REThink Real Estate

Tara-Nicholle Nelson
Inman News®

Q: I am on a mission to buy a home. I’ve wanted to own a home my entire life, and thought I would miss the opportunity to buy while the market was down, because I had no real savings when the market crashed. I think I’m ready, though, and prices still seem low. What should I be doing now to make this happen in 2012?

A: Let me count the ways — I mean, the things — you can and should be doing now if you want to buy this year. The recession has done lots of favors for buyers-to-be, including dropping prices and interest rates to bargain levels. But it has also created a lending and housing market climate in which loans are tough to get, tensions about buying into a down market run high, and transactions are harder and longer to close than they have ever been.

If I were talking to a friend who wanted to throw a New Year’s 2013 party in her new home, here are the things I’d tell her to do, stat:

1. Fix credit problems. More deals than ever are dying on the vine, and credit problems are a top reason home-sale transactions fall out of escrow. Detect and correct errors on your credit report now by reviewing the federally mandated free reports you can get at AnnualCreditReport.com.

2. Study up. Do some research, both online and offline, into things like:

Areas: Start your online research into decision points like tax rates, school districts, neighborhood character and even prices in various areas. Check out NabeWise.com for some local insight into neighborhood flavor and personality.

When you start connecting with local agents, ask them to brief you on neighborhood market dynamics. They can give you a deeper view into need-to-knows like how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search vis-à-vis what you have to spend.

Agents: This is the perfect time to ask your family and friends for a referral to an agent they know, have used and love. Then, follow up by doing an online search for the agent’s name and seeing what sort of online reviews and activities you find. When you’ve narrowed the field down to a few, call them up and set up a meeting to find out if you’re a good fit.

Distressed properties: In some areas, more than 40 percent of the homes on the market are short sales and foreclosures, and they involve a very different timeline and set of facts than traditional home sales. Read up and talk with the agent candidates you interview about what you should expect from these types of listings, to minimize surprise and manage your expectations way in advance.

3. Save even more. Sounds like you’ve worked hard for a number of years to save enough cash that you think you’re in the clear when it comes to funding your down payment and closing costs. Studies show that after months of saving, people often let up and relax into a spending season. Even at your early stage in the process, it’s easy to start noticing and buying the furnishings and touches you want to install in your new home.

While I don’t want you to feel deprived or forgo amazing and affordable deals on things you know you’re going to need, I assure you that no matter what amount of cash you have on hand, when you start house hunting, making offers, closing your transaction or moving in, the time will definitely come when you’ll wish you had more.

You might want to ratchet up your offer a bit to best another buyer, or you might just end up with a place that needs a little sprucing up. It might be months before you know exactly what you’ll need extra cash for, but now is not the time to press the gas pedal when it comes to your monthly spending.

4. Purge. Now’s the time to sell, donate or give away as much of your junk or, excuse me, precious personal possessions as you can. Use the proceeds to pad your cash cushion, or tuck the donation receipts away for your tax records next year.

Start here, and chances are good that your house hunt — and purchase — will be in full swing by spring, if not sooner.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Book Review: ‘The Prosperous Heart: Creating a Life of “Enough” ‘

Tara-Nicholle Nelson
Inman News®

Book Review
Title: "The Prosperous Heart: Creating a Life of ‘Enough’ "
Author: Julia Cameron and Emma Lively
Publisher: Tarcher/Penguin, 2012; 240 pages; $25.95

I read a lot of books — over 200 just in the last three years. I bring up that number by way of pointing out the scope and significance of this statement: one of my top 10 favorite books of my entire lifetime is "The Artist’s Way."

It might sound artsy-you-know-whatsy, but since its 1992 publication this masterwork has served over 3 million artists and others who need to be — or simply want to be — creative, with its powerful tools and insights for getting and staying unblocked.

While it has served that role in my own life in my work as a writer and creator of digital content, "The Artist’s Way" has been at least equally as impactful in my entrepreneurial, personal, financial, and career endeavors. The ability to think flexibly and innovatively in crafting original solutions to problems has been of great, great value (and has probably saved my bacon more than a few times).

