Financing Co-ops

Co-op financing is different from condo or town house financing. Many co-op boards set the minimum down payment you must come up with. The remaining is usually financed by lenders who specialize in co-op financing. Since these lenders can’t use the property for security, their terms may be more credit driven than the usual real estate financing. Real estate brokers and co-op boards will often have a list of lenders who finance their units.
Also, be aware that many co-op boards will not allow shareholders to use their stock as collateral for loans once the original share loan is paid off. So you may not want to pay off a co-op loan early. Unlike single-family homeowners, you won’t have access to low interest home equity loans if you need one.

Financing Condos and Town Houses

Condos and town houses pose a few financing challenges that singlefamily homes don’t have. Namely:
When you apply for financing, the lender will add the condo fee to the payment and then run the ratios. For example, a $1,000 a month mortgage payment at 6 percent interest equals a $166,792 loan. But if you buy a condo with a $115 a month condo fee, your loan amount drops to $147,611. This means you can buy more of a single-family home on a given income than you can a condo. Conventional lenders generally prefer no more than 40 percent rentals in a project (the FHA currently says that 51 percent must be owner occupied). They’re so sticky on this that when you make application for a condo loan, you’ll most likely be given a form for the homeowners association to fill out verifying the percentage of rental units.
With new developments, conventional lenders like to see at least a one- to two-years track record and 50 percent of the units sold before they’ll make loans. To get around this situation, developers often arrange for financing with a lender who will warehouse (keep the loans in-house) the loans for a year or two before selling them on the secondary market.
This is another reason to pick your condo project carefully and look at its history and rentals to owner-occupied ratio. If the project has too many rentals, you may not be able to sell at any price if a buyer can’t get reasonable financing.

Twin Homes Buying

A twin home is basically a duplex with each side owned separately. Or, in other words, two single-family homes connected by a common wall. You’ll find twin homes in PUDs, subdivisions, or in twin home neighborhoods built in or next to single-family home projects. They attract mostly first-time homebuyers and retirees scaling down. Developers build twin projects when land costs are so expensive that a higher density is needed to keep costs down. They may also build a twin home or condo project in order to satisfy federal or local housing regulations that require a certain amount of low-income housing.
The economics of twin homes are more similar to PUDs than to single-family homes. If you buy a unit and find that your neighbor likes to restore cars or doesn’t like to do yard work, you’ve got a problem. A well-maintained twin with great landscaping joined to a neighbor who is a slob will suffer a big loss in value. If the project is a couple of streets of twin homes tacked onto a subdivision without strong CC&Rs (covenants, conditions, and restrictions), there’s not a lot you can do.
Andy and Pat found this out when they bought a twin as their first home near a mid-priced subdivision. They liked the area, but couldn’t afford a single-family house; they could qualify for a twin. The neighbors, also first-time homebuyers, were great, and everything went smoothly for a couple of years.
Then a slowdown in the local economy forced several large businesses to lay off people, and Pat and Andy’s neighbor was one of the unlucky ones let go. A for sale sign followed, but after several months of no action, the bank foreclosed and an investor bought the twin for a rental.
The tenants didn’t take care of the yard, the grass died, and it soon became an eyesore, making it impossible for Andy and Pat to sell their side. Eventually, they too sold their side to the investor for what they owed, losing equity and about a thousand dollars in closing costs. To be fair, this situation could have gone in a different direction. Suppose Pat and Andy had bought a rundown twin at a great price, moved in, and fixed it up. After a year or two, the economy improved, interest rates dropped, and an entry-level housing shortage developed, causing housing values to skyrocket.
Homeowners like Pat and Andy could sell, make a good profit, and move up to a bigger home with a hefty down payment. It’s like playing the stock market. If you can buy low and the market goes up, you make a profit.
Unfortunately, for most people their housing decisions depend on what’s happening in their life at the moment and not on the business cycle. When that happens, making or losing money in real estate becomes a toss of the dice. A little planning and homework can improve your timing considerably, so you can move up with a big down payment. So, if you find a great deal in a twin home project, do the same homework you would do when considering a condo. Especially important, meet your neighbor and make sure you’re compatible before you sign the purchase agreement. If the other side is a rental, an oversize red flag is waving frantically. To put a positive spin on it, perhaps you could eventually buy the other side too and have a duplex. Twin home financing is the same as detached single-home financing, because the homeowner owns both the structure and land.

