Green Building and the Profit Motive

Whatever good things we build end up building us. – Jim Rohn

I have been getting the question recently “What is a LEED Certified house?” A couple of them are being built right now here in Artesia.  The Leadership in Energy and Environmental Design or LEED is created by the United States Green Building Council.  This system measures construction methods used in home structure. The system is designed to identify homes that employ the use of sustainable materials and energy efficiency in the construction process.  Increasingly, builders are striving to meet the LEED standards in custom homes.  As we become more aware of the cost of inefficiency in cars, buildings, and homes to our nation and our efforts at energy independence, better gas mileage, more efficient methods of heating and cooling, and structures that require less energy are becoming more attractive and in demand. The LEED building standards emphasize these efforts.

Green building techniques, alternative energy heating and cooling systems, and photovoltaic solar arrays aren’t just for communes and subversives anymore.  As a student of Economics, I always believe the “market” will decide when a behavior or trend is viable.  We are quickly reaching the marketplace dynamics that make these types of buildings and systems not only viable, but desirable. Show me a home that cuts my energy costs significantly, contains less chemicals and noxious compounds in the materials, improves the health of my family, and I will show you the money.  When these choices in building homes actually lead to more money in your pocket and a more durable and sustainable home, the “market” has decided the time is now.

In order for a home to be LEED certified, the construction should contain nature friendly methods, which include using recycled materials, eliminating waste generated due to construction, use of materials that do not emit harmful substances. The LEED certification is a terrific guide for homeowners who want to buy or renovate their present homes and make it more nature friendly. Moreover, a home to be certified also needs the assessment of a third party and ensures that you get certification by adhering to eco-friendly standards.

The LEED promotes building and designing green homes. The system contains four categories used in measuring the overall performance of a home. Every category has certain credit numbers and each credit is worth one or more points. A home is given a LEED Certification based on the total points scored. The four certifications include LEED Certified for a home with scores from 45 to 50, LEED Silver for those scoring from 60 to 74 points, LEED Gold for those homes with 75 to 89 points and LEED Platinum for homes scoring from 90 to 128 points. The builder can choose which credits to follower for a home a home to be certified.

Among the four categories, there are eight mandatory measures that must be accomplished in each LEED-certified home. Below are the eight categories and the corresponding points.

 

  1. Innovation and Design Process – nine points are given for using unique regional credits, measures not presently addressed in the rating system, special design methods and excellent performance levels.
  2. Linkages and Location – ten points for placing homes in environmentally and socially responsible methods with regards to the bigger community.
  3. Sustainable Sites – twenty-one points for using the whole property to minimize the effect of the project on the site.
  4. Water Efficiency – fifteen points given to outdoor and indoor conservation practices that are built into the home.
  5. Energy and Atmosphere – thirty points for improving energy efficiency, especially in the heating and cooling design of the home.
  6. Resources and Materials – fourteen points for choosing nature friendly materials, minimizing waste during the construction and using materials more effectively.
  7. Indoor Environmental Quality – twenty points for the improvement of the quality of indoor air by minimizing possible pollution in the air.
  8. Awareness and Education – three points for educating a homeowner, building manager or tenant regarding maintenance and operations of the energy features of the home.

The LEED certificate is the only national homes rating that clearly defines and establishes the features of a green home.  It allows builders around the country to get a green LEED rating recognized by homebuyers throughout the country.  Builders using LEED can differentiate these homes as some of the best homes in the market.  Moreover, the LEED certification makes it easy for buyers to easily identify high quality, eco-friendly homes.  LEED homes are available here and now, but you have to know who to call. Find out more about the standards and methods at http://www.usgbc.org/LEED/ .

Palo Duro Homes builds custom, LEED Certified, Indoor Clean Air Certified (EPA) homes in Artesia and all across the Southwest.  Call me 575.308.1087 to start yours today.