But I have long thought of my personal non-artistic uses of the book as rogue, or off-label, specifically when it comes to matters of finance and business. "The Artist’s Way" was intended for artists, after all — it’s not called the "Businesswoman’s Way" or the "Money Maven’s Way."

So imagine my delight and surprise to learn that the creator of "The Artists’ Way," Julia Cameron, was releasing a title on that topic nearest and dearest to my heart: prosperity. In her new book, "The Prosperous Heart: Creating a Life of ‘Enough’ " (Tarcher Penguin, 2011),Cameron and co-author Emma Lively aim to first reset readers’ understanding of prosperity as a spiritual matter, not a monetary one.

They carve out a new definition of prosperity as having faith, satisfaction and "enough" — "having a life beyond need and worry." Financial healing, they make sure to point out, is included, but is only one element of true prosperity.

After dealing with definitions, Cameron and Lively provide a set of five tools to help readers generate this expanded sense of prosperity. The first two, dubbed "Morning Pages" (three pages written longhand, stream of consciousness, first thing every morning) and "Walking" (literally, taking a 20-minute walk two or more times a week) are tools used in "The Artist’s Way" to unleash creative flow.

In "The Prosperous Heart," Cameron slightly repositions them as tools for cultivating emotional and financial clarity, especially when it comes to understanding where your values and your actions are not in alignment, and healing that disconnect.

The next two tools are much more financial in nature, but are still uber-simple: "Counting" (tracking every dollar and cent that flows in or out of your hands and accounts) and "Abstinence" (refraining from creating new debt, with exceptions for car and home loans that are affordable vis-a-vis your monthly income).

The last tool, "Time-Outs," are like micro-meditations —  5-minute a.m. and p.m. quiet times that we can use as check-ins with ourselves, our feelings and our choices (about finances or otherwise) or to pray, meditate, or otherwise get "in touch with a deeper, kinder, wiser part of ourselves."

Beyond their utility for their intended purposes, all the tools can also be used to help detect where the bulk of your own personal challenges in the prosperity realm may lie. The more resistance you feel to the idea of practicing any given tool, the authors say, the more valuable that tool will be in creating the prosperity you seek.

(This mirrors precisely the lesson I learned long ago from an old yogi from India, who brusquely overruled my protests that I’d been too tired to come to class one evening by declaring that the times when I most feel like staying at home are the times I stand to gain the most by coming to class and practicing, anyway. How true that has proven to be in the years since. When I’m too tired to worry about whether I’ll be able to balance on one foot, I’ve found that it is much easier to do so.)

After introducing readers to these tools and making the case for incorporating them into our daily routines, Cameron and Lively provide a 12-week course in prosperity, touching on everything from:

• inventorying and examining your spending habits, money fears, relationships and past losses;
• trusting in a higher power and in yourself to provide for your wants and needs; and
• practicing kindness, forgiveness and velocity: the authors’ term for not too little and not too much action.

If spiritual matters or references, of even a nonspecific, nondenominational nature, tend to frustrate or offend you, "The Prosperous Heart" might not be for you. One of its core premises is that a higher power exists that wants to and will provide for you.

While the authors carve out an extremely broad realm of how individual readers might conceive of that spiritual force, some might find that to be a turnoff.

If, on the other hand, you do believe that some sort of higher power does exist in the universe, and you have been plagued by money problems or worries, have experienced hard times, or simply crave to feel at ease and abundant in the financial realm of your life, it would be a serious strategic error to omit "The Prosperous Heart" from your library.

It should sit side by side on your bookshelf or in your e-book reader with other authoritative titles about organizing, saving and investing your money.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Mood of the Market

Tara-Nicholle Nelson

I recently bought a couple of spa treatment packages for a friend’s birthday (as much as a gift to myself as to her, to be sure). The package included a pedicure and a massage for the price of the massage, but had a bizarro restriction that required I pick the gift cards up at least one day prior to spa day.

