Buying Real Estate with Brigitte Kephart

Buying Homes and/or Selling Homes in Metro Indianapolis

Call Me - 317-345-5562 - For Help

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Home Price Appreciation - Q & A
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Q: What is the difference between market value and appraised value?

A: Appraised value is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker.

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Q: How do you increase the value of your property?

A: The biggest factor outside of a homeowner's control is market conditions. But other issues -- including the condition of the property, specific home improvements and neighborhood stability and safety -- can influence property values. The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing.

Though markets vary, that has occurred twice in recent history -- in the early 1970s and the late 1980s. However, single-family homes appreciated much more than condominiums. While overall market conditions are out of the homeowner's control, other factors are not.

For example, specific home improvements can increase the value above the cost of the improvements. According to Remodeling magazine, which publishes an annual "Cost vs. Value" remodeling report, a remodeled bathroom returns 81percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent.

Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.

If you live in a high-crime area, an organized community watch program not only will lower the crime rate but also have been known to enhance property values.

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Q: What are the standard ways of finding out what a house is valued at?

A: A comparative market analysis and an appraisal are the standard ways consumers, lenders and realty agents determine what a home is worth. Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. You also can research "the comps" yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location.

This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet.

An appraisal, which generally cost $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.

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Q: How can I improve the value of my property?

A: The biggest factor outside of a homeowner's control is market conditions. But other issues -- including the condition of the property, specific home improvements and neighborhood stability and safety -- can influence property values. The greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Though markets vary, that has occurred twice in recent history -- in the early 1970s and the late 1980s.

Specific home improvements can increase the value above the cost of the improvements. According to Remodeling magazine, which publishes an annual "Cost vs. Value" remodeling report, a remodeled bathroom returns 81percent to the owner, a bathroom addition, 89 percent and a master bedroom suite, 82 percent. Remember, quality pays. Well-planned and well-executed remodeling jobs are a good investment while bad work seldom enhances value or livability.

The safety and security of a neighborhood can affect property values, too. If you live in a high-crime area, an organized community watch program not only will lower the crime rate but give home values a boost, too.

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Q: Should I add on or buy a bigger home?

A: Consider these questions before making a choice between adding on to an existing home or moving up in the market to a bigger house:

• How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?

• How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?

• What do local zoning and building ordinances permit?

• How much equity already exists in the property?

• Are there affordable properties for sale that would satisfy housing needs?

• Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.

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Q: What kind of return is there on remodeling jobs?

A: Remodeling magazine produces an annual "Cost vs. Value Report'' that answers just that question. The most important point to remember is that remodeling a home not only improves its livability for you but its curb appeal with a potential buyer down the road. Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. While home offices are a relatively new remodeling trend, for example, you could expect to recoup 58 percent of the cost of adding a home office, according to the survey.

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Q: Where do I get information on housing market stats?

A: A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards.
For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying. Your local builders association probably gets this report. If not, the housing research firm is located in Canton, Mich.; call (800) 755-6269 for information; the firm also maintains an Internet site. Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 495-4700. The census bureau also maintains a site on the Internet. The Chicago Title company also has published a pamphlet, "Who's Buying Homes in America." Write Chicago Title and Trust Family of Title Insurers, 171 North Clark St., Chicago, IL 60601-3294.

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Buying Your Dream Home - Q & A
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Q: How do I begin the process of buying a home?

A: Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a "To Do" list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the "Homes" section of the newspaper.

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Q: How does the lender decide the maximum Loan amount I can afford?

A: The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

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Q: How can I find out about local schools or community resources?

A: You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.

Contact the local chamber of commerce for promotional literature or talk to your real estate agent about welcome kits, maps, and other information. You may also want to visit the local library. It can be an excellent source for information on local events and resources, and the librarians will probably 
be able to answer many of the questions you have.

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Q: How can I find out the selling price of surrounding homes?

A: Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a REALTOR, they may have access to comparable sales maintained on a database.

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Q: What should I look for when walking through a home?

A: In addition to comparing the home to your minimum requirement and wish lists you should consider the following:

Is there enough room for both the present and the future? 
Are there enough bedrooms and bathrooms? 
Is the house structurally sound? 
Do the mechanical systems and appliances work? 
Is the yard big enough? 
Do you like the floor plan? 
Will your furniture fit in the space? Is there enough storage space? (Bring 
a tape measure to better answer these questions.) 
Does anything need to repaired or replaced? Will the seller repair or 
replace the items? 
Imagine the house in good weather and bad, and in each season. Will you be 
happy with it year-round? 

Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint. 

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Q: What does a home inspector do and how does that figure into my home purchase?

A: An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs, that are needed.

The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an 'out" on buying the house if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

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Q: Do I need to be there for the inspection?

A: It's not required, but it's a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you'd I like to purchase and it is a good time to ask general, maintenance questions.

If your home inspector discovers a serious problem a more specific Inspection may be recommended. It's a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas asbestos, or possible problems with the water or waste disposal system.

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Q: How do I make an offer on the home I choose?

A: Your real estate agent will assist you in making an offer, which will include the following information:

Complete legal description of the property 
Amount of earnest money 
Down payment and financing details 
Proposed move-in date 
Price you are offering 
Proposed closing date 
Length of time the offer is valid 
Details of the deal 

Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just Making an offer.

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