Monday, December 30, 2013

How to Avoid the Legal Pitfalls of Being a Chicago Landlord

Guest author Randy Weinstein has been a licensed attorney focused on real estate since 2006. Randy has been recognized by Superlawyers magazine as a rising star for the past two years.

Randy Weinstein graduated from the University of Denver with a juris doctorate and a masters of science in real estate and construction management. 
Contact Randy at his website or by email

Homeowners in Chicago who are looking to purchase a new home and rent out their current home must take proper precautions to be cash flow positive.

Changing Your Mindset - Becoming a Business Owner

The first thing that people must understand when they go from living in their home to renting out their home is that they are going from home-owners to business-owners.  By turning your home into your business, you must take the same precautions that you would take in starting any other business.  People should be prepared to consider:
  1. Properly forming an Illinois Limited Liability Company (LLC) 
  2. Executing a Quit Claim Deed from themselves personally into an Illinois Limited Liability Company
  3. Hiring a real estate broker to obtain qualified tenants 
  4. Engaging a real estate attorney to review and/or draft your lease
  5. Consider a property management company to handle repair issues and rent collection. 

Steps 3-5 are particularly important for properties located in the City of Chicago and Evanston. This is because these municipalities have strict Residential Landlord Tenant Ordinances (RLTO) to protect tenants.

Beyond failing to maintain a habitable property and failing to provide essential service, tenants in these  municipalities can have claims against their landlords for actions and/or inactions, including, but not limited to:

Sunday, December 15, 2013

House Hunters vs. Real House Hunting - What You Should Expect in Your Home Buying Process

Many buyers enjoy watching real estate shows on HGTV and TLC (like "House Hunters", or "My First House").  Here are a few ways your real house hunting process may be different than what you see on TV.

1.  Your Process Isn't Under a 30 Minute Timeline

Shows like House Hunters display the entire process, from initial search to close, within their allotted episode time slots.  While most buyers certainly don't expect the process to be nearly THAT quick, there is often some anxiety about the length of the search process.

If you don't find you home on the first search, don't worry.  It's a totally normal part of the process.  You are absolutely able to look at more than 3 homes to make your decision, and sometimes it takes a good amount of time to understand the market around you!

Thursday, December 12, 2013

How to Tackle Clutter and Prepare Your House to Sell

You've decided it's time to move to a new home and sell your current one.  Exciting!

When you start looking around at the clutter your home has collected over the years, however, sometimes prepping for a sell can feel a bit daunting.  In some cases, you don't even see it.  Intellectually you know you have "stuff", but in your eyes, everything is in its place.

So, how should a seller prepare their home (and their mindset) for the actual sell?

Preparing is "Pre-Packing"

When you sell your home, you're going to pack up and move out. The best approach is to box up and donate as much as you can to both prepare your home to show and to prepare for your actual move.  If you haven't used it in a month or two, it can go.  You may feel like your home looks a little barren after all this packing - that's okay, it's a good thing.

Tuesday, December 10, 2013

5 Reasons You Should Sell Your Home Before Spring

Many sellers believe that waiting until the spring season to sell their home is a better alternative to selling during the winter.

In all actuality, this isn't entirely true.  Selling during the winter has its own distinct set of advantages.  Here are a few of our favorites, courtesy of our friends at KCM blog.

During Winter, Only Serious Buyers Are Looking

During the winter, and particularly during the holiday season, the buyers that are out looking are typically very serious buyers with a more immediate need.  There are less "lookers" - that is those who are only starting to look around to figure out what they want.

Thursday, December 05, 2013

The Truth Behind "Sale Pending" - You May Still Be Able to Buy

Most house hunters in the modern market are doing a lot of their property searches through online services.

It is through these searches that a prospective homebuyer comes across terms like "contingent", "A/I", "pending" or "sale pending" and take them to mean "off the market."

In many cases, and depending on the source, this may not be true.

Here's is how you can tell if a "sale pending" home is still worth pursuing, courtesy of Zillow Blog.

"Subject to" and "Contingent Upon" Could Be Part of the Transaction

Tuesday, November 26, 2013

What to Expect When Buying a Home During the Holiday Season

If you're looking at buying a home during the holidays, you most likely have the immediate need for a home - be it relocation, or a new job opportunity, or otherwise.

While you may think this time of year may not be the best for house hunting, there actually are some distinct advantages for looking.

The Sellers Mean Business

Just like you, home sellers this time of year typically want business to move quickly due to immediate need.  This means: a faster negotiation period, and greater willingness on their behalf to agree to concessions.  Even if you make a lower offer, they may be more willing than normal to work with you.

Less Competition

Not a lot of people are out looking for homes this time of year, so this reduces your chances of multiple offer bidding wars (which occurs a lot more in the spring and summer).  Less competition often means, also, a bigger discount on your housing budget.  Work with an experienced real-estate agent in your area to determine what housing price range you could be competitive in this time of year.

