Archives: October 2016

What Is Home Equity?

Home equity seems to be a very simple calculation — the total amount of mortgages owed subtracted from the current market value of a home. Here is a simple example:

  • A New Albany home with equityCurrent Home Market Value: $325,000
  • Existing Mortgage: $225,000
  • Homeowner Equity: $100,000

One side of the equation is well defined, and it is found on the monthly mortgage statement, the loan balance. The other side is less obvious — the current market value of the property.

As a homeowner, your down payment purchases your initial equity, and your monthly (or additional) principal payments increase your equity. In strong real estate markets and in-demand locations, equity can increase quite rapidly as the property value increases, but the inverse can also happen — too much available inventory and market down-cycles can lead to falling home values and a reduction in homeowner equity.

It can be difficult to put an accurate value on something that you have emotional and monetary vesting in. It is safe to say that most people think their home is worth more than it is.

Homeowners can make savvy assessments about their home’s current market value by following the sales of similar properties in the neighborhood, but should stay away from websites such as Zillow and Trulia, which provide inaccurate and outdated estimates. The most accurate measurement requires a comparative market analysis from a real estate professional or having the home professionally appraised. But, the bottom line — your home is worth as much as someone is willing to pay for it.

Creating Value is in Your Hands

Maintaining the condition of a home is vitally important to retaining and increasing value. Homes are judged against their peers: how they compare to similar homes in the neighborhood. Another way to retain value is to not over upgrade, since it is rare to ever recoup the money spent if you exceed neighborhood value. Keep up the landscaping and do the little things to add curb appeal.

Putting Home Equity to Work

Discussion with a real estate agent at the officeHome equity represents the largest single asset of millions of people, and because it represents so much of an individual’s net worth, it must be treated with respect. Home equity is not a liquid asset until a property is sold, or it is borrowed against.

There are two types of loans that tap into homeowner equity as collateral.

Home Equity Loans

Many home equity plans set a fixed period during which the person can borrow money, such as 10 years. At the end of this “draw period,” the person may be allowed to renew the credit line. If the plan does not allow renewals, the homeowner will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period, for example, of 10 years.

A home equity loan, sometimes called a second mortgage, usually has a fixed rate and a set time to pay it back, generally with equal monthly payments.

Home Equity Line of Credit

A home equity line of credit is similar to a credit card. The lender sets a maximum amount you can borrow, and you can draw money as you need it, though many home equity lines of credit require an initial draw. The interest rate varies daily, and is usually prime plus a set number, but the required payment is usually interest only. Once the loan has been paid down, the payment is reduced, and it can be paid off and initiated as many times as a homeowner requires.

How Much Equity can be Accessed?

Since the financial institution is lending money and using a home as collateral, they will not lend 100% of the home’s equity. The bank does not want to take the risk that if the house price drops, they would be carrying a loan for more than its market value. Therefore, most banks will allow a qualified homeowner to borrow approximately 80% of their equity.

It’s Important to Use Your Home Equity Wisely

contractor making improvements to a homeBecause it is likely the biggest asset most people have, losing your home equity is hard to overcome. It must be used in prudent ways, and the payments against the loan must be affordable. Using equity money to make the loan payment is only acceptable for a short-term solution.

There are number of good reasons to use money from a home equity loan… and some really bad ones. First, let’s cover smart uses.

1. Invest in Your Home

The best way to use the money is create more equity in the home. Among the very best returns on your investment (ROI) include kitchen and bathroom remodels, adding square footage or an extra bath, enhancing curb appeal and repairing/keeping the existing structure sound. Making prudent investments in your home is a wonderful win-win: you enjoy the upgrades and the repairs can add value to the home.

2. Invest in your Children’s Education

Using your home equity to finance a child’s higher education may be the greatest payoff of all. Not only is the rate much lower than a student loan, it is an investment in the child’s future.

3. Supplement Retirement Needs

Older homeowners spent their working lives paying down their mortgage. At retirement, when monthly income is reduced, a home equity loan could pay for a dream vacation or an unexpected major expense.

4. Augment the Impending Sale of a Home

If you’re planning to sell soon, a home equity line of credit may be the best way to finance improvements, and you can pay it off entirely when you sell. Investing wisely on upgrades and repairs may even reap a profit on your investment.