 

Caveat Emptor

A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether. – Roy H. Williams

A few years ago, a home buyer could almost buy the first home they looked at and be assured that it would be worth more when it came time to sell. In today’s real estate market, you have to be a more savvy buyer, you need to be more selective about what you buy, and where. In short, you need to know more now before you jump into a purchase.

Here are five things you need to know, and do, before you purchase your first, or next, home.

1) Know your Options for Financing

Bad financing has burned many a buyer in the last couple of years. A Realtor can refer you to a number of reputable home loan professionals in the area, home loan companies that have been around for a long time and will be here for years to come. This should be your first step in buying a home.
If you have a loan representative help you determine how much you can afford, it will save you a lot of frustration and wasted time. There are dozens of loan programs available. Discuss your needs and objectives with your loan professional. Review the loans and rates available in your area, and based on your income and existing debt, determine how much you can afford.

You need to make an informed decision about which loan is right for you today, and in the long term. Things to consider include: First Time Buyers programs, Government backed loan programs, Down Payment options, Locking in the Interest Rate, length of escrow, and direct payment options.

2) Understand What A Buyers Agent Does

The buyers agent works for you, and represents your best interests. In our area, Realtors usually help you find a home without a written agreement called a Buyer Broker Agreement. When you work with an agent without a written agreement, it is called being a transaction broker. In most cases the representation of the buyers agent will not require payment from you, as the buyer’s agent is paid out of the commission charged to the seller of the house that you buy.

3) Know What Affects the Value of Homes

Real Estate is a major investment. Things change, neighborhoods change. People move more frequently today than they have in the past. You have surely heard it before, but the most important thing affecting the value of a home is LOCATION! Some other things to consider include:

Is the neighborhood being kept up or is it slipping?
How is the home in relation to others in the area? Is the home the smallest home in a neighborhood of big homes, or the most expensive home in a neighborhood of cheaper homes?

  • How might things change in the future? Those open lots behind your home, are they zoned to become a park, a school, a convenience store, or more homes?
  • How has the area appreciated? What is the future potential?
  • Are there any environmental issues with the ground water?
  • Any history of flooding?

These are the kind of questions you need answered before signing on the dotted line. Which leads us to…

4) Have a Professional Home Inspection

Sometimes called a “Whole House Inspection”, it can be written into your offer on the home that the offer price is based on the successful results of the home inspection. If the inspector finds a defect, the owner will have to fix it, or you can negotiate a modification to the price. If you can’t work it out with the seller, you do not have to proceed with the transaction. By having a professional Home Inspection, you might save yourself thousands of dollars and many hours of frustration from future problems with the house. There are also available home warranties that a buyer can purchase. T hese cover the appliances in the home and other items for the first year after you buy the home. This allows you to relax knowing that if anything goes wrong with the house after you move in, it is covered by the warranty with nothing more than a small deductible. Ask your Realtor for details.

5) Know How the Purchase Will Affect Your Taxes and your Household Budget

There are many tax benefits to owning a home including deduction of mortgage interest and loan points in certain instances. Check with your tax adviser or accountant to make sure you understand them. You need to know the effects on your taxes and budget before you buy the home to prevent surprises later on. The tax laws change frequently, so get the latest updates. And how will your new monthly mortgage payment impact your overall household budget. You may have to adjust your spending habits in order to adapt.

Don’t go into the home purchase without being armed with the facts. It may end up costing you thousands of dollars and years of frustration.

The Cost of Poker…

Inflation is taxation without legislation. ~Milton Friedman

One questions I get very often concerns the basic process of buying a home. It usually goes like this: “I am interested in buying a home, but I have no idea where to start.” Many of these people think as a Realtor, I can get them a loan and conduct the transaction from start to finish. This is when I direct them to our fine lenders in the area to begin the approval process. The first step is to find out if you qualify for a mortgage loan, and for how much. Where most of them ultimately end up is usually in one of two loan programs FHA and USDA. Both of these government backed mortgage programs have features that make them affordable and workable for the first time home buyer. Low down payment, low interest rate, and easier credit requirements are some of these features. But changes are coming to the FHA program that you should know about if you plan to utilize this program in the near future.