Sunday, November 24, 2013

How to Maximize Your Holiday Dining Room Space

The dining room is the home of festive dinner parties, especially during the Thanksgiving holiday.  How can you maximize your dining room space to accommodate your party needs?  Here's our interpretation of some tips from the Zillow Blog.

1. Clear Your Space

Move out the non-essential pieces in your dining room for the holiday season.  In some cases, this may mean you're only leaving your table and chairs.  Less is absolutely more during a crowded party, as more space = more comfort.

2. Set Up a Buffet

No need to stack all your food on the table.  Set up a buffet-style dining experience by serving your food in the kitchen on either a table or on the counter, letting guests arrange their own place in a spacious area.

Wednesday, November 20, 2013

30-Year-Fixed Mortgage Rates Fell 16 Points

Mortgage rates for 30-year fixed mortgages tumbled to their lowest rate in about six months this week, according to Zillow Blog. The current rate borrowers were quoted at 4.06% this week, down from 4.22% last week.  It might be a good time for summer 2013 buyers to re-finance.

This fall occurred steadily last week, leveling off at 4.12% this past weekend, and then dropped again to yesterday's rate.

Graph Courtesy of Zillow Blog

How to Warm Up an Older House

If you live in an older home, there is a good chance that your home may get a little chilly come the winter months.  Here's some tips on a few ways to get your older home a little better insulated so you can stay warm and cozy, courtesy of our friends at Zillow.

1. First, get an energy audit

The first step in any good retrofit of your older home is to get an energy audit done.  An energy audit will show you just exactly where and how you are losing your heat - by warm air escaping, or cooler air entering.

Some utility companies do this for free, so check with your local providers first to see if that is the case.  If not, you may want to hire a professional auditor.  Professional auditors often do more than just locate your problem sources.  They may suggest plans of action for your specific problems.

If an audit is too costly, you can try to find the leaks yourself by simply using the smoke from a stick of incense.  Wave it near windows, doors, and anywhere else there might be a gap.  You can then tell if it blows inwards, or gets sucked outwards - both are a sign of a leak that you can treat with some insulation.

Monday, November 18, 2013

What to Expect When Purchasing a Foreclosed Home

If you have never been through the purchase process of buying a foreclosed home, there are a few things you need to expect.

1. Know in what stage of foreclosure the property is

There are 3 stages that a foreclosed property can be in, and each have their own unique challenges.

At this stage, the owner technically still owns the property, but knows that there is a potential for foreclosure.  This could be for any number of reasons, but most likely it has to do with them not being current on their payments, leading their credit to be in danger.

The challenge with this stage is the timeline is often tricky.  Sellers may be expected to either close quickly, or be negotiating with a bank on a short sale scenario.  Be prepared to be patient in these cases.

Friday, November 15, 2013

Where Home Prices Will Be in the Next 5 Years

Prospective home buyers and sellers are often curious where the market is believed to be heading within 5 or so years.  A useful tool in determining this is the Home Price Expectation Survey.

The Home Price Expectation Survey is performed every quarter by Pulsenomics. A nationwide panel comprised of over one hundred economists, real estate experts, and investment and market strategists are surveyed on where prices are headed over the next five years.  These results are then averaged and comprised into a single number for our viewing.

Tuesday, November 12, 2013

Why Waiting to Invest in Real Estate Isn't a Good Move

Amongst savvy investors, it is a common mentality that waiting to invest could have a far worse impact on your finances than making a bad investment.

It does sound a little backwards, on the surface.  However, as findings from blogs like The Simple Dollar and Lifehacker have found, when it comes to investment, an extra couple of percentage points will not make a significant impact on your intermediate-term investing.

No one wants to make a bad investment.  Waiting for the "right moment" to invest, however, is actually a bit counter productive, according to The Simple Dollar:

[I]t will take a very long time for a poor investment choice to have a significant negative impact on you, but it doesn't take much time at all for the choice to not invest to have a negative impact on you.

Let’s say, for example, that you’re able to put aside $100 a month for retirement. You can either start putting money aside right now in a investment chosen at random that earns 6% per year (on average), or you can give it six months of study and choose a much better one that returns 7% per year.

How long before the 7% investment catches up with the 6% investment?

A little over 11 years.

The same premise is exactly true in real estate.  The right time to invest in a home truly is now, and that is typically the correct answer.

Monday, November 11, 2013

Home Inventory Up 2.1% year-over-year: Increase Expected to Maintain

As of November 4th, housing inventory is greater in 2013 than it was November 4, 2012.  This may come as a surprise, after an aggressive spring and summer market, so I'll say it again.  We have more inventory now than we did a year ago last week.  This will make for the third consecutive week of increased housing inventory.  This indicates a bottoming out of inventory earlier in the year.

According to Calculated Risk Finance, these trends are right in line with what we typically see seasonally - low point of inventory in late December through early January, with a peak in mid-to-late summer.  That said, the "sellers market" we saw earlier this year is now more of a "balanced market".

This graph, compiled by Housing Tracker with the weekly inventory from 54 metro areas from 2010-13, indicates just this.  Most likely, the seasonal decline will be less than normal at the end of this year.  The year-to-year change should continue to increase.