Here are some examples of some not very wise choices.

  • Adding luxury amenities like a swimming pool, a hot spa, lavish landscaping, expensive appliances and exotic counter tops and flooring rarely pay off.
  • Purchasing a car or boat or most any personal luxury items is a poor use of the funds, since these items quickly depreciate in value.
  • Also stay away from using money on risk-heavy investments. Financing stock purchases, start-up businesses and paying routine bills is not financially smart. If you cannot afford to purchase those items with available funds, using equity from your home means they should not be in your budget.

You should treat a home equity loan as an investment and not as extra cash when making financial decisions. If your intended use of the money doesn’t pay you back in some way, it’s not the best use of your valuable equity.

We Are Happy to Assist You

If you would like an assessment of the market value of your home and the current equity you can access, give us a call for a comparative market analysis.

How Color Can Help Sell Your Home

Yes! Just like curb appeal matters, the colors of your home can and will influence buyers. With that in mind, we explore which colors tend to appeal to the masses.how-to-choose-paint-color

The color scheme of your home, from the outside in, sets the tone. It’s like going to see a theatre play and seeing an intricately crafted and appropriately painted set for the production. It can immediately intrigue you–before the play has begun and even if you know few details about the play.

When it comes to color, be sure to consider the location. A peach-pink home in a retirement community might be okay, but that same color in an upscale, urban city may be unappealing to younger city dwellers.

The outside of your home is one of the largest areas potential buyers will see. So make your decision carefully and be sure to have a professional paint job done. If you choose white for the exterior, your home is likely to appeal to the masses, according to one study that indicated upwards of 40 percent of people liked white homes.

The great thing about a white home is you have plenty of options to make the home stand out by using an accent color for the trim. The downside is that white gets dirty very fast and shows it more than other colors. So before you list your home, make sure that you have a fresh coat of paint applied or pressure wash the exterior to bring back that newly painted look.

Also take into consideration the color of other homes on the block. Typically, white will not look out of place. However, if you had a purple home on a block where the homes are mostly beige and neutral colors, you’ll get noticed but won’t likely get the kind of attention you want.

Beige with neutral-colored trim is another popular color scheme. Both beige and white are safe exterior colors. They don’t turn buyers off.

There’s also been a trend to paint just the front door a deep, rich color like red. This may not be appealing to all. However, buyers would tend to overlook it because it’s a simple change as well as one that can easily and cheaply be changed to the new buyer’s choice. As long as the colors look good together, this wouldn’t necessarily turn buyers away.

The paint inside your home is equally important. In fact, one good tip for sellers is that if they can do nothing else, they should get some fresh paint up on the walls. The new paint helps showcase the home and gives it a new-home feel.

There are a wide variety of interior colors. Don’t feel like you have to go with only beige. You can be a little more daring, using bold accent colors. Just make sure the paint colors you choose don’t give a dark, closed-in feeling. Aim to create comfort, a sense of calmness, relaxation, and a place where family can unwind. Earth-tone colors convey this very well.

For a more chic and sophisticated look, interior designers often choose from the grey palette. A dark grey color can create a bold statement and attract the eye to a particular area.

Whatever colors you choose, remember that your aim is to appeal to the masses. Test the colors out first. Get opinions from the experts.

Your real estate agent has likely been in hundreds of homes and can offer you some very good guidance.

(Article courtesy of RealtyTimes.)

5 Home Staging Mistakes That Frighten Buyers Away

house with dark staircaseHalloween is just around the corner. For many homeowners, that means carving pumpkins, hanging up Halloween decorations, and stocking up on fun-sized candy. But if you’re a homeowner who is thinking about selling this fall season, you might be preparing your home for buyers instead of trick-or-treaters.

Home staging is a crucial part of home selling preparation. According to the National Association of REALTORS® 2015 Profile of Home Staging, 32% of buyers’ agents and 37% of sellers’ agents believe that a staged home increases the amount buyers are willing to pay up to 5%. On a $200,000 property, that’s $10,000!

But is your home effectively staged to sell? If you are preparing your home yourself, beware of these staging mistakes that scare away home buyers — and potentially thousands of dollars.