FHA has announced that it is increasing both it’s up-front and ongoing costs, which means the cost of borrowing is going up for the consumer. In its announcement, the FHA said it would increase its annual mortgage insurance premium by 0.10 of a percentage point for loans under $625,500, which would now cost 1.25 percent of the loan amount, up from 1.15 percent. That change takes effect on April 1. The agency also said it planned to raise another fee, known as the upfront mortgage premium, by 0.75 of a percentage point, bringing the premium to 1.75 percent of the loan amount, which can be rolled into the mortgage. What this means for the borrower is closing costs may increase if you are getting an FHA loan. Also, your monthly payment will increase if the loan amount is more than 95% of the appraised value of the home.

If you are in the process of looking for a home and are pre-approved with an FHA loan, you can avoid these cost increases if you have a home “under contract” and have an FHA case number before April 1. So, if you are carrying a pre-approval in your hip-pocket and being very picky whilst perusing the market, it’s time to make a decision. The cost of waiting is not insignificant. Don’t be pushed into making a bad choice, but if you have plans to buy and are just waiting the market out or have been less than motivated, let money be your motivator. Waiting=$.

If you haven’t even begun the process of getting approved and think now you’re out of the game, don’t panic. FHA will still be the best and cheapest option for many borrowers. But there is another option we have available to us here in Eddy County. The USDA Rural Development loan program is another government backed mortgage with very low rates, and zero down payment. The mortgage insurance cost of a USDA loan is also lower than FHA and conventional programs. This equates to a lower monthly payment. The objective of the USDA loan initiative is to allow low to middle income borrowers and first-time buyers to qualify for a home purchase. The credit standards are less stringent allowing many more applicants to qualify. We have several good USDA lenders in the area, and the USDA also has representatives who can answer questions and get the ball rolling. Call my office to get contact info.

There is an old adage “Good things come to those who wait.” I could not agree less. It should say, “Waiting usually carries both a benefit and a cost. Weigh them carefully.” Things are getting more expensive, not less. That includes houses, loans, money, everything. We may be entering a period of higher inflation than most of us have ever known. With these government backed mortgages raising fees, the private mortgage market will soon follow and after time, it will become the normal cost of borrowing. As the economy recovers, housing prices should rise along with interest rates. These add to the cost of home ownership. These are the costs of waiting. There may be benefits too. Patience is still a virtue, but we need to see both clearly and evaluate from there.

All Real Estate.  All The Time.

Your Goverment Bailout? Nyet!

There is only one thing more harmful to society than an elected official forgetting the promises he made in order to get elected; that’s when he doesn’t forget them. – John McCarthy

So… The big banks and the President are going to bail you out of your upside-down mortgage? You have been saved from the housing downturn. You have been rescued by the great pumpkin! Thank the Maker! May I get real for a moment? That’s not going to happen. But here is how this was reported by our 4th estate this week:

“HUGE settlement between nation’s largest mortgage banks and US Government to ease housing woes.”

Let’s examine this more carefully, and in the full light of truth. The total amount of the settlement is approx $40 billion. That sounds like a big number, but in relation to the total amount of upside down mortgage debt, it’s a drop in the bucket. In the 4th quarter of 2011, the Federal Reserve estimated the total outstanding single-family mortgage debt to be over $10 Trillion. The $4 Billion our government has extorted from the major banks will amount to 0.4% of the total. Doesn’t seem so grandiose now, does it?