Wednesday, October 30, 2013

What is a Pre-emptive Rate Lock, and How Long Should I Wait to Get One?

Industry authorities agree: interest rates are expected to gradually keep climbing, despite recently passing the federal budget deadline. Borrowers that are getting ready to apply for home loans shouldn't wait for a change in the tide, according to a recent article in the New York Times.

It is in your best interest to buy now while rates are relatively low.  According to Keith T. Gumbinger, the vice president of the HSH, "The likelihood is that rates will move higher rather than lower in the coming weeks."  Trying the market is not advisable, especially if it is currently at a place that you can make a transaction work.

Your best option is to establish a pre-emptive rate lock sooner rather than later, to ensure you are getting the best rate.

So, what is a "Pre-emptive Rate Lock"?

Monday, October 28, 2013

Inventories Have Returned to Normal - But What is Normal?

While housing inventories are still 13.4% lower than they were list year, it is still much closer to what is considered a balanced 6-month-supply market, according to Real Estate Economy Watch and the recent RE/MAX report.

In September, home sales were up 10.7%, and the median price of these homes ($185,000) was 12.2% above the median price of homes last September.  This makes 20 consecutive year-to-year increases for the month of September.

These moves mark a shift towards stabilization, and normality.  However, if you are a homeowner waiting for the market to return to normal, we would like to note that based on historical and currnet trends, this is "normal".  What we can remember, in our recent memory of the real estate market over the last 10 years, is an anomaly relative to how the market operates.  Waiting is not likely to be more beneficial in the long run, as the market is now at a stable place for most to begin exploring opportunities.

Friday, October 18, 2013

What Increased FHA Loans Mean For Homebuyers

The Federal Housing Administration is set to increase their loan limits, which should give a large helping hand to U.S. home buyers.

The loan limits now span up to $729,750 in a good portion of U.S. counties.  This is great move forward from the FHA, especially considering their loan reduction back in 2011.

Here are some FHA tips, courtesy of Ron Euliano over at Bridgeview Bank Mortgage

What can an FHA mortgage do for home buyers?

An FHA mortgage provides a few advantages that loans by Freddie Mac or Fannie Mae do not.
  • Buyers can have as low as a 3.5% downpayment
  • "Looser" mortgage underwriting standards, in comparison to other loan backers
  • FHA loan can be acquired 12 months after a foreclosure, short sale, or bankruptcy
  • You can borrow more money from your bank with an FHA loan than with a conventional one


Tuesday, October 15, 2013

Do you qualify for the Home Affordable Refinance Program?

1 in 5 homeowners nationwide qualify for the Home Affordable Refinance Program (HARP) - the program backed by the government in 2009, designed to help homeowners who owe more than the worth of their home and are current on their payments refinance to either a lower interest rate or more stable mortgage.

According to Zillow Blog, HARP has improved vastly since its creation.  It is now significantly easier for homeowners to qualify.

Have you tried to refinance in the past, but were turned down by your lender?
It's worth taking a second look now.  The expanded eligibility requirements very likely may help you qualify.

See if You're Elligible for HARP:

Sunday, October 13, 2013

Pending Home Sales Declined this Fall

Pending home sales in August slowed, according to RISMedia.  The sparseness of home inventory, paired with rising interest rates and home prices can be the prime suspects, the National Association of Realtors (NAR) states.

The chief economist of NAR, Lawrence Yun, stated that this was an anticipated decline, especially following the increased levels of sales of existing homes at the end of this summer.
"Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month. Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."
In the Midwest, we saw a decline of 1.4% from 111.6 in August.  This is, however, 13.8% higher than we found this number last August.

Monday, October 07, 2013

The Top 6 Ways Hiring a Real Estate Professional Will Save You Money

Don't burn your cash on your home sale transaction.
The real estate market can be an intimidating place, even for the most experienced buyers and sellers. And for most people, purchasing a home is the most significant financial investment they make in their lifetime. Ultimately, hiring a real estate professional puts more money in your pocket, even after spending money on commission. If that's true, why would a consumer decide to go it alone?

In general they don't. Approximately 90% of home buyers and home sellers both hire a professional to assist them in their transaction.

Here are the top 6 ways that real estate agents are invaluable to your process.

1. Negotiation

Whether or not you feel well versed in the ins and outs of real estate, having a real-estate agent there to fight your battles for you can pay HUGE dividends in the end.

A real estate agent's job, first, is to know the real estate market. They should know approximate home values in a neighborhood, and more so, they should know how to analyze the data to recognize trends. You don't want to be the one holding the bag on a $400,000 purchase to find that the market dropped 10% within a year of buying. That's $40,000 in the toilet.

Currently in the Northeastern Illinois, according to Midwest Real Estate Data (MRED LLC.), the average home sells for somewhere around 94% of its original list price. A good Realtor can negotiate, on average, about 97% of the list price (we get even more), for a 3+% improvement on return just on face. (Of course it's more complicated than that, 97% of the correct list price might be far more than 94.5% of a poorly priced home.)

