually be replaced by a buyer’s market (and vice versa), with the middle ground representing the balance a healthy market covets. As a real estate investor, you would be wise to remember that. For every buyer’s market, there is a sellers market; for every seller’s market, there’s a buyer’s market. The two have become synonymous with each other, and those that can tell the differences between the two stand to gain an edge over the competition. Are We Currently In A Buyer’s Or Seller’s Market? We are currently in the midst of a seller’s market, but I digress. The fundamental indicators supporting today’s housing market are anything but normal. It is true: everything suggests 2018 is a seller’s market. Inventory levels can’t keep up with demand. As a result, we have seen home prices increase almost exponentially. It is important to note, however, that we haven’t seen as many homeowners participate in the market as we would like. Despite being a seller’s market, owners don’t appear ready to sell for one simple reason: the moment they sell, they will be forced to join the ranks of buyers competing over the little inventory that has made itself available. As it turns out, most homeowners are content living with their equity for the time being. It is, therefore, safe to assume we will continue to see a seller’s market until more inventory makes its way to the market. Tips For Buying In A Seller’s Market We maintain there is no market that can’t be taken advantage of by savvy real estate investors. More importantly, there’s an exit strategy for just about every scenario, no matter how expensive or cheap the market finds itself. That said, there’s no reason to be discouraged by a seller’s market if you are looking to acquire your next deal, but rather invigorated. Take solace in the fact that it is still possible to invest in a seller’s market if you exercise the right exit strategies. Due, in large part, to the absence of significant profit margins in a seller’s market, markets like the one we are seeing today tend to favor long-term strategies. Of course, it’s entirely possible to find a deal to rehab and flip in a matter of months, but the data suggests now may be a good time to look at acquiring rental properties. Rental property acquisitions won’t come with a smaller price tag, but they will award investors the opportunity to offset the higher costs with a few years of rental income. In other words, it could potentially pay off to buy a rental property in a seller’s market. You will certainly pay more upfront, but the passive income potential could easily make up for the initial cost. In some cases, it may only take a few years to make up for the added costs. At that point, investors may choose to continue collecting rental income or, if the market is right and the numbers work, rehab the property and sell it at a later date. The returns may not be immediate, but the idea of buying a rental property could pay off in the long run. Now, as for the process of buying a property in a seller’s market, there are a few things that could ease the high acquisition costs:
Selling A House? Here’s How To Thrive In A Seller’s Market Despite a seller’s market inherently favoring homeowners, there’s still a few things you can do to maximize your profits, not the least of which include:
We are currently in the midst of a seller’s market, but the doesn’t mean homeowners can sit back and rest on their laurels. Complacency could significantly reduce your opportunity to maximize profits. Instead, take the time to learn the ins-and-outs of a seller’s market, and what it takes to work in one. Only those comfortable working in any condition will find success easier to come by. Key Takeaways
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