In addition to being a paltry sum, you must be upside-down and delinquent on your mortgage. If you have fought, scratched, gone without food and other necessities to pay your mortgage on time every month through hardships, layoffs, and a horrible economy – there is nothing for you. If you were delinquent in the past few years of turmoil, but have fought your way back to good standing – there is nothing in this for you. If you are struggling to make payments on a mortgage with a much higher rate, but do not now meet the qualifications for refinancing at today’s historically low rates – this settlement will do absolutely nothing for you. In fact, you might be hard pressed to find somebody who will benefit from this settlement beside the President’s re-election campaign.

This is largely a “market problem” and the market will need to clear it out. Washington can do all the arm-twisting it wants, but until it becomes very painful for the banks to hold onto these mortgages as-is, or it fits into their forecast for profitability, no changes will be made. Banks have had problem mortgages on their balance sheets for years. But after stubbornly hanging on to those trouble assets, some banks are coming around and changing their tone when it comes to so-called “short sales.” In fact, not only are they allowing such transactions to happen, they’re also giving homeowners some big incentives to do so.

Short sales occur when a prospective buyer makes an offer on a home that isn’t enough to pay off the seller’s mortgage. Especially in states like California, where the lender often doesn’t have recourse to hold the homeowner liable for any shortfall, lenders have often resisted short sales. For a while, that made sense, as banks figured that short-sale offers were low-balling the true value of the home and that if they foreclosed on the property, they could resell it at its higher market price.

But lately, banks have realized that the foreclosure process is long, costly, and fraught with peril. With regulatory investigations into foreclosure practices adding to the potential problems of years-long delays and an obstacle course of legal requirements, banks are concluding that it’s better to accept the bird in hand of a short sale than to hope for a recovery that may take years to come.

I’m not trying to rain on your parade here. You may be one of the few who are going to be helped by this latest development. Your mortgage may be refinanced at today’s low rates and put you in a better position to keep your home or make it possible to sell it. If you think you may be one of the lucky few, it is definitely in your best interest to ask. Call your lender and ask if your loan is eligible. The worst they can say is no.

If you’re in the majority, then you are stuck with your current mortgage and home. You have a couple choices. You can try to refinance. You can try to sell, or short-sell if you are under-water. Or you can stay pat and live in your home and wait for the recovery. This is how the market works. It is isn’t always fun or fair, but it works itself out eventually.

My point in all this is to give you some perspective on what you hear coming out of Washington. Remember, it’s an election year and both sides are going to promise to take care of all your ills. Promises like bailing you out of your debt, and paying for retirement, and covering college tuition for your kids. The problem is that those promises will likely never materialize. It pains me to be the messenger but – we’re on our own. Sometimes the problems are too big to be fixed by campaign promises and rhetoric. Hold fast. The recovery will come from Main Street, not Wall Street. It will come from the heartland, not the Beltway. You and I will be the recovery if we’re diligent and patient and resolute.

All Real Estate.  All the Time.

Indecent Appraisal

There is no such thing as absolute value in this world. You can only estimate what a thing is worth to you. – Charles Dudley Warner

Good day everybody. I hope your week was wonderful. Mine was all real estate, all the time. Actually, I did get some family, church, a little sleep and one college hoops game in there as well. But enough about me, on with the show!

This week’s topic is another area where confusion can rule the day for those who don’t deal with real estate transactions frequently. That topic is the real estate appraisal. An appraisal is defined as “the expert estimate of the value of something.” The key word in that definition is estimate. Appraisals contain so much gray area and can be so subjective, that they are increasingly at the center of complaints and litigation. Many things are appraised. You may have had inherited jewelry, or firearms, or an antique you bough at a garage sale appraised by an expert in that particular field. Gems, coins, tools, electronics, musical instruments, and many other things you might not realize can, and are, appraised from time to time. When a value has to be established for an asset, a qualified person uses various methods to estimate what that asset is worth. Let’s look at how a real estate appraisal is performed.