Understanding PUDs (Planned Unit Developments)

PUDs can be clusters of single-family homes or attached town house style units with common areas such as club houses, swimming pools, and tennis courts. The big difference is that you own the structure and the land it sits on, plus a small yard or patio. PUD financing is the same as single-family homes, since you own both the dwelling and the land. But, you’ll probably have to factor the HOA fees into your qualifying ratios.
PUDs are becoming popular in areas where land is scarce and expensive. By putting homes on small lots, developers hope to keep home costs down to where they will sell reasonably fast. You’ll want to beware of PUDs that have too many look-alike homes jammed on small lots; the project can take on a sterile, impersonal look. This is not the type of development that creates homeowner pride. And homeowner pride is a key component of an area that maintains and increases its value.
Because many PUDs have similar market economics as condos, you should also look at the owner to rental ratios. A PUD that has a lot of rentals is going to have a problem keeping its value. Actually, a neighborhood of single-family homes in a standard subdivision with more than 10 percent rentals can have the same problem too. PUDs are becoming more popular because the monthly fees are lower than condos, and you have more control over your home. But, you still don’t have quite the same freedom as the usual subdivision, because the homeowner restrictions are stricter to protect everyone’s investment.
The biggest downsides of PUD living are that you may not agree with the restrictions and you pay the monthly homeowner fee whether you use the amenities or not.
Loren and Dora found this out when they retired from Boeing and downsized to a smaller home in an upscale PUD. It was a new development, and they enjoyed making friends as more people in their age range moved in. Soon, phase one sold out and the homeowner association assumed management of the project. The first few years were fun. Dora was active in the homeowners association, while Loran improved his golf swing. But when new people were voted into the homeowners association, things began to change. New rules were proposed by the new administration and passed. Restrictions were made, such as that you couldn’t keep RVs next to your house or garage doors open for more than a certain period of time, and grass had to be cut twice a week. It was an attempt by the homeowners to maintain the image and value of their community.
Loren and Dora had a small motor home and parked it next to their house on a concrete extension of their driveway. They were given notice by the association that it had to go. Also, the association’s enthusiasm for the new rules grew, and soon maintenance personal were instructed to knock on doors or leave notes on the doors of homeowners who were slow to comply.
For most of the homeowners, it wasn’t a big deal, but for Loren and Dora, the restrictions and their deteriorating relationship with the association officers were too much, so they decided to sell. It wasn’t long before they found a buyer and ended up making a good profit, which, ironically, was due in part to the association’s working hard to maintain its image as a quality place to live. The lesson learned here is that before you buy a home in a development that’s managed by a homeowners association, check out the bylaws and rules. Look at the lifestyles of the people who will be your neighbors. Ask yourself if you would be comfortable living there for a few years.

Town Houses Buying

Up a notch on the food chain are town houses. They are often built in rows and can be single or two story, with each unit having a small yard or patio. The grounds and structures are still owned in common and maintained by the homeowners association.
Town houses tend to hold their value slightly better than condos, but they still suffer from many of the same problems if you need to sell in a hurry. So when you shop for a town house, zero in on projects that have a great location, good amenities, and a homeowners association that keeps the grounds and buildings in good condition. Also, check out the number of units that are rentals; anything over 10 percent should raise a red flag.
Proceed with caution if:

• The developer couldn’t sell the units and rented them out to generate cash flow.
• The project didn’t sell well, so the developer discounted the units and investors bought them for rentals.
• The project went into foreclosure or bankruptcy, and the bank took over the project and liquidated the units attracting bargain hunters and investors.
• The life cycle of the project is at a point where the original owners want to move up or sell and can’t, so they rent their units and values ratchet down.