Our buyer clients also save money through strong negotiation skills. MRED says that Prudential Rubloff, @Properties, and Dream Town Realty's clients pay about 95% of original list price when buying a home, where Baird & Warner's clients only pay 93.2%. There are many, many variables that account for the difference (neighborhood, average purchase price, etc.), but the point is there's a difference even amongst represented buyers, imagine the challenges for an unrepresented one?

Finally, a Realtor's job is to act as a sort of buffer between the two negotiating parties, diffusing often very heightened emotional states of parties on both sides of the fence. In these sort of situations, it is your realtor's job to specifically negotiate the facts, and present your interests in the best possible way.

Already they have more than earned their commission, but we're not done.

Friday, October 04, 2013

The Cost of Remodeling - What Pays Back the Most?

Shows like HGTV's Love it Or List It depict all of the merits of remodeling, especially when it comes to increasing the value of your home.

While it is true that the cost of remodeling has dropped 10-15% in the past 5 years, be careful.  In almost all cases, the amount of money that you will invest in a remodeling situation will be greater than the amount of value it will add to your home when you plan on selling it.

Take a look at Remodeling Magazine's figures.  Back in 2005, homesellers earned back, on average, 82.5% of the money spent on renovation projects.

In 2011-2012, however, it has greatly diminished to a mere 57.7% on average.

So what does this mean?  Are renovations not worth it?

Monday, September 30, 2013

9 Ways To Save Money On Your Kitchen Remodel

Most homeowners spend a great deal of time in the kitchen, whether to entertain, heat up leftovers, do dishes, or... on that rare occasion, make a meal.  When looking to sell your home, if you do choose to invest in updates, you get your highest return on investment in the kitchen and bath.

If its time for you to remodel your kitchen, here are 7 ways for you to save money on your effort, courtesy of Zillowblog.

1. Carefully shop for your big ticket items

Take your time when shopping for cabinetry and appliances.  If you are able to whittle down 10% or more off of the cost of these items, simply by shopping around a little longer, you will end up with a lot more cash to play around with when looking at light fixtures or a new faucet.

Make sure you speak to your home contractor to avoid buying the wrong shape, size, or grade items.

 2. Stay away from the "professional" appliances

These are the items that can really break the bank.  Instead of going with the pro lines, go for home-appliance manufacturers that have the same functionality while mimicking the pro look - equaling some steep savings.  These types of appliances are often designed specifically for the home market, often including amenities that pro-versions don't offer, such as a self-cleaning oven.

Wednesday, September 18, 2013

8.3 Million Underwater Homeowners Should Resurface by 2015 - Are You One of Them?

Currently 10.7 million homeowners across the nation owe, at the very least, 25% or more on their mortgages in comparison to what their properties are worth, according to a report from RISMedia.  However, another 8.3 million homeowners are brushing the surface, being either slightly underwater or slightly above water.  This means that they are on the right track to having enough equity to be able to sell, without a short sale scenario, sometime within the next 15 months.

These homeowners include those with a loan to value from 90 to 110 percent.  This means they have between 10% positive equity, and a 10% negative equity.  They additionally comprise 18% of all U.S. homeowners that have a mortgage, as of the beginning of September.

Saturday, September 14, 2013

Make Your Bathroom Look Larger With These 5 Tricks

Bathrooms typically aren't the most inspiring spaces to design.  You've got all of the plumbing fixtures to deal with in an often cramped space, and your decor has to be moisture-resistant.

While I'm sure you'd much rather spend time and effort on a living room or bedroom, remember that the bathroom is one place that every guest in your home will be using.

So...where do you start?

Here are 5 great tips from Zillow Blog and Designer Jaque Bethke of PURE Design Environments, Inc.

1. Know your audience and set the scene

Who is going to be using this bathroom the most?  Guests you are entertaining?  The kids?
What about the frequency of use?  Is this an every day bathroom, or an on occasional bathroom?

If its a day to day bathroom, make sure you're using a classic and timeless design - you don't want to get tired of a "trendy" space.  However, if it is a space for guests, go ahead - have some fun.

If its used by guests, consider what you don't need, like a vast array of towels or soaps.  It can exist purely with good-looking function, without the frills.

If there's a shower involved, this will affect your design as well.  Make sure you avoid things like wallpaper, for example, which can deteriorate over time in the presence of humidity.

2. Save Your Space

Once you've established who is using the bathroom and how often it will be used, the next step is space optimization.  Storage is a priority, as clutter can instantly make a room feel smaller.

You can use a medicine cabinet alone, but many also need counter space.  Consider over the toilet storage shelves, or installing wall fixtures.

If you're undergoing a renovation, wall-hung sinks and toilets save space by hiding the pipes in the walls.

Friday, September 13, 2013

Is Waiting for Interest Rates to Come Down a Good Idea?

30 year fixed mortgage rates were previously at an all time low.  However, as you can see in this graph from KCM blog, they're now on the rise.