The problem: The spa was across a bridge from my town. Despite my very best calculations, I hit unexpected traffic and it took me an hour’s drive just to pick them up.

It’s a good thing for the spa that I was literally stuck on that bridge, unable to turn around; otherwise, that would have been an undone deal. I was very clear that the value of my hour far exceeded the value of those two "pedis."

In the end, the conditions I had to surmount to take advantage of the bargain negated the value of the deal — and then some.

And that happens much more frequently than you’d think in the world of real estate. Today’s ridiculously low prices and interest rates, combined, seem like the perfect storm for finding a great deal.

But some buyers run into — or even unwittingly create — circumstances in an effort to cash in on the bargain that deactivate or diminish the full value they otherwise stand to gain from buying at the bottom of the market, for both home prices and interest rates.

Here are three ways homebuyers are defeating their own deals in today’s market:

1. House hunting too long. As many as 60 percent of the homes for sale in some markets are short sales. Many other listings are bank-owned (also known as real estate owned or REO) properties, and those homes tend toward two extremes: terrible condition, or so nice at such a low price they receive multiple offers.

Even the nicer, nondistressed homes on the market can end up in and out of contract over and over again due to appraisal or other lending-related issues.

As a result, it is not at all bizarre to hear homebuyers today say they’ve been house hunting for a year, 18 months, even two or three years. When you house hunt that long, you become susceptible to house hunt fatigue, which causes irrationally extreme overbidding out of sheer exhaustion.

Alternatively, it can cause you to settle for whatever house you can get, even if it doesn’t actually meet your needs — then spend the next 10 years obsessively spending to upgrade, improve, repair and furnish the place to try to make it more like the home you actually wanted.

Both of these outcomes negate and deactivate the bargain you stood to score.

To avoid house hunting too long, it’s uber-important to get and stay clear on the differences between what you want and what you need, and to work with a local real estate professional you trust.

Look to your agent to get and keep your expectations centered in reality, so you can make more strategic decisions throughout your entire house hunt, like house hunting in a price range where you’re likely to both find homes that will work for your life and be successful in your efforts to obtain one.

2. Making lowball offers way too low. Overbidding seems like an obvious way to cancel out the bargain potential of your deal. But making excessively low offers — offers sellers couldn’t afford to take if they wanted to — can have the very same result.

Buyers who think they can operate strictly on the basis of buyer’s market dynamics — without realizing that most sellers will need to make enough to pay off their mortgage or at least receive the fair market value for their home — are cutting off their own noses to spite their faces, all in the name of trying to score an amazing deal.

Note to "lowballers": If you don’t actually secure the home, the superlow price you offered is no deal at all.

3. Freak-outs, stress, drama and mayhem. Once was, it was mostly the buyers uneducated about the homebuying process who tended to freak out and stress the most, especially at the top of the market. These were the folks who found themselves defeated at every turn by buyers who knew what they were up against and were prepared to make their best offer on their first offer.

Fast forward, and now the norm is for buyers to spend much more time reading up on what to expect, but the inundation of information can create brand new mindset management challenges.

Almost every buyer is stressed about whether they can qualify for a loan, and about buying into a down market. Some buyers try to apply national headlines about home prices being depressed to the superlocal dynamics of their neighborhood market.

This is unwise if you happen to be, for example, trying to buy a home in the boomtown real estate markets of Silicon Valley. Others go the opposite direction and deny that the basic truths about, say, buying a short-sale listing will actually apply to them (attention homebuyers: buying a short sale usually takes a long, long time).

The emotional freak-outs that result from having your expectations shattered, sometimes brutally, in the course of buying a home often lead to panic-based and fear-based decisions, which can be costly in the short and long term. Additionally, the stress itself can take a toll on your ability to be productive at work, and can even impair your relationship with your mate, neither of which are worth any deal you think you stand to strike.

