Category Archives: investment

Atlas Chalet Shingles?

chalet roof400

Welcome to the newest scourge of home construction… Atlas Chalet shingles.  It looks like they might go down the same path as synthetic stucco and pressed board siding.  Lawsuits, big money outlays for home-owners and fear for home-buyers and sellers alike.

The brief history would be that Atlas Chalet shingles were marketed from the early 1990s until around 2010 as a lower-cost “architectural shingle” option.  The gave the look of a higher end architectural shingle, while installation and cost was more like a traditional composite shingle.  However, problems started popping up with the quality of the shingle.

chalet roof400If you have a house that was built or re-roofed from 1990 until 2010, there is a fair chance it has Atlas Chalet shingles… while certainly not on every house, they were quite popular for several years and tens of thousands of homes around Georgia have them.

What can I do about it, you say?

There are a few options open to home owners with the shingles…

  • pay to replace them… out of your pocket…
  • pray for storm damage and an insurance company that will spring for their replacement…
  • ignore the problem…

Obviously, before you pay to replace a perfectly good roof, you should get an inspection.  Some roofers will be happy to do a full inspection of the roof to determine what product is on it, as well as if there are any current issues.  If you are considering selling your home, GET IT INSPECTED!!!  Nothing will ruin your day like having an unexpected, but avoidable issue like this pop up from the buyer’s inspection.  And when the buyer’s inspector catches it, he is likely going to go into full “deal destruction mode”.  At that point, almost anything short of replacement out of your pocket… before consummating the sale… will kill the contract.

Which brings us to our first option… just sucking it up and replacing the roof out of your own pocket.  There are actually some roofers out there that will tell you about how they “work with the insurance company to replace your roof on their dime”… but what they are failing to tell you is that the insurance companies are ONLY going to pay if there is damage.  And even then, depending on how much damage there is, they may not spring for a full replacement.  Frankly, if you have a 20 year old roof (Atlas Chalet shingles were marketed as a 30 year roof…) it might just be time to replace it and take the hit.

If your roof is newer, and fully functional, you are not in a good place (well, you are… the roof is working, right?).  It isn’t old enough for you to justify dropping $10k or $20k on replacing a 5 or 10 year old roof.  The insurance isn’t going to want to eat that cost either, for a roof that is doing its job.  Further, there are reports that some insurance companies are cancelling policies at renewal if they find out that you have the Atlas Chalet product up there.

If you aren’t selling your home, as much as I hate to say, it, you might just hope for a hail storm…

Honestly, most home-owners are going to take the “head in the sand” approach and hope that they don’t have a problem.  If they are selling, they are going to not disclose… because they don’t know for sure.  And, since there aren’t any settled lawsuits that I know of, the product is neither recalled nor ruled defective, they don’t “need” to disclose it if it is there.  BUT… this WILL bite them in the butt if they are trying to sell.  A home inspector will find the roof and will notify the buyers and the whole transaction will almost assuredly blow up and fall apart.

If you are planning on selling your home in the next couple of years…

At the very least, you should get informed about this product.  If you have paperwork from the construction of last time the roof was replaced, check to see what product was used.  If you have the Atlas Chalet shingles… you will know what may come up.  If you DON’T have these shingles, you will be prepared if the buyer’s inspector wrongly tags you with these shingles… which certainly can happen.

If you have these shingles, you might call a roofer to get your roof inspected.  Be VERY careful when you select a roofer.  There are always some contractors in the world that just want to get your money.  They will say whatever they need to say in order to get a check…

State of the Market for the North Gwinnett HS Area

Real estate is local… and one of the biggest influences in real estate is the local schools.  Great schools spur demand.  Mediocre schools lag.  People actively seek a way out of bad school districts.  It isn’t the only thing that pushes value and demand, but it certainly is one of the big drivers.

redatacenter image july2013 - NGHSTransportation, jobs and local amenities are also drivers.  Depending on the type of buyers, things like hospitals may pull one demographic, while shopping and restaurants may pull in another.

In the case of the schools in the NGHS cluster (Roberts, Suwanee, Level Creek and Riverside Elementary; North Gwinnett Middle School and North Gwinnett High School), there is a draw from the quality of the schools.  People WANT to be in this area to have access to these schools.

Because of that, we are seeing prices push up and inventories push down.  In fact, when looking at the sales, the recent decreases look to be largely because there simply isn’t enough inventory to support more sales.  So, while at first glance it may look like this area is slowing down, the problem is that there just isn’t any supply to allow a higher number of sales.  The North Gwinnett Cluster consists of parts of Suwanee and a little bit of Sugar Hill.