When a home, commercial building, or piece of land needs a value affixed, the appraiser will begin by performing a physical inspection of the property. With a house or other building, this means gaining access to the property, inside and out, taking photos, and making notes on the condition, size and features of the home. The appraiser will note the size of the rooms, the number of bathrooms, the “finishes” (i.e. granite counters, appliances, tile vs. carpet, etc) present in the home. He or she will also note whether the home conforms with the neighborhood. For instance, is it the nicest home in the area? The most run-down? Or is it comparable in size and age and style with the average home in the neighborhood?

The next step is to find comparable properties. Or “comps”, to provide perspective and establish the trend of property values in the area. Comps are usually divided into two categories: sold and active. Sold are self-explanatory, but active comps are properties that are on the market now. Sold comps are best if they have sold in the last 3 months. Sometimes the appraiser has to go back farther than that in order to have enough sold comparables. Comps are where appraisals can get tricky. What is the “area” used to draw the comps from and how is the neighborhood defined? In larger cities, the area from which comps are selected might be only a few blocks in each direction. Any farther than that and the whole appraisal can be called into question. In Artesia, the entire city is generally accepted as the area from which comps can be taken. Local appraisers who know our market will use the whole city as their comp ground. But when appraisers come in from out of town, they tend to try to pull comps from only the immediate neighborhood and that causes problems. A town the size of ours is too small, with too few real estate transaction to restrict comps to one 5 square block area.

Once the comps are selected then an average value of homes can be established. This is the “baseline” from which the value of the subject home will be calculated. Adjustments are made for differences in size, age, style and finishes. Again, this an area where problems can arise. What do granite vs. laminate counter tops add to the value of a home is very subjective. All finishes or upgrades in a home are similarly subjective. Our market values high-end finishes differently than do the Los Angeles, Dallas, or Chicago markets. I may feel that tile shower surrounds are more valuable than cultured marble, but that is projecting my preference into an appraisal if it cannot be supported with evidence. After the various adjustments to the baseline are made, a value is estimated.

It’s not very scientific, and it has flaws, but it is the system under which we live. Here are some things to remember if you have an appraisal come in askew on your property: If you paid for the appraisal, you have the right to receive a copy of it; Appraisals are not written on stone tablets and can be challenged. Speak to the lender who ordered your appraisal if you think there are errors or oversights in it. Look at the comps used to make sure they were the best comps available for your property. If you believe one or more of the comps are deficient in some fashion, questions the use of that comparable. Home buyers and home owners who are refinancing their home often feel they have no recourse when the appraisal comes in conspicuously low. I’m here to tell you – you do. Call your lender and ask questions. Call a real estate professional for advice. It’s free, and we have dealt with these situations before and can help. Don’t take it lying down. You are the customer, and you should be satisfied with the product for which you pay. Does that mean every appraisal should turn out the way you want? No. Sometimes, appraisals are just expensive bad news. But it’s your right to question how that news was divined by the professional you paid.

In the aftermath of the housing crisis, appraisers face enormous pressure to keep appraisals low. Some have been sued by lenders for overvaluing properties and putting banks on the hook. Many appraisers are cautious at best, and cowered at worst, by the stories of litigation and large judgments. These are useful things to keep in mind if you will be needing the services of an appraiser in the near future. You cannot ask for a specific appraiser, but you can ask that your lender use local professionals who know this market. Ask to receive copies of not only the appraisal, but also any correspondence between the bank and appraiser. Knowledge is power, and I hope to give you ample power to be your own advocate.

All Real Estate.  All the Time.

Christmas and the Grateful Heart

Christmas Eve, eve. I like today. Tomorrow is Christmas Eve and it will be a little frantic with last minute trips to Walmart, or as I affectionately call it – “The Pit of Despair.” There will be cooking and gift wrapping and then Church, and it will feel a little like a foot race until we can go to bed. But today, the day before Christmas Eve, it feels like the holidays are really here. That feeling is enhanced greatly by the few inches of snow we woke up to and the steady pace of the white stuff falling from the sky. I can’t remember the last time we had a white Christmas, but we’re getting one now. So today I’m writing a blog and only working a few hours. Then I’m going to spend time with my family and build a fire, and cook some posole. Yep. Today is pretty great.