There is also opportunity in these situations for a buyer who is looking to downsize or retire. You can get a great deal if you’re willing to ride out the market and get active in the homeowners association. Eventually, the rentals will sell and the project will stabilize, as more permanent homeowners move in. Many projects that go through this cycle end up becoming desirable and upscale communities, although it may take a few years to do this.
The key to finding these potential winners is to look for location. A development may be going through problems now, but if it’s attractive and has a good location, it will eventually become a winner. Interestingly, FHA usually won’t insure loans on projects that are more than 50 percent rentals and Fannie Mae limits its lending on projects with more than 49 percent rentals.

Understanding Co-ops in Condo Business

When you buy a condo, you own a percentage of the building and improvements—you own real estate. But when you buy a co-op, you are buying shares in a corporation that owns the building. In effect, you are leasing a unit from the corporation, and your monthly payment (assessment) depends on the number of shares you own. As a shareholder you have a vote in co-op matters. Usually, it takes a 2/3 or ¾ majority—depending on the bylaws—to enact or change rules. Typically, co-ops are converted apartment buildings, hotels, or even warehouses. However, in some urban areas such as New York, San Francisco, or Chicago developers will build new units and sell them as co-ops.
Since co-ops are corporations, a board of directors or co-op board runs the show. It sets the rules and can determine who is allowed to buy shares or what improvements you can make to the unit. For some people that’s a plus. Who gets to live in the building can be tightly controlled in contrast to a condo, where whoever has the money to buy a unit is in. But this is a two-edged sword. The exclusivity of a co-op can make getting your money out when you want to move harder and more time consuming than a condo. You pay a monthly maintenance fee and can also get a buildingwide assessment bill if revenues fall short of outgo. Although the board can’t discriminate based on race, sex, or religion, it can reject your application if it feels you won’t fit in. Also be aware that if you want to buy a co-op, the board will most likely want as much information on its application as a mortgage lender. Also in some areas, a seller doesn’t have to give you a seller’s disclosure form detailing the condition of the co-op. The seller is selling stock, not real estate, so a disclosure form is not required. This presents a special challenge to you to make sure the co-op is in good condition. A professional inspection can be a good investment before you buy. If the co-op board is keeping costs down by deferring maintenance, you may want to look elsewhere.
You also need to find out if the co-op board imposes a flip tax if you sell. This is a fee levied when a shareholder decides to move and sell their stock. The fee can be a percentage of the sale price (commonly 1 to 3 percent) or a set cost per share. It can also be based on the profit from a sale or how long you’ve lived there. Which formula is used boils down to what the board and co-op members can agree on. The big question on a flip tax is whether it will hurt you when you want to sell. Some brokers say it does, others say it depends on the co-op and the nature of the flip tax. If the co-op you’re looking at does have a flip tax, do a little extra homework and find out if it has caused sales problems in the past.
Buying a co-op can also have special financial challenges. Co-op boards often require 30 to 50 percent down payments, and some boards allow mortgage financing for the balance while others won’t. Every co-op board is different, and practices differ depending on area. For instance, when Anita sold her New York co-op and moved to the West Coast, she discovered that a condo or co-op was all she could afford. After a month of house shopping, she finally found a co-op in her price range and filled out the application. A couple of days later she got word that the board had accepted her offer. ‘‘It was amazing,’’ Anita said. ‘‘When I bought my New York coop, the board ran a credit check, employment check, and called my references. Here in San Francisco the co-op board seems almost indifferent.’’ And the financing was up to her with no minimum down payment.
Like condos and town houses, co-ops can be a good investment if you do your homework and buy wisely. Also, be aware that not all real estate agents are savvy on condos, less so on co-ops. Co-ops are a niche market, and you want to find an agent who works that niche. In New York City, for example, there are real estate brokers who specialize in co-ops and even in certain buildings. They know the market, the board members and their preferences, and can help you pass the board’s requirements. Ask board members what agents do the most business in their co-op and talk to two or three to find the one you’re most comfortable working with.
Be aware, though, that in most areas, New York included, condos tend to hold their value slightly better than co-ops. This is due to fewer selling restrictions on condos, and when you own the unit, you have more control.
A great Web site for co-op buyers and owners is www.cooperator .com. It also publishes a magazine for co-op and condo owners, especially in the New York City area.