Since schools are one of the big drivers of demand, MANY consumers search for real estate based on schools.  Unfortunately, there are a lot of homes that are incorrectly entered, causing homes that are NOT in the cluster to land in the search results… and even throwing off the statistics, as homes outside of the correct area are included in statistical samples.

Working with an agent that lives and works in the area you are interested in helps to sort out some of the chaff… but even then I see a lot of agents that have been in the market area a long time kind of “forget” that several new schools opened 3 years ago… and that the alignment and attendance zones changed.  One easy way to tell… any listing with North Gwinnett High School and Lanier Middle School together is wrong… 

If you are interested in a home in the North Gwinnett Cluster, or if you want to sell your home in the North Gwinnett Cluster, give Lane a call…

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Affordability… The Forgotten Aspect of Home Buying

In early June, 2013, the interest rates for home purchases were hovering around 3.5%.  In July, those rates were hanging out at 4.5%.

 

Historical U.S. Prime Rates

Historical U.S. Prime Rates (Photo credit: Wikipedia)

There are two ways to look at that…

 

  • Mortgages jumped in expense drastically between those two points.
  • Looking at rates from a historical perspective, 4.5% is a screaming deal.

But in fact, there is a third, often overlooked aspect that needs to be addressed.

  • Rates are STILL expected to rise over the next few months and years.

As a home buyer in the market, assuming a housing payment budget of $1500/mo (for comparison, we’re just going to use PI… Principle and Interest… and not include Taxes and Insurance).

  • With a 3.5% interest rate, the buyer could get a loan of about $334,000.
  • With a 4.5% interest rate, it drops to about $296,000
  • When the rate rises to 5.5% (and it eventually will…), that loan amount will drop to about $264,000.

 

Buying berries

Buying berries (Photo credit: Wikipedia)

Seeing the difference between 3.5% and 5.5% means a drop in purchasing power of almost $70,000 with the same payment, it becomes painfully obvious that interest rates are at least as important as price when it comes to affordability.

 

Yet, many buyers will delay on the purchase, trying to find the right price, while the interest rates pushes properties out of their grasp that they COULD have purchased previously.  Let’s not mistake… price IS important… but it is only part of the picture.

Looking forward

Looking forward at the real estate market, from late July, 2013, there are a variety of thoughts and opinions.

We are expecting a slow-down in closings for July, compared to the pace we saw in May and June.  Granted, those were pretty active months.  I would think that the lion’s share of the slow-down may be attributable to increased interest rates and housing costs.  There was a HUGE bump at the end of June… rates jumped almost ¾% over one weekend.

Moving into August and September, I expect to see sales rebound somewhat.  Interest rates WILL have an impact, but I think that we will also be seeing the wave of initial buyers subside.  There was a tremendous pent-up demand… and there is still a significant number of buyers on the edge of entering the market… that dived in at the first signs of recovery.

As more buyers are able to sell their homes without injecting huge amounts of cash, and more buyers feel more secure abut their employment, they will look to move up or purchase.

Is it too late?

No… but it does require a different thought process than a year or two ago.  Then, deals were everywhere.  Buyers didn’t have to be quick, and they didn’t have to make competitive offers on most properties.  But now, buyers NEED to be ready to offer when they see a property.  They also need to be ready to start with their best offer… they might not have a second chance to offer on that property.  Sellers are not required to send out a call for “Highest and Best” after getting multiple offers.  Many don’t.

But in 3-5 years, when buyers are looking back on the opportunities they had today, they WILL see that there were great deals to be had.  They just required more of a fight than they did when there were fewer buyers in the market and more properties available.

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What a Seller Sees in YOUR Offer…

Last week I outlined 5 things you might be able to do to make YOUR offer the winner in today’s real estate market.  Now we are going to look at offers from the perspective of a seller…

What is important to a Seller?

English:

English: “The Flower Seller,” a portrait by photographer Joseph Knaffl, taken circa 1916 at his Knoxville, Tennessee studio. (Photo credit: Wikipedia)

To begin with, keep in mind that each seller is a unique individual (or pair of unique individuals… or company with unique individuals overseeing sales of assets/homes).  What tops the charts for one seller might hardly merit a mention with another.