This makes many buyers wary about buying a home.  Surely they must come down some time, right?  Unfortunately, this may not be the best plan of action.  While no one can predict the future, professionals agree - waiting is not a good strategy in this market.

Most experts, including The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors, actually anticipate rates climbing rather than lowering.

Sunday, September 08, 2013

Every Seller Should Stage Their Home - And It's Affordable

Home staging, despite its reputation, is not only a marketing device that homes with large price tags use.  In fact, most sellers would highly benefit from some level of home staging.

Here are some basic home staging myths:
  •  Myth #1: I can't afford staging
    There are many levels of staging.  It doesn't have to involve a high-end designer coming in and removing all of your furniture.  Instead, there are more affordable options like a one-time furniture placement and design consultation.
  • Myth #2: My home wont benefit from staging - my home already looks nice
    Just because you enjoy what your home looks like doesn't necessarily mean it is being marketed optimally.  Home staging experts know what sells, and a little home staging can go a long way.
So, what sorts of staging are there?  Here are 5 ways to stage your home, courtesy of Zillow Blog.

1.  A One-Time Consultation

Home stagers are truly home designers.  They specialize in looking at a space and evaluating what will make it most appealing to customers.  They may suggest a new paint job or new carpet, or even some landscaping to add to the curb appeal.

This is an extremely affordable option.  Designers can cost as little as $75/hour to $200/hour, depending on your location.  Their advice on colors, fixtures, and finishes makes sure you are putting your money to the right places, and can be some of the best money you spend before listing.

We feel so strongly about the value of staging, that we hire a home stager to consult with our clients before listing the home at no cost to the sellers.  Just ask!  Our favorite designer?  Shhh.... It's Gar Wilson with Better Spaces. Let me connect you.

Friday, September 06, 2013

5 Tips for Buying High-Quality Cabinetry For Your Kitchen

A lot of emphasis is placed on buying stainless steel appliances or updating countertops in the kitchen.  The foundation of the room, however, is your cabinetry.  This can make or break a kitchen, as cabinetry typically predominates the room.

Buying cabinets can be very intimidating.  There are, at least, 10 different tyles of wood to choose from, and from there over 500 different door styles to select, along with innumerable color combinations.  So where do you start?

2013 president of the National Kitchen and Bath Association, John Morgan, and the Zillow blog put together this list of 5 Tips for Buying High-Quality Kitchen Cabinetry.

1.  Go with the pros

Any kind of kitchen redesign or remodel, according to Morgan, is best undertaken by an experienced team that you trust.  Grab yourself a designer, contractor, and cabinet installer with a solid reputation.  This team will know what quality products you can use, at whatever price point you're looking at.  Don't settle for anything less than the best team, because a shoddy team can lead to a shoddy product.  Make a good investment.

Wednesday, August 21, 2013

How Supply and Demand Prices Your Home

As anyone who has ever taken an Econ 101 class is familiar with, price of any item is predominately based on "supply and demand": how many items are available in relationship to how many people want to buy that item.  Houses are priced mostly with the same philosophy.

The trajectory of home values is estimated largely based by how much inventory is available in the market.  Year-over-year home appreciation numbers have been strong.  Demand for housing has been up and the supply of homes have been astonishingly low.  According to KCM blog, however, that is beginning to change.

 The National Association of Realtors has reported that the month's supply of available housing inventory has increased from 4.3 months (as of January) to the current number of 5.2 months.  Inventory is anticipated to increase as we are moving forward. just released their National Housing Trend Report, which monitored the shifting in home inventory levels across the country.  Here are their two major findings:

1. The dramatic year-over-year inventory declines have evaporated.

National inventories in July are 5.24% below the level from a year ago, compared to 16.47% in January.

In Chicago, citywide inventories are just 5.4% lower than four months ago, in April 2013, but were down an incredible 44.8% from January 2012 to January 2013. (Source: MRED LLC.)

Monday, August 19, 2013

Real Estate Investors - Know Your Risks

Investing in real-estate can be a good move, and there are several options in the market for you.  Each option comes with its own set of risks and benefits.

Here is the breakdown, courtesy of Zillow Blog.

1) Direct ownership

Direct ownership entails buying property on your own (or with a spouse), and handling all operations - like maintenance, leasing, and property management - either by yourself or by hiring a property manager.

Benefits: You make all of the decisions and earn all profits, while directly controlling the asset.

Risks: Bad tenants other other management hassles, making a poor financial choice, losing money on the sale of the property  and assuming full liability past insurance coverage.

2) Partnerships with close or well-known associates

This involves partnering with a friend, or a small group of investors similar to yourself, or family members.  It is extremely important for you to understand your co-investors well, alongside their financial position, motivation, work ethic, and to what extent they want to share in the management of the property.

Two big suggestions for this venture:
  1. Have a written agreement established between the parties
  2. One party should be responsible for the management of the property (or managing the property manager), and should be paid for handling the management.  This eliminates the "who should deal with the issue" conversation, and help reduce tension amongst the members of the party.
Benefits: Shared decision making and profits, and all partners directly control the asset.  This can be a plus IF all partners are on the same page.