Neighborhood questionnaire.

Walk around the neighborhood and ask several owners the following:

• How long have you lived here?
• Do you feel the board is doing a good job?
• Do you have a management company, and is it doing a good job?
• Do you attend the association’s meetings?
• What do you like best about the community?
• What do you like least about the community?
• What do the dues cover, and how often have they been increased?
• Ask an adjoining unit about the soundproofing. This is the number one complaint of condo owners.

Condos and Loft Conversions

In many areas of the country where housing demand is greater than supply, apartments and even commercial buildings are converting to condos. Their main attractions are location and/or price. If it’s a trendy location near downtown or a university, you’ll pay a premium. Apartment buildings converted to condos offer ownership at attractive prices. But when buyers want to move up and find they can’t sell, they’ll rent their units. As more and more units are rented out, values can nosedive.
Typically, one-bedroom units are at the bottom of the food chain and the most difficult to sell. If at all possible, go for at least a two bedroom. Remember, in an economic downturn, conversions are likely to lose more value faster than other types of housing. When Joe retired, he and Sandy bought a warehouse conversion in a great downtown location wanting to be close to cultural events and the Delta Center, where the NBA Jazz played. It was an upscale project that didn’t quite live up to expectations. The local real estate market cooled, and two years later not all the units had been sold. The developer discounted the remaining units in an effort to close the project. That dropped the value on the sold units several percentage points. If owners wanted to sell, they would have to compete with the new discounted units, and that would mean taking a substantial loss.
So where did Joe and Sandy make mistakes? First, they bought into a new project when the housing market was strong, not taking into account that the area also had single-family homes in the same price range. In order for the loft development to hold its value, there would have to be a continuing hot market with little competition from condos and single-family homes.

Condos and Co-ops in Urban Areas

In urbanized areas where condos and co-ops predominate and the competition with single-family homes is not a factor, the economics change. Condo values become a factor of supply and demand, along with the health of the local economy. The usual dynamics of real estate such as location, price, terms, and condition apply more equally. In other words, when you buy a condo in these areas, you’re competing condo to condo, and the playing field is more level.

Have an Exit Strategy in Mind during Condo Buying Transaction

Too many first-time homebuyers visit new condo developments that push a fun lifestyle, owning-is-cheaper-than-renting sales pitch, along with attractive financing packages. They don’t think about what will happen when all the units are sold, the developer moves on, and the project becomes part of real-world economics. The bottom line is that if you know you’ll be moving up in a few years, you’ll need an if-we-buy-this-can-we-sell-it exit strategy in mind. Look at other similar condo projects in the area and check out how they’ve held their value over the past few years. Have your realtor pull the sold records for the past year and see where values are going.

Condos Are a Good Investment As Long As You Do Your Homework

The example above is not intended to be a horror story to discourage you from buying a condo, but to point out that it takes a little more homework and savvy before you sign closing papers. In all fairness, it should be pointed out that this same situation can happen in a newer single-family home subdivision. However, in a condo project, the units are alike, so price tends to become the biggest sales factor. In a slow market, you have to underprice your neighbor, since you don’t have curb appeal, super landscaping, or a new vinyl fence to make a compelling difference.
If you’re retiring and plan on staying in the condo for a long time, the selling bubble and market ups and downs won’t be as big a problem.

