Screen Porch Progress

I don’t know if you’ve been watching the progress of our screen porch via my Facebook account, but it’s pretty cool to see it all come together. I have to say, with the arrival of our twins, I didn’t think we’d ever really put one on our house. Both Julie and I grew up in parts of the country with basements-some finished and some unfinished. All the folks we knew who found a way to afford converting their unfinished basement to finished square footage often claimed it was the best thing they ever did. The comment that immediately followed always was “I wish we had done it years ago.” 

 

 
The reality is that with four children the days of extra money have been permanently kicked to the curb. Yet, we didn’t want to wait 15 years to put one on and inevitably say “we wish we had done it years ago” too. The market condition also swayed our decision as well. What’s happening in the economy has impacted everyone and there are some great opportunities emerging as merchants try to tempt us with some terrific pricing. The same thing is happening in the area of home improvements. For our porch, labor is infinitely more available as home building has slowed. That, coupled with a lower cost of materials, means that we are paying less for the same porch we initially looked at a year ago.

 

 
To help make this all happen, I investigated some various financing options to help make our dream a reality. Let me share with you the type of loans that surfaced:
 
Type A: Cash out style loan that changes the current loan you have.  It’s a great program that gets you a new loan in the repayment years you desire (e.g., 30yr, 20yr.) at a relatively competitive rate. Yet, we had such a low interest rate at the moment that we couldn’t get using this option, I opted to pass on this loan type.
 
Type B: HELOC, a Home Equity Line of Credit.  This is basically when you pull some equity out of your home for whatever you want. Some loans are adjustable based following the prime rate and some are fixed. There are many guidelines associated with HELOCs and one is staying within Texas state guidelines that require a minimum 20% equity in your home.  Given the change in home values, we didn’t meet this mark.
 
Type C: Home Improvement loan.  This is a loan that allows you to obtain financing if you are doing a specific home improvement (e.g., pool, kitchen remodel). The bank checks to ensure you have adequate equity in your home without the additional value added by the improvement and can allow you to go up to 95% of your home equity. If you want to do a home improvement, this is the option leveraged. The only downside is that you have to get your contractor or company (e.g., pool company) and your project proposal approved by the lender first.
 
It you are considering a home improvement or are interested in pulling some equity out of your home, I’d be happy to discuss the options available to you. 

Home Improvements

Over the past few weeks, we’ve been talking about what kind of improvements can help add real value to your home in today’s market. I’m not sure about you, but with four children ages five and under, Julie and I don’t have a ton of time to figure out what will appeal to the masses.
 
So how do you figure out what’s hot and not? Since we have still have an array of model homes in the area it’s good to go check out the price range in which you would sell your house as well as one level up. For instance, if you think you’d want to sell your home for $250k, it would be a good idea to see what builders are offering in that range and the $300k range. This will help you understand what’s standard at that price range and what you have in your home that would be noted as an upgrade. By looking at the next price bracket, it will also give you some ideas around what you can do to help make your home feel like a more expensive home helping to give you an edge over a new home.
 
Some great places to find the location of model homes in your area is move.com which includes a new home search engine that will help link you to builders’ sites. Another way to see what homes in your range offer is by checking out what’s currently listed on Realtor.com. Finally, home improvement and design sites, like those listed below, will help you give you ideas around current trends and some things you can do to improve your home.
 
HGTV, Southern Living, Fine Living and Home and Design 

Best of luck in all your home improvement efforts-let me know how it goes.

Home Improvement

Last week I mentioned that Julie and I have a home that has hit the 10-year mark-which means that it’s officially no longer a “new” home by Frisco’s standards. We’re making some maintenance related repairs in addition to considering several updates.  I solicited feedback a few weeks ago and have received some great responses that I wanted to share.
 
Jeff Cheney of Keller Williams has some advice, as well as suggesting home owners reference available online resources, to help them understand the potential rate of return on various improvements.
 
According to HGTV, five improvements deliver the best returns:
 
*102%:  Minor Bathroom remodel which includes updating such things as replacing flooring, reglazing the tub, replacing fixtures/lighting and updating shower doors.
*100%:  Landscaping
*98.5%: Minor Kitchen remodel, which includes refacing/refinishing existing cabinetry and updating things like appliances, countertops, sink/faucet and wall finishing
*95.5%: Exterior improvements, including paint, siding and updating an entry
*93.5%: Attic space to bedroom conversion
 
One may ask that if you can’t get all your investment back, why bother to even make the updates? Similar to good home maintenance, buyers expect well priced homes not to need a ton of work. If the perception is that it will take hours to remove Aunt Nellie’s wallpaper, replace the shag carpet and refinish cabinetry buyers will be looking for a pricing discount commiserate with the effort and cost of updates.
 