Saturday, August 17, 2013

Housing Bubble Myth DeBunked

Is there really a "housing bubble"?  We agree with Keeping Current Matters (KCM) - we have no such thing.  It is still substantially cheaper to buy a home than to rent one (especially in Chicago), and buying is still 8% undervalued on a price-to-income ratio.

With figures like that, we can safely say that the idea of living in a housing bubble is pure myth.

Infographic courtesy of the KCM blog.

Tuesday, August 13, 2013

Home Value Appreciation Expected to Exceed 6% in 2013

Home values at 2013 year-end are expected to be up 6.7% from the end of 2012, according to Zillow blog and their survey panel of 106 real estate and economic experts.

As the housing market continues to appreciate,  the panel believes that rising mortgage interest rates wont pose too much of a threat if the acceleration rate stays between the 4-5% range.  If it does reach 6% or higher like expected, however, it could start to cause problems for homeowners.

Median U.S. home values are expected to rise to $167,490 by the end of 2013, up from $156,900 at the end of 2012 and $161,100 currently.  The current 5-year expectations for home value appreciation anticipates record highs by the end of 2017, nearing the $194,600 high of May 2007.

Values for the city of Chicago have followed a similar trend, but perhaps more dramatically.  Home prices are up about 20% year over year from July 2012 to July 2013, but of course this varies greatly by neighborhood.  Home price gains have already leveled off in the most recent 6-8 weeks, but still have the Autumn market to finish the year strong.

Median Home Prices for City of Chicago - July 2012 - July 2013 (Source: MRED LLC.)
This year's appreciation rates are expected to end on a strong note before slowing down from 2014 through 2017.  In 2014, the panelists anticipate rates to slow to 4.4%, and then slow further to 3.6%, 3.5%, and 3.4% in 2015, 2016, and 2017, respectively.

Wednesday, August 07, 2013

Home Warranty Know-How

You've probably been offered extended warranty plans when you bought your new computer or phone.  Sure, some people buy that kind of plan, but most consumer reports say they aren't really worth the extra money.

In the case of a home warranty, however, it is a completely different story.  Here is some essential home warranty know-how, courtesy of the Zillow Blog.

What is a home warranty?

When you move in to a new home, will be offered a "home warranty" which could be anywhere from $300 and $500 a year, depending on where you live.  It covers the costs of repairing or replacing any kind of malfunctioning system in your home: like a leaking dishwasher, a fizzled clothes dryer, or a hot water heater that isn't heating anymore.
Want to know how to get a free warranty?  Read to the end!
You typically  don't have to pay anything out of pocket or make any arrangements other than calling your home warranty provider - and they take care of the rest.  In some cases there can be a co-pay around $50 per incident, but nothing too substantial.

Tuesday, August 06, 2013

Sellers: Demand These 5 Things of Your Agent

If you are thinking of selling your home and taking advantage of the current "sellers market" status, having an agent on your side is essential.  However, make sure you are getting the most out of your experience by making these 5 demands on your agent, courtesy of the KCM blog (Thanks, KCMBlog!).  These 5 simple, but important demands will help ensure that your agent is truly able to give your sale the time and attention it deserves.

Here's what I would say if I were in your shoes.

1. Be honest with us about the price.

It is a common practice for agents to accept a listing at any price, and then negotiate the price to whatever the "correct" budget should be somewhere down the line. This is a ploy by an agent that either is telling you what you want to hear to get the listing, or is not a capable market analyst.  It is also a blatant violation of the Realtor Code of Ethics.

In truth, your agent should be educating you in the fine points of pricing a home, the current market data that will drive your market price, and then asking you how you want to compete. In short, the list price is your decision - you just want to know that your agent believes in it and isn't appeasing you.

This price-point security is especially important because agents will not be selling your home once, but twice; once to the buyer, and then again to the bank's appraiser.  As many sellers have experienced, the second sell - to the bank - can be much more difficult than the first.  Since it can be such a trial to get a bank to agree on a contract price, its important to really have your agent on board with the price point so that they can go to bat for you.  If the agent you're working with does not discuss the price in depth, this should be a major red flag.

2. Understand the time-frame that my family and I have to work with.

Moving to a new home usually requires a detailed scheduling negotiation - when can I take off work, when will the kids need to start school, etc - which is an important component to your process, as it can be a great emotional strain.  Make sure your agent understands your concerns with the time frame.  While they may not be able to set an exact date for your move, make sure that they at least have an appreciation for your concerns and will work with you to the best of their ability.

They didn't ask you about your time-frame?  Another red flag. 

Saturday, August 03, 2013

The Top 3 Reasons to Buy Now, Not Later

It's a sellers market with low inventory.  But should buyers stray away?  Just the opposite.

Here are the KCM blog's top 3 reasons to buy a house now, rather than later.