Understanding Condo Economics

If you’re graduating from being a downtrodden tenant to home ownership by buying a condo, there are some economic realities you should be aware of as you shop around.
First, in a mixed area of competing single family homes and condos, the condos will not appreciate as fast as detached homes in a normal market. In slow economic times, the condo market suffers first and is slower to recover.
In urban areas that have predominately condos, this market competition with detached houses will not exist and normal supply and demand will govern values.
Second, condos are more area sensitive than detached homes. If a project becomes run down or the area suffers because an off ramp or factory is built close by, values will sink to the bottom and stay there longer than an area of single family homes will. Next, since units in a condo project are similar and buyers move in at about the same time, it usually happens that when you want to sell, so will a lot of other owners. A three- to five-year selling bubble often occurs in new projects that attract first-time homebuyers. So, if you need to sell fast, it may be difficult because most of the units are the same, and price is all that sets you apart from the competition. A desperate-to-sell condo owner, who bottoms out his sales price, will hurt the whole complex.
Lewis and Charlene had this problem when they tried to sell the condo they bought four years ago. Like most others in the development, they were first-time homebuyers and couldn’t afford the average $168,000 house prices in the area. The condo, with a fireplace, two baths, and two bedrooms seemed perfect at only $110,000. Monthly payments on a variable mortgage were less than rent, even with the $85 condo fee added in.
The first two years of living there were great for Lewis and Charlene. They loved the location, pool, and lifestyle. Then a baby came along, and suddenly the future looked different. After two more years, they started thinking about a home with a yard. Their income had gone up, and they felt they could afford to move up. About then more for sale signs started appearing in windows around the development and were slow to disappear. Moreover, Lewis and Charlene’s mortgage balance was still about $108,000, since they had financed some of the closing costs.
Some owners who had more equity were discounting their condos as low as $103,000, hoping to get a quicker sale. When this happens, your equity often becomes the difference between the loan balance and the lowest priced unit in the complex. In this case, Lewis and Charlene would have to write a check for $5,000 plus to sell their unit. In retrospect, they would have been better off to rent for a couple of years and save up a bigger down payment while their earning power grew.

Condos 101

Unlike detached single family homes, condo ownership is based on shared ownership and responsibility. When you buy a unit you normally get the interior airspace only. The ground and buildings are owned in common with the rest of the owners in the project. The second big difference in condo ownership is being part of the homeowners association (HOA). If you own a condo in a project you are automatically a member of the association. The members elect a board of directors to govern the affairs of the project subject to the bylaws. It’s the board’s job to enact and enforce the rules that, in view of the board and members, will make living in the project a pleasant and profitable experience.

The Unique Challenges of a Co-op or Condo Buying

Many people buy a condo or co-op because they’re just starting out and don’t need or want the square footage and yard work. Others, in response to the empty nest syndrome, want to shed square footage, yard work, and maintenance cares. Regardless of your reasons for considering a condo, town house, or co-op, this chapter helps you navigate the obstacles to finding your dream home and getting the best deal. But an equally important part of the buying decision is the section on homeowners associations. They are the key not only to a good condo experience, but also to maintaining your home’s value.

The Keys to Her Castle: Home-Buying For Women

HOUSE HUNTING and dating have a lot in common. Both involve long lists of must-haves — three bedrooms, stable family, walk-in closet, higher education. But just when you think you've found "the one," there's always a compromise. That corner home with the immaculate lawn? Termites. The new guy in accounting? Two kids.

But in real estate, like love, the unexpected doesn't have to be a deal-breaker, as Jennifer Musselman says in "Own It! The Ups and Downs of Homebuying for Women Who Go It Alone" ($11, Seal Press), due out on June 1.

Imperfections add character, right? And many gals love fixer-uppers, really.

To that end, "Own It" almost reads like a dating manual, with chapters titled "Growing Out Your Roots," "Dirty Little Costs of HomeBuying" and "Are Your Signs Compatible?" But Musselman's main message is empowerment: Twenty percent of home-buyers last year were single women, according to the National Association of Realtors — which means no waiting for McDreamy to show up before you make that down payment.

» EXPRESS: The book reads like it's written by a friend giving advice, not a real estate agent. Why?
» MUSSELMAN: I am not an expert in home buying, I am not a financial expert — I am an expert in being the girl next door. My books have come from first-hand experience and going through the failures in order to succeed. It's been my journey, and maybe someone can learn from it.

» EXPRESS:So, why do you think women are reluctant to buy real estate by themselves?
» MUSSELMAN: It's two-fold. There's the psychological part of it, the fear of doing this by myself. And there's the financial side of it, which just feels overwhelming. You have these women who say, "I'm an independent woman; I'm already relatively successful in my career. If I buy a home on my own, will men still see me as someone they want to partner with?" In the whole Cinderella fairy tale of women wanting to be saved, I was afraid that might be a turn-off to a man, because I do want to have a family. We feel that decreases our dating pool.