1. A Dark and Spooky Entryway

Your front entry is one of the first things buyers notice about your home. Peeling paint, deep shadows, and uninviting colors don’t create the best first impression. Turn your front entryway into a focal point by painting your door a bright color that complements your home.

cobwebs on dusty night stand2. Cobwebs in the Corners

At a showing, buyers are going to inspect virtually everything: light fixtures, closets, ceilings, you name it. Thoroughly clean your home from top to bottom (or hire a professional) to make it look like new. You can always ask a friend or neighbor to take an objective look at your home.

3. Startling Colors on Your Walls

The goal of home staging, besides selling your home for top dollar, is to help buyers visualize themselves living in your home. If you have bold, bright colors on your walls, switch to more neutral colors to appeal to all potential buyers.

4. Menacing Halloween Decorations

Staging your home for Halloween is fine in moderation. But remember, not all buyers will think the fake spiderwebs or rubber arms are festive. Unless the headless horseman himself is buying your home, it’s best to keep him out of your front yard.

standing in a long dark hallway5. Hovering Like a Ghost During Showings

How you present your home when it’s on the market goes hand-in-hand with home staging. Make your home available and make yourself scarce during showings. Potential buyers might find it creepy if the current homeowner is lurking somewhere in the shadows.

Thinking of Selling Your Home This Fall?

Selling your home doesn’t have to be scary. We have a wealth of home staging tips and home selling resources that will help you sell quickly and for top dollar. Contact us to learn more.

Don’t Miss These Fun Events Happening in New Albany This Month!

There are some great events happening this month in New Albany, and we wanted to make sure you know the details!

Wednesday, 10/19: Downsize New Albany Seminar

New Albany homeowners downsizingTime: 6:30 – 8:00 PM

Location: Heit Center

Cost: FREE

(Hosted by Kate & Tony Thomas, New Albany Realty)

Learn the ins and outs of downsizing from a panel of local experts at our second downsizing seminar. Our first was so popular, we are bringing it back! Topics will include real estate market and strategies, home improvements and staging, selling personal and household items, and more! Refreshments and appetizers will be served. RSVP to info@newalbanyohio.com.

Learn more at www.DownsizeNewAlbany.com.

Thursday, 10/20: Haunted Hike and Happy Hike

Time: 7:00 PM – 10:00 PM

Location: Rocky Fork Metro Park

Cost: $5-$20 per person

(Hosted by Handshake America)

The Haunted Hike is a very scary 1 mile hike through the woods. You will not be touched or chased, but you will be scared! The Happy Hike is for kids 10 and younger who don’t like being scared. There will be a series of Halloween themed activities for kids. Wear your costumes!

Learn more at http://handshakehauntedhike.eventbrite.com.

Saturday, 10/22: New Albany Craft & Vendor Fair

ceramics at arts & crafts fairTime: 9:00 AM – 4:00 PM

Location: New Albany 2-8 Gymnasium

Cost: Adults – $2, Children Under 12 FREE

(Hosted by Girl Scout Troop 307)

Several Unique Vendors, Free Parking, Lunch available. Raffle held every Hour.

E-mail Stefanie Hatfield at hatf02@gmail.com for questions or more information.

Sunday, 10/30: Night Moves Concert

Time: 3:30 – 5:00 PM

Location: McCoy Center for the Arts

Cost: $10 Donation at the Door

Annual community concert featuring Songs of the Season and tunes that go bump in the night! Featured groups performing will be New Albany Winds, New Albany Chorus, Center Stage Singers, NAHS A Cappella Choir, Broadway Beginners cast members, and youth pianists Kelley, Danna & Abbie Long.

Learn more at http://www.newalbanyarts.org

candy in a bowlMonday, 10/31: Halloween – Beggars Night

Time: 6:00 – 8:00 PM

Trick or treaters will fill the neighborhoods for New Albany’s annual “Beggars Night.” Stay safe!

Buying or Selling a Home in New Albany?

Whether you’re relocating to New Albany, downsizing, or moving to a new neighborhood, we can help you with anything you need. Contact us at 614.939.1234 to learn more.