Cheney offers words of caution to homeowners around what kind of return you can expect for your neighborhood. “Homeowners should keep in mind any home that is over-improved in relation to the surrounding homes is unlikely to yield a high rate of return. It’s important to note that if you have the most expensive home on the block, your investment will probably not return as much as the upgrading of a less expensive home nearby.”
 
This is right in line with last week’s article that discussed that highly specialized, and often costly, improvements will not always deliver a strong return. Instead, consider the price range and general features of homes in your neighborhood before making any significant updates. While you should certainly makes changes to fit your lifestyle and preferences, it’s always a good practice to take a hard look at what percentage of the money spent on these modifications you would see should you ever have to sell.
 
Next week, we’ll talk about what typically does give you the best return on investment and the rate of return you can generally expect.

Where Do I Sign?

I am a member of a trade group called National Association of Mortgage Brokers (NAMB).  It is an association, like every industry has, that helps to keep the playing field correct and competitive in this market, at least that is my explanation for them.  Recently, laws changed on how appraisals can be ordered for residential home loans.  Something called the Home Valuation Code of Conduct (HVCC) was introduced a bit ago- just a horrible idea and plan.  And it is costing homeowners Billions.  This link takes you to a page that has more detail and a petition provided by the NAMB, if once you realize the negative with this new legislation and want to help us make a change, then please sign!

House for Sale

In 2003 I was able to handle the mortgage financing for my sister and brother in law as they bought a larger home in Dallas so they could have more room for the boys.  This place is awesome and only a few blocks away from Richardson Bike Mart’s Coit store location.  But with their boys off to and out of collage, time for these empty nesters to downsize.  Wait till you see the back yard and the study- just a great house and well off the main streets but so close to every thing.  Now, when they sell I wonder if we can have them move in with us so they can help us with all of our kids.

Speaking of Homes

Over the next few Weeks I want to chat a bit about what you should or should not do to your home.  With Julie and I watching a fair amount of TV while feeding the twins- we find ourselves on the design channels mostly.  One theme we see on the shows that help you sell is that after the stager helps get the home ready for the market- the sellers want to stay.  The experts all agree that most homeowners during uncertain economic times will choose to stay in their home and remodel vs selling.  So what projects should you do and will they help or hurt your values if and when you do sell?  As the season is changing here in Frisco and the weather cooling off, Julie and I are ready for our 1st project of taking out the one side door we have and replacing that with French doors that both open and side windows to brighten the kitchen.  Those doors open to a side patio and the long term goal is to frame that in as a screened patio but for now, just the doors.  So what will a project like this add or take away from the Davis value?  Check back next week.

Two Homes Ready for You to Buy!

I recently learned that a good friend of mine and a Frisco staple is on the move.  With that comes an unbelievable home for sale.  A home that was completely restored years ago and is a landmark of Frisco’s past.  Just South of downtown Frisco, you can walk to Randy’s Steakhouse.  Hate to see folks move out of my little small town, but glad to have the positive impact they made in this community.  The 2nd home might be a problem for many of you- it is across the street from me.  This is the 2nd time that an investor bought this home out of auction- put a renter in it and then let it go into foreclose.  Thanks for the value help Mr. Investor, jerk.  Be awesome to have a family actually buy and “live” in this home for a change.

Did you find a safe place to be during the recent storm?

The boys and I had our first experience of going to the safest place in our home – an inside closet – when the sirens sounded. I hope you remembered to take your cell phones, billfolds and/or purses with all your credit cards and ID, perhaps a bottle of water and a package of cookies! Oh, and shoes. Should the storm develop into a real problem for you, that would involve lots of broken glass. Since I was raised in Kansas, I have considerable knowledge of tornadoes and have spent lots of time in the basement! We were fortunate this time and I hope you were, also.
 
It was the aftermath of the storm that made me think of a new product that would be useful for city employees. As the police and city workers are driving around searching for damage, I think it would be useful if they had some kind of a GPS laser tool. With such a tool they could pinpoint downed power lines, trees, etc. by simply pointing at the object. My new tool would instantly send the location of the problem to the city office where it could be mapped. Crews could then be assigned to various parts of the city for repair and/or cleanup. Not only would they be aware of problems instantly, they could also deal with the worst problems first.  I think I should patent this idea quickly!

What about you? What inventions and ideas are floating around in your mind?