» EXPRESS: What was the hardest part of buying your condo?
» MUSSELMAN: The whole house-buying process: What is an escrow? Signing my name to contracts. Asking, "Can I afford a mortgage on my own?" But what seemed like an enormous burden at the time, in retrospect, is freedom. Like changing a car tire, until you've done it once, it's overwhelming.

» EXPRESS:How have men reacted to your owning your own place?
» MUSSELMAN: It actually has helped weed men out. It empowered me to not just settle. Any man who is afraid of my happiness, success in life and accomplishments, I see that right away. I'm not wasting my time with men who, in a month, I would have found out are not a good fit.

» EXPRESS:Has making that mortgage payment felt like a financial burden?
» MUSSELMAN: For the most part, it's made me smarter about how I spend my money. I have to budget more, but I'm not scraping by in the way I feared I would. I'm not splitting a rent payment with friends anymore, but I still take the same amount of trips, I still go out to dinner with my girlfriends. I just prioritize more.

» EXPRESS: Ever felt any buyer's remorse?
» MUSSELMAN: Life circumstances will always change, but buying a home will not keep you from those things you want. From the outset, it looks very daunting and like too much of a commitment, but it empowers you because it's an investment in your life.

» EXPRESS: What do you think is the biggest adjustment for new homeowners?
» MUSSELMAN: When you're renting, if your toilet overflows or your dishwasher isn't working, your landlord is supposed to come out and fix it. Now it's not just one-stop calling. One of the things I say in my book is get an "A team" and a "B team" — repair people you automatically call, so when a problem does arise, you aren't scrambling to find someone. Talk to your friends and neighbors about plumbers and electricians they use and like. It's kind of like finding a hairdresser. Word of mouth works best.

» EXPRESS: What do you hope women take away from reading this book?
» MUSSELMAN: I really wanted to encourage and empower women of all ages to take charge of their emotional and financial happiness. Men can be part of our support system, but they shouldn't be our whole means to survival or happiness in life. Home-buying should be seen as an investment in ourselves and our futures. A lot of times, I think, women, as smart as we are in business, put ourselves second in our personal life.

Written by Express contributor Josie Roberts

Appraisals and Repairs

When an appraiser goes through a home doing a conventional loan appraisal, he is primarily concerned with value. Any obvious problems, of course, will be flagged and need to be repaired as a loan condition. FHA/VA appraisals are a little different. They are more thorough and detailed in their inspection. It’s not unusual for the appraiser to poke around in the attic, climb down in the crawl space, and check windows for cracks or failed seals. And a roof must have least three years of life left or it must be replaced. Appraisers not only look at value but also want to make sure the buyer won’t have to make any repairs for at least a year. Still, FHA/VA appraisals are not professional house inspections, nor are the appraisers trained to be inspectors. If you’ve made an offer on a home and the appraisal comes back with a list of repairs, the seller doesn’t have any alternative other than to do the repairs if the sale is to move forward. Sometimes, if there are extenuating circumstances like bad weather, a lender may allow money to be put in escrow for a short time so that the loan can close. But the old days of buying a home ‘‘as-is’’ are no longer an option when a lender and appraisal are involved.

Unrealistic Pricing Results in Low Appraisals

A common reason for a low appraisal is a property that is overpriced for the area. This happens when sellers make structural additions, landscaping, and interior improvements that other homes in the area don’t have. When they sell and try to recoup the dollars they spent in improvements, they price the home way over what other homes are selling for in the area. Should a buyer come along and offer close to the asking price, the sellers’ expectations will crash head on with reality when the appraisal comes back.
Real estate agents also contribute to low appraisal problems. Too often an agent inflates the value of a house in order to get a listing. Sellers should know better, but greed gets in the way. Hope springs eternal that lightning will strike and the agent can get them a higher offer. If a high offer does come along, the appraisal will inject reality into the sale, and a low appraisal will be the result. The most common result of overpricing is that the house will stay on the market through a series of agents and incremental price reductions. Eventually, the price will hit market value and a sale will occur. But, depending on the sellers’ circumstances and market conditions, that can take months or even years.