1. Prices are rising, and will continue to rise

According to recent findings from the Home Price Expectation Survey (comprised of over one-hundred respected economists and market analysts), home values are expected to appreciate anywhere between 12.3%-32.8% over the next five years.  This figure, coupled with recent speculations that low housing inventory does not expect to improve any time soon, suggests to potential buyers that waiting will most likely not improve your odds.

2. Mortgage interest rates are increasing - fast

Mortgage interest rates were at an all-time low earlier this year, but they are now on the rise without any sign of slowing.  The National Association of Realtors, the Mortgage Bankers Association, Freddie Mac and Fannie Mae, have all projected that 30-year-fixed mortgage rates to rise to somewhere between 4.8 and 5.1% by next year.  If you wait a year, your mortgage will cost more than it would now, which could definitely inflict a heavy impact on your budget.

Thursday, August 01, 2013

WIll the Housing Shortage Continue for Long?

Since early spring, home prices have been rising at a double-digit rate.  Why?  According to Lawrence Yun, chief economist for the NAR, the reason lies in that basic economic principle: "increasing demand and tight supply."

With the economy improving, it is not surprising that there is a rise in housing demand, especially following a five-year period where new households were being formed at less than half of the normal rate (college graduates moving back home with mom and dad, young professionals getting roommates, etc.)  Since the six million new job additions in 2012-13, this number has seen a rapid rebound.  Yun anticipates this continuing for several years, ultimately at least returning to the historic average of 1 to 1.1 additions of new households per year, if not surpassing this figure.

The catch is, naturally, supply.  Yun provides a few possible scenarios where inventory increase could be suggested.  The first coincides with underwater homeowners being able to sell due to rising prices, thus adding to supply.  While this scenario may provide a new property on the market, these homeowners typically have an intent to move and buy another home, not to sell to become a renter.  Selling a home, and buying another, results in a zero sum inventory gain.

Friday, July 26, 2013

Buy A Home... or Two

Some insightful words were said at the CNBC/Institutional Investor conference by American hedge fund manager and Paulson & Co. founder/president, John Paulson.  He firmly believes that, in the next 4 to 7 years, we can expect the strong recovery in the housing market to continue:

"It’s not too late to get involved. I still think buying a home is the best investment any individual can make. Affordability is still at an all-time high."

Additionally, Paulson stated that one should, "Buy a home and, if you can, buy a second home."

Wednesday, July 24, 2013

June Home Sales Slightly Down

After the three-and-a-half year high in May, sales of existing homes dipped slightly in June.  The June sales number lowered 1.2% to an annual rate of 5.08 million compared to 5.14 million in May, according to the National Association of Realtors.  It is good to note, however, that compared to June of 2012, sales are up 15.2% - a fantastic figure.

Why the dip now?  It is likely that the rising mortgage interest rates alongside a lack of inventory has something to do with it.  June's Chicago-wide supply was 2.8 month's of inventory at the current sales pace - down a whopping 57.4% from this time last year.  The market still highly favors sellers.

Many sellers see the surface facts and believe that in a seller's market with limited inventory, they can make more money by overpricing their property.  Sellers are urged not to get too confident with the current conditions, however, especially with the recent slowing in home sales.  Additionally, there is nothing that will turn a buyer away quicker than an overpriced property.  (Click here to read why)

Wednesday, July 17, 2013

Sellers Beware: Overpricing Can Be A Huge Mistake

With rising market prices, many sellers have felt the urge to overprice their properties to get a good deal out of the trend. Overpricing a property can be a huge mistake when coupled alongside a low inventory and rising interest rates, as this is something that can easily turn buyers and investors away. This is a really discouraging notion, with the housing market just beginning to come back nicely.

We have had the most success, repeatedly, by pricing competitively.  Generating high interest, getting multiple prospective buyers in the door, is the single best way to negotiate the best sale price for the home seller.  

Asking prices, according to Trulia, have dramatically jumped up and continue to accelerate at a rapid pace. Year-over-year prices jumped 10.7%, Quarter-over quarter 4.1% (16.4% annualized), and month-over-month 1.5% (18% annualized).

An 18% increase in home prices within the next 12 months is highly unlikely under any circumstance. It is more likely that in a more expensive market, price appreciation will slow and inventory increase. Purchasers often set out with a pre-set budget anyway, so it is unlikely that they will bite at the higher property prices anyway - not when there are other prices available to them, and market analysts to tell them what is overpriced.

The bottom line: don't get carried away with the "increasing prices" headlines of the past few months.

Tuesday, July 09, 2013

Waiting to Buy Could Be Costly

A figure recently released by the KCM blog supports what statistics have been suggesting about the rising price of home ownership over time.  In short, the cost of homes is climbing, and at the same time, the cost of borrowing money is climbing, causing the total cost of home ownership grow at a notable rate.

KCM compared approximate mortgage interest rates from this time last year to this year, using a 10% increase in price values to allow for the general upswing in housing prices over the past year (many areas going up by double digits).  Here is what they found:

With the cost of borrowing money going up right alongside the cost of homes going up, home ownership is only getting more expensive over time.  Playing the waiting game, in this instance, will not likely be in your favor.