In fact 2011 has been pretty great for the Takacses. Mrs. Takacs moved into a new position as Principal of Yucca Elementary and, of course, she’s a natural. My children are beautiful, healthy and smart as whips (They get that from me). My career change to Real Estate has turned out to be a wise decision – one I should have made years ago. All in all, I am blessed beyond measure and I am certain I don’t deserve the life I have.

One of my goals is to live life gratefully. It doesn’t take a genius to realize that a life of comfort and peace and health and joy is a gift, not a by-product of my guile or intelligence. Those may be contributing factors, but mostly what I have is unmerited favor and I am thankful for every bit of it. I read recently that grateful people have demonstrably better health indicators such as blood pressure, headaches, cancer occurrences, etc. So if there is a correlation between being grateful and being healthy, then sign me up for both.

It’s hard to be grateful at times. Things aren’t always good, and there is real pain and suffering in this life. It’s a challenge to be grateful for the storm when it’s raging around you, but I have actually found it therapeutic to force myself to give thanks when things are bad or stressful. It is calming and helps me to focus to think of all the the things that I take for granted. Things like a warm house when it’s cold, a dry bed when it’s raining, food in the pantry and water that comes magically out of a tap. These are things that I know are not commonplace for many of the world’s citizens.

So Merry Christmas from me. Be grateful for what you have. I am grateful for the opportunity to write this blog, and to practice Real Estate and to live in our great country. I am grateful for you.

All Real Estate. All the Time.

Ray Ave in Winter

View out my front door this morning.

December Thoughts

Christmas is almost here. I don’t know where the year went, but it’s gone. Hopefully after the holidays, people will be thinking about getting into that bigger house or taking advantage of the bargains in investment properties. Right now we’re all just trying to make it through the month. I thought I would offer some advice to those of you who may be thinking about buying or selling a home in the new year.

First, if you’re planning to buy a home after Christmas, don’t let the Grinch steal your dream. That mean old Grinch will suck the resources right out of you and leave you farther from your dream than you are now. I’m talking about debt. If you plan to be a buyer, limit, or even avoid altogether using credit accounts. Big balance run-ups in the during the holidays can negatively impact your ability to get a mortgage. This will be an exercise in delayed gratification. Your kids won’t burst into flame if they don’t have the latest toy craze or Abercrombie jeans. Your spouse won’t melt if you don’t get him or her hundreds of dollars worth of proof of your love. Tone it down, and focus on the long term. Think of the great Christmas you will have next year in your new house.

If you’re thinking about selling in 2012, there are things you can do to prepare and make your life easier. Start de-cluttering now. Survey after survey of home buyers show that houses that are neutral and open show better than those with bold colors and lots of furniture and brick-a-brac. Buyers want to be able to picture the space – not your stuff. Also, consider having a professional cleaning done if it is not your strong suit. Carpet cleaning goes a long way toward removing pet smells if you have them. If you have pets, you have pet smell – just take my word on that.

Start prepping the family for the need to keep the house clean in order to show at a moment’s notice. The easier you make it for Realtors to show your home, the more likely qualified buyers will see it. I have had buyers completely cross a home off their list because the sellers made it hard to make an appointment. The sellers who always have family in, or claim it isn’t a “good time.” These are the houses that don’t sell as quickly or for as much as they should. Make it easy, keep it clean, and leave when it’s being showed. It really makes buyers uncomfortable when the owners are home during a showing.

The best advice I can give you if you’re either going to buy or sell a home is to use the services of a licensed Realtor. We know the market, and the inventory. We know the tricks to making your home look it’s best. We want you to buy or sell – it’s how we get paid. I’m ready when you are.

All Real Estate. All The Time