Preparing a home is one way to sell it quickly

By MATTHEW McGRATH
No matter what the market looks like, selling a home is about getting people into the house and getting them to imagine themselves living in that space.

And, let's face it, the housing market has been better.

The number of homes selling are dropping, prices are falling and the number of homes on the market are increasing, along with foreclosures and repossessions.

The National Association of Realtors, in its April home sale forecast, does not expect the housing market to get any worse. But, it also does not expect that the housing market will get any better for at least six months.

As any real estate agent would say, the more time a house spends on the market, the less likely the owner will get their asking price.

Despite the market, preparing a home for sale, or staging it, is one way to close faster.

"It's just the basics," said Robert Bornstein, the owner of Homeowner Concepts and 123 Realtors in Toms River. "You have to improve curb appeal and reduce the clutter in your home."

"A couple of years ago, this would not have been necessary," said Phyllis Pamfumi, owner of Restyled to Sell in Old Bridge.

Now, it's absolutely necessary, she added. "Especially, in this market."

How to stage a home for sale depends on the type of home being sold and the neighborhood where it's located.

"You don't want to put in granite counter tops into your kitchen if you live in a moderate neighborhood," said Stephanie Singer, a National Association of Realtors spokeswoman. "That may not be the type of improvement that buyers want."

New siding, windows or landscaping might be warranted outside. Inside, new carpeting could be installed, new paint applied, and family photos or other knickknacks removed.

"You want to create the illusion of space," said Jayne Camlin, an agent with Gloria
Nielsen Realtors in Englishtown. "You can't sell how you live."

Rearranging furniture or painting a room to accent the home's highlights is important because it draws buyers' attention away from the sellers' lives and into the way they think their lives could be in a particular home.

"They are not buying your furniture," Pafumi said. "They are buying the fireplace; they are buying the picture window or they are buying the square footage."

Singer recommended checking the competition by going to neighborhood open houses. It's a good way to compare a home to others in the same area, she said.

"You want your home to look like others around it," Singer said.

Staging a home before it goes on the market is the key.

"A lot of people stage the home after it has been on the market for six months. By that time, they have already gone through two price reductions," Pamfumi said. "When it's market-worn, we have to stage it to get that asking price."

Potential buyers need to be "wowed," when they walk into a home, Singer added.

What an Appraiser Looks For

Basically, home appraisers arrive at a value by looking at what similar homes have sold for in the area the last few months. They get comparables from public records, local multiple listing sales, and their own experience in the area. The appraiser schedules a walk-through to determine the condition and how the home compares with similar sales in the area.
Since appraisers are human, they have their opinions and prejudices. Two appraisers can look at a home and come up with two different opinions, even though both are following accepted appraisal standards. They can also miss problems, make mistakes, read the measuring tape wrong, and all the other things people do. So what do you do if you get a low appraisal? If an appraisal comes in low and you disagree with it, most appraisers will listen to your argument. But, you’ll need to provide solid evidence that they missed the call. For instance, if you have some comparable sales in the area they missed, that helps. Or if the appraiser got the square footage wrong, you can tactfully bring it to their attention that a remeasure will confirm your figures.
The appraiser is not your enemy, and you don’t want to make her one. If there are problems, it’s best to talk to the appraiser and find out why. Most of the time more data or repairs can resolve these problems.

Appraisals: They’re Not Inspections

Many buyers believe that an appraisal will uncover problems in a home. While it’s true that obvious problems will be flagged, appraisers are not home inspectors. An appraiser’s job is to make sure the property’s market value is in line with the sales price to protect the bank’s investment.
To clear up this confusion, the Department of Housing and Urban Development (HUD) requires FHA buyers to sign a form affirming that they understand the appraisal is not an property inspection or warranty. HUD received many complaints from people who thought FHA appraisals should have found problems that surfaced after they moved in.