Space Constraints

Over four years ago, Julie and I looked for our second home in Frisco. We had just had Luke and decided it was time to sell and get a little more space-specifically another bedroom and a game room.  We happened upon our current home that just happened to be a 5-bedroom, 4 bathroom house. Initially, we couldn’t imagine what we would do with all those bedrooms as at the time we only planned on having two children. As always, God knew what was best and now we are incredibly grateful as we eagerly anticipate the arrival of our twin girls.
 
Julie and I both grew-up with basements, which we sorely miss from a storage perspective. An attic is nice, but it’s not nearly as convenient as a trip down the stairs. Since we’re about to experience a 50% increase in our family’s size, I am in the market for a professional organizer who can come in and show us how to add to or change our existing spaces to provide more storage capacity. We’ve registered for all the pre-requisite things these two little girls will need (yes, shameless attempt to get you to log onto the girls gift registry) – but with all the other “stuff” we have, how can there be room? If you know anyone who’s a professional organizer, or have tips of your own, please share them.

My State of the Industry Views

Many of you have watched me and my life changes over the years.  And I bet a few of you were surprised 8 years ago when I decided to change from fun loving bicycle guy to pencil pushing mortgage guy to 2 years ago opening my own Mortgage Company.  I sure was.  Over that time I have engrossed myself into this industry and it amazes me when I see huge changes like we have coming ahead of us.  Simply put- because of the actions of a few greedy individuals- the housing industry will change and not for the better.
 
There are 2 worlds in mortgage lending- Retail and Wholesale.  I am a Mortgage Broker and work out of the Wholesale channel.  We all deliver our loans to the same place for the most part in Retail and Wholesale- the large lenders that set their standards of underwriting and products via the guidelines of Fannie Mae and Freddy Mac.  Be it Wells Fargo, CitiMortgage, Chase or Bank of America- they all carry the same products and after closing, the loans, for the most part turn into a commodity that can be traded and sold without too much affect on us the home owners.
 
Since home values have dropped in many States- those commodities were not generating the same profit and when you don’t show a profit- folks start asking to see your books.  Hence- where we are today- bad books and deception.  Then came the finger pointing, “it wasn’t us, it was them.”  Sort of reminds me of Adam and Eve in the beginning- if only they would have 1. Stayed away from the darn tree and 2. Owned up for their actions instead of placing blame down the line.  Well- us Brokers are the ones that most have decided can’t defend themselves as well and therefore must be the root of all the problems we have.  Hard for me to understand that- if I am simply approving folks on guidelines for products that Fannie and Freddy created and that the Banks then underwrite and approve- how am I the bad guy again?
 
To save us- the Government has created many committees and they have started to put in place new laws and guidelines that Fannie and Freddy should follow and in turn- so must the Banks.  Potential borrowers are seeing new credit and appraisal actions start to take affect and both are stopping folks from that home loan transaction.
 
Credit:  The other day I was working up a refinance scenario for a friend of mine who we had just closed on their home loan a year ago- let’s call that Before Fallout, BF.  So a year ago this person with a credit score of near 689 was, in the Banks and Guidelines views- A Paper loan without any adjustments to their rate.  Today- After Fallout, AF- they are well below that A paper (with the same rate mind you as BF) and if the market rate for perfect credit was 4.875% that day- they would have gotten a 6.25% rate, after factoring in all the adjustments for risk.  Granted- we need to get the ropes pulled tight- but this is just silly.  It is them making up for past mistakes and looking to gain back as much income (risk) as they can and Mark my Words- this will hinder lending going forward.
 
Appraisals:  Soon I won’t be able to 1. Pick the appraiser to use on your transaction and 2. Have any communication with the appraiser that is picked.  The belief here is when Mortgage Brokers pick and speak with appraisers- we manipulate the market and push the values to what is most needed to make that loan work.  On my web site I list a few trusted appraisers that I have worked with for years, want a challenge? – call any of them and see if you can “manipulate” them into getting you the value you want for your home.  Can’t be done- these guys have licenses and risk all if even one appraisal comes back from a 3rd party reviewer and can either lose their license or go to jail.
 
I want this not to be a grim picture of the 2009 home buying and refinance season- just my views as to what I have been watching.  My belief is that many in power view Mortgage Brokers so poorly- they are looking for any and all ways to make us appear less attractive and to encourage the client straight to the Retail side of the banks.  Currently I am in a great place and have more business than I can keep up with and hope that those oh so powerful folks don’t look for more ways to change that.  Thanks for reading-