The Good News
Is it too late?  In a word, "no".  Home prices are still well below their 2006-2007 peak prices, and it will continue to take some time to reach those levels.  Interest rates are also, from a historical perspective, very low.  That said, all indicators suggest that home prices are continuing to climb, and with interest rates growing in tandem, the time to act is upon us.

Monday, July 08, 2013

5 Ways to Cut Your Summer Energy Bill

In the hot months of summer, energy bills can skyrocket with efforts to stay cool.  Here are Zillow's 5 simple ways to cut your energy bill without undergoing renovations.

Clean your filters
A simple cleaning of your filters can help your air conditioning to run more efficiently.  This should be number one on your list, as a clean filter can lower your A/Cs energy consumption by up to 15%!

Some filters can be cleaned, but many have to be replaced.  Central air conditioning filters can be located along the length of the return duct.  Consider cleaning these monthly during the summer months.  Room air conditioning unit filters can be located in the grills that face your house.

Insulate as much as you can
While Chicago residents certainly think about insulation during the winter to keep the cold, sometimes people forget that insulation is just as important during the summer to keep the cold in.  Proper insulation can reduce costs by as much as 20%.

What is the best place to insulate?  Believe it or not, your attic should be one of the first places you start; temperatures can climb up to 140 degrees during the summer, which will leak down into your home.

Shade your windows
Awnings, window shades, and blinds can be an easy energy-saving tool.  While it does not block any actual air from leaking into your home, the shade alone can help conserve your energy.

Awnings are particularly useful in reducing solar heat gain (up to 65% on on south-facing windows, and 77% on west-facing windows).  Keeping highly-reflective blinds completely closed on a sunny day can reduce heat by up to 45%.  Curtains can help too, but their effectiveness varies depending on fabric type, color, and backing.  Drapes with medium coloring and white plastic backing can reduce heat gain by 33%.

Use a Smart Thermostat, and Set it as High as Possible
The ability to program your thermostat can easily help reduce your energy bill.  Set your thermostat as high as possible - the smaller the difference between indoor and outdoor temperatures is, the less energy you will be using.

The newest thermostat available, The Nest, is a $250 thermostat which learns your thermostat preferences as you use it.  After about a week, it can anticipate when you will change your thermostat and what you will change it to.  You can also control it remotely from your smartphone or computer.

Turn it Off and Unplug
Plugged-in devices suck about $100 from your bill every year, according to the United States Environmental Protection Agency.  Computers alone can account for 2-3% of your energy bill.  Sleep modes do help, but it is even better to flip off a power strip or unplug altogether.  Consider the Smart Strip which can sense inactivity and automatically flip switches off.

Sunday, July 07, 2013

8 Alternatives to Granite For Your Kitchen

When it is time to remodel a kitchen, most people turn to granite for their countertops.  In fact, according to a survey conducted in 2012 by Harris Interactive on behalf of The Marble Institute, 75 percent of homeowners looking to remodel their kitchens within 2 years said they were going to go with granite.

Granite is certainly a good, secure option.  It is highly durable and its good looks will last awhile.  However, it is still highly expensive and heavy, and requires quite a bit of upkeep.

Zillow has come up with a thorough list of 8 Kitchen Counter Options That Will Make You Forget Granite.  Here is a breakdown of their list:

Carrara Marble

- White or blue-grey marble
- Softer than granite
- Does stain and scratch, creating a "warmer" patina as it undergoes the aging process
- Often used in sculpture and building decor, particularly in Italy


- "Butcher block" is the most common type used, but other woods such as cherry, bamboo, zebra wood and iroko have been used
- Highly durable
- Wear on the wood give the counters a nice patina
- Some maintenance required to prevent drying of the wood


- Smooth, matte, natural stone
- Soft-grey to Charcoal in color
- Acid and heat resistant
- No special cleaners needed
- Oils can be used to enhance the stone's look

Engineered Quartz

- 95% natural quartz, 5% polymer resins
- Super-hard, low-maintenance, natural-looking
- Comes in a variety of colors
- Relatively scratch and heat resistant


- Many colorizing and stain techniques available
- Can add embedded stones, tiles, silicone chips to create a unique counter
- Highly durable: scratch-resistant and heat-resistant
- Extremely heavy
- Can be damaged by acidic substances, and must be sealed and maintained to resist stains


- Versatile and easily customizable
- Can endure high-heat
- Wont stain
- Non-porous, making them very hygienic
- Under-mounted sinks not recommended

Stainless Steel

 - Complimentary to many of today's stainless steel appliances
- Stain and heat-resistant
- Can be scratched or dented
- Other metal countertops fall in this category: copper, pewter, zinc

 Solid Surfaces

- Can look like natural stone
- Less expensive and require less maintenance than real stone
- Can be created with no seams
- Heat and moisture resistant
- Easy to Clean
- Can be scorched and scratched

If you are looking to remodel your kitchen, give me a call or send me an e-mail and we will put you in touch with some experts in the field.