Archive | March 2015

Home Values, Home Improvements, and Decision Making

As a mortgage lender, people constantly talk to me about what they’re doing to their home and tell me what wonderful improvements they’re making that are going make their house’s value go through the roof.  Unfortunately, a lot of these improvements are going to cost a lot more than they’re going to generate.  This week I’m going to give some helpful tips on home improvements and home values.

Before we get into specifics:

People get very hung up on their home’s value. It’s an important piece of a person or family’s portfolio and for most American’s it’s their largest asset.  However, if you have no plans to sell your home and don’t need to create additional value for a refinance, property transfer for estate planning or other life event, don’t be so concerned with fluctuations in this number.  Values are going to do what they’re going to do and over time they will go up.  There’s never been a day in US history when national home prices were lower 10 years after a home’s date of purchase,   Meanwhile enjoy your residence for what it is, a place to live.  If you do home improvements on a home you don’t plan on selling any time in the next few years, do them because you want to utilize the improvement yourself.

Also, think about why you’re looking to increase the value of your home.  Is it for sale or are you just going to be having the house appraised?  While an appraisal is an opinion of value, it does not necessarily indicate the price a home will sell for, particularly in a seller’s market where multiple offers can be higher than an appraiser’s opinion.  If you’re looking to increase appraised value, price per sq foot in your neighborhood and overall condition may be your biggest concerns when deciding on what work to do.  If you’re looking to sell, you’re going to look to do work that may broaden the appeal of a home or you might try to give your home that little bit of edge that makes it stand out from all the others that potential buyers see when looking at open houses over the weekend.  As I’m going to mention time and time again in this blogpost, consult a Realtor for help in determining what repairs or upgrades are right for your home.

Talk to a real estate professional:

If you’re looking to sell your house over the next year or two and are looking to maximize “Sellers should always contact a Realtor before doing capital improvements so that they’re not investing in upgrades that won’t generate a return” says Cindy Lorimer of PLG Estates in Beverly Hills.  A Realtor can also make sure a seller isn’t going to be making changes to a home that differ from current trends in the market place (even if you can find it, avoid that shag carpeting, people) or a particular neighborhood so please make sure that the Realtor you’re talking with is familiar with your area.

Bigger really is better…most of the time:

The things that will almost always add value to a home are square footage and room count.  Turning a 2 bedroom home into a 3 bedroom home or adding an additional 600 square feet can be a great way to bring up the value of your home.   Be careful though. You don’t want to become the biggest house in the neighborhood.  You can start reaching a point of diminishing returns.  When planning an additions, always discuss your cost per square foot with a licensed contractor and discuss the future value of the home with a Realtor.

Be careful when updating

When looking to update a bathroom, kitchen, or other component of a home don’t get ahead of yourself.  If you’re looking to do so before selling make sure that you don’t do that remodel too long before you sell.   Preferences change frequently and what looks great to a buyer today may seem dated in 4-5 years.  Kitchens, in particular are now gathering places and not just where people keep and prepare their food.  If you’re trying to maximize your return, wait until you’re getting ready to look at selling before investing all that money.  Also, don’t overspend on a project that may not yield any return at all.  Many people fall into the trap of paying for top of the line finishes and appliances even if they cost more than they’re worth to a buyer.

Keep it clean

The simplest thing that you can do to maximize the value of your home is to keep it clean.    Appraisers might see a filthy house and assume it’s not properly maintained or they might just be influenced in their opinion on some of the more flexible areas of the report.  Home buyers are looking to by a home that makes them feel comfortable.  Trying to sell a messy house is an easily avoidable pitfall.

I hope this week’s version of Mortgage Insights has been useful to you.  If you need a Realtor to give you any advice on how to prepare your home for sale, please give me a call at 310-867-2750 or email me at and I’ll be happy to arrange for you to speak with one of the wonderful professionals whom I deal with on a daily basis.


back to blogging and the direction of interest rates

It’s been a quite a while since I’ve posted and it’s nice to do so again. In fact the last time was 2013 and what a difference 16 months can make. Since the last time I wrote an article for this blog there has been a new Fed chair installed, the Republicans now control both houses, Greece has defaulted on their debt, inflation has become incredibly tame, ISIS has emerged, unemployment has dipped to pre-recession levels, Russia has been in conflict with Ukraine, and a new presidential election cycle has started to heat up.
What do each of these mean for the direction of interest rates? There is no one answer. Individual events may have an impact on markets including the bond markets which move interest rates, but more than one factor will affect their general path. For example, on a daily basis the crisis in Ukraine may move rates lower due to what people refer to as a “flight to quality”, a search for the safe haven of bonds that often occurs when international tensions and conflicts can impact global markets. Events like this, however, tend to have short term impacts on markets over a period of days or weeks.
The Greek debt crisis has been having a more lasting effect on the direction of rates as European Union leaders and Greek officials have struggled to reach a consensus on how to work out Greece’s ability to pay its bills. This will have a longer impact on rates not only in Europe but here as well as Greek default will weaken European debt, strengthening ours by comparison and driving down US rates.
The installation of the new Fed chair will have perhaps the biggest impact on interest rates as its up to Janet Yellen to decide when its time to raise the federal funds rate as the economy and inflation start to heat up. He’s done a brilliant job showing restraint and successfully winding down QEIII and Operation Twist. It will be interesting to see what happens in the months ahead.
All of that being said, when is the best time to lock YOUR interest rate? If you’re comfortable with the rate and payment you’re receiving it’s a great time to lock.