  • Timing.  This is huge for some sellers.  As mentioned before, the longer the time between contract and closing, the more than can go wrong.  And what sellers often worry about “going wrong” is that the buyer will simply back out.  But there are also considerations that revolve around the cost of holding the house, like mortgage payments, utilities and maintenance.  The seller has likely “disengaged” from this home and invested themselves in another.  On the flip side, some sellers might need some time here because they still have to find a house.  Offering a fast close, but stating that you are flexible and able to meet the seller’s needs may be a deal-maker. 
  • Financing.  First, there is NO excuse to not have a good pre-approval letter.  OK, the one acceptable excuse is if you have a “proof of funds” letter and you’re paying cash.  If you have the money for a larger down-payment, that might be the deal-maker for you.  And at least explore alternative options to FHA and VA financing.  FHA or VA may be your best bet… but KNOW they are instead of just assuming.  And if you have the liquid cash to make the purchase, talk with your mortgage professional about the option of purchasing with cash and then doing a cash out refi.
  • Photo taken in Bodie, California. See file name.

    Photo taken in Bodie, California. See file name. (Photo credit: Wikipedia)

    Inspections.  I expect that any of my buyers will want an inspection.  However, if you REALLY know what you are doing, buying a house “as-is” instead of subject to an inspection or “due diligence” period can really set the mood for a better deal with the seller.  There are dangers, but they might be offset by the savings.

  • Earnest Money.  I almost always recommend that a buyer offer up 1% for earnest money ($1000 minimum).  Offering up less just doesn’t seem as serious to me.  While seldom do buyers lose it unless they do something egregious, it does look better to sellers.
  • Price.  If you are deficient in one area, you may be able to make up for it in another.  I know that isn’t the goal, but it is a reality.  You aren’t going to get the best price, while at the same time getting the seller to accept a long closing, riskier lower down payment and loan type, long due diligence period and other non-monetary concessions.

So, let’s put on the Seller shoes…

Your house is on the market, listed at $250k.   Sales have been moving along well in the neighborhood, and like almost all sellers, you think your house is “better than average”.  Here are three offers to look at.  Which one do you think is going to be the winner?

  1. $230k price.  No closing costs.  21 day close.  $2,300 in earnest money.  No inspection.
  2. $250k price.  $7,500 in closing costs (3%).  45 day close.  $2,500 in earnest money.  10 day due diligence period.
  3. $260k price.  $10,400 in closing costs (4%).  60 day close.   $1,000 in earnest money.  7 day due diligence period.

I’d love to get some comments as to which offer YOU like most and why.

 

 

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5 steps to get YOUR offer to be the one that WINS

exterior

Be the winner…

A couple of years ago all of the strategies revolved around finding ways to get the lowest price out of a seller.  Then, it morphed to finding the line where the bank would sell.  Over the last few months, the next evolution has come

Winning the bid.

Often we see good houses come on the market and go under contract in less than a day.  These homes are often pulling in multiple offers, some considerably above the asking price.  Yet, many buyers are still convinced that we are in a market that favors them.  We aren’t… except for a few less desirable neighborhoods or some very high price points.

master_bedroom_2

master_bedroom_2 (Photo credit: lane.bailey)

In order to actually buy a house, instead of just making offers, there are a few steps you can follow to “win the bid”.

  • Get a serious pre-approval.  If your mortgage person isn’t pulling your credit and spending some time getting it, it probably isn’t worth getting.  Sellers see an offer with a pre-approval as being MUCH more serious than one without.
  • Have a down payment.  The larger the down payment, the more stable to buyer.  Of course, this is going to vary depending on the buyer segment (1st time buyers usually don’t have 20% to put down… I understand that).
  • Cash is King and FHA is the Stable Boy.  FHA loans are the toughest on sellers.  Not only does the property need to appraise on value, but it has to meet specific criteria for condition.  Most houses meet everything, but an old roof or a missing handrail can turn into anything from a headache to a nightmare for the seller (and the buyer).  A cash sale, on the other hand, is pretty assured.  Conventional loans fall somewhere in the middle… and VA are more rare, but slightly tougher than FHA on the seller.
  • Be ready to close ASAP.  The longer the seller has to wait between an agreement and a closing date, the more that can go wrong and the more expenses that can get racked up.  Aside from the seller’s house payments and utilities, there is lawn upkeep and maintenance on the house.  Not only that, but if you are waiting 2 or 3 or 4 months to close, the seller may think you could develop a case of “cold feet” and change your mind.
  • Price heals all.  We used to tell this to sellers… poor condition can be corrected with price.  Much to their dismay, that “correction” was usually an over-correction.  Now, the shoe is on the other foot.  Buyers that have issues with some of the above conditions can “heal” their offers with price.  But that “healing” is likely to involve a larger bump in the offer than one might think…  Of course, in the end, it comes down to the seller and what is most important to them.

In next week’s post, we’ll look at 3 sample offers and compare them…

 

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