Again, managing your expectations by working with a trusted broker or agent you feel comfortable relying on to understand the market in your neck of the woods and the type of transaction you want to pull off is essential to downgrading the role emotion plays in your real estate decision-making.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

REThink Real Estate

Tara-Nicholle Nelson
Inman News®

Editor’s note: This is the second of a two-part series. Read Part 1: "When it makes sense to keep an underwater home."

Q: At the top of the market, I owned three properties: my first home (in a marginal neighborhood, now about 100 percent upside down), my own residence (a big fixer in a great neighborhood), and a triplex I bought as an investment (an OK neighborhood, needed some work, fully rented, but now upside down by about 30 percent).

When the market turned, I had a couple of bad tenants in my first home and the triplex that set me way back financially, and I was unable to borrow the money I needed to fix the house I lived in. I did a short sale on the fixer and got temporary loan mods on the other two, and moved back into my first home.

The problem is, they’re both so upside-down and don’t seem likely to come back up anything soon … should I just sell everything and start over?

A: Last week, we covered the preliminary step I want you to take with respect to your personal residence, of examining whether the home still works for you, for the most part, as a personal residence, notwithstanding the fact that it’s upside-down.

Many a homeowner makes the wise decision of staying put in an underwater home on the grounds that the home is functioning well as a home for their family, is affordable and looks like it will remain functional on those counts for the foreseeable future.

I’m aware, though, that your situation is complicated by your perception of both of the properties at issue, at least in part, as investments that now seem likely to have outlived the purpose for which you bought them.

I can’t give you a black or white answer in terms of whether you should sell or hold either or both of your properties. But I can give you a set of considerations to factor into your decision. After you evaluate the life-property fit of the home you currently live in, consider these three things:

1. Your options. One of the biggest, most stressful mistakes we make, as humans, is to agonize over decisions without a complete understanding of the full spectrum of options that are available to us. So, educate yourself!

Get online and do your reading, talk with your own lenders to see what options they might have available, and then also talk with local professionals you trust — at the very least, include a real estate broker, a mortgage pro, an attorney and a tax expert on this list. They might know of options you don’t, and they might be able to help you understand the timelines and feasibility associated with each option.

For example, banks seem to be granting short sales at higher rates than before, but they still take a long time, and the exemption from federal income taxation on the debt forgiven via a short sale is currently set to expire at the end of 2012. That might suggest you should list your properties for sale and apply for short-sale approval, stat.

On the other hand, there have been a number of governmental foreclosure relief program developments that might offer help for you, some of which are available only in the hardest-hit states.

The pros can also help you get a deep understanding for all of the tax, credit, financial and even legal implications of all the options available to you. Get the information and professional input you need to fuel a clear, complete understanding of your options before you move forward with your decision-making process.

2. Your values. The decision whether to hold or sell your properties is a hybrid business/personal decision that will impact the overall "after" picture of your life. While you can and should factor in input from professionals and even personal advisers whom you trust are knowledgeable and have your best interests at heart, only you can decide what’s really important to you in a way that drives the ultimate decisions you make.

(And decision really should be decisions, plural, because you could very well create an action plan that involves putting the place on the market as a short-sale listing while you apply for a loan modification, or some other set or sequence of actions.)

So, when I say to factor in your values, I’m simply encouraging you to get clear on what is important to you. Owning the place you live? Tax advantages? Reducing your expenses? Saving up to secure your retirement?

This phase of the process will help you get out of the very common real estate decision trap of doing things for their own sake: owning because ownership is good, or getting out of the market because that’s the supposedly smart thing to do.

Whether you decide to hold, sell, or try to make some other changes to your situation then sell as a backup plan, it’s important that each action step you build into your plan be set in service of some higher life aim, goal or value.

3. Your priorities. Once you do a deep dive into your values and even list them out in writing, one essential truth will quickly become very evident: You can’t (likely) have them all. Early on in this decision process, you’ll need to rank your values and objectives in order of importance, and communicate that to the professionals you look to for advice.

There are trade-offs involved in virtually every real estate decision. For example, you might have to give up some tax benefits of property ownership to cut your costs and save your financial acorns for the winter of retirement.

You might have to sacrifice free time and get a side job to make your real estate obligations if you decide to keep the triplex after the mortgage adjusts (if you’re currently paying only interest, a mortgage adjustment that happens in January might involve a decrease in interest rate but still increase the overall payment if you have to begin paying toward principal).

Only you can know what’s important to you, in your finances and your life, to make the critical decisions you now face. So get clear on your full range of options and the implications thereof, build out a strong sense of your own values and life vision, then prioritize and rank the things that are important to you. Once you have these inputs, your action plan should soon become clear.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Book Review: ‘The Smartest Money Book You’ll Ever Read: Everything You Need to Know About Growing, Spending and Enjoying Your Money’

Tara-Nicholle Nelson
Inman News®

Book Review
Title: "The Smartest Money Book You’ll Ever Read: Everything You Need to Know About Growing, Spending and Enjoying Your Money"
Author: Daniel R. Solin
Publisher: Perigee, 2011; 304 pages; $25

Today’s post-recession, pro-consumer, anti-bank zeitgeist reflects a dramatic sea change in the world of personal finance advice. Gone are the days when the cable TV pundits whose eyes bulge as they holler hysterics about what, when and whether to buy, sell or hold are taken seriously as anything but entertainment.

All the rules of thumb (e.g., owning a home is good) have been revised and nuanced (e.g., owning a home is good if X, Y and Z, but renting makes more sense if A, B and C).

And there’s also been a sea change in how this advice is delivered. Instead of a once-weekly column in the local paper by a financial writer, these days there is a steady stream — flood, even — of advice-blog posts written by actual financial advisers and delivered in short, simple chunks right-sized for today’s shrunken attention spans.

Daniel R. Solin is one such expert/blogger, and uses the same pithy style, linking to complementary online resources as he does in his advice columns on HuffingtonPost.com and USNews.com in his new book, "The Smartest Money Book You’ll Ever Read: Everything You Need to Know About Growing, Spending and Enjoying Your Money."

Here are four of Solin’s smartest financial do’s and don’ts:

1. Don’t try to play the market. Solin practically pleads with readers not to base their housing or stock market investment decisions on their guesses as to whether the market will rise or fall, and when.

On real estate, Solin says to get aggressive about building equity by making conservative mortgage decisions and extra payments, when possible, rather than trying to sell at the top of the market and buy at the bottom.

And when it comes to the stock market, Solin exhorts readers: "Don’t just do something — stand there!" Solin repeatedly cites historical evidence that simply getting and staying in the market yields better results in the long term than what he calls "hyperactive" investing.

2. Do consider other options to a reverse mortgage to access fast cash in retirement. "Smartest" offers loads of Solin’s advice for retirees whose portfolios, plans and bottom lines have been adversely affected by the recession.

Rather than seeing a costly, legacy-draining reverse mortgage as their first resort for access to large amounts of cash, Solin first cautions retirees to get serious about whether anything but health, food and shelter are truly needs vs. wants (note: helping your children is not a need, in his book) and lists a number of more attractive, but less commonly considered options for accessing cash, including a "regular" home refinance or loan against a 401(k) or cash value life insurance policy.

3. Don’t confuse salespeople for financial advisers. Calling the investment industry "friend and foe," Solin points out the sobering truth that 95 percent of actively managed funds fail to equal or beat their market indexes, yet the fees for investing in actively managed funds tend to be several times more expensive than for index funds, eroding whatever returns investors in active funds do attain.

Solin urges readers to be aware of the difference between an investment broker, who he says is more accurately described as a salesperson; and a financial adviser, who can take a look at your life and your money and help you set goals, pick low-fee investments, rebalance your portfolio, manage your tax exposure and manage your emotions.

Solin recommends that readers put together a trusted team including an estate planning attorney, a certified public accountant (CPA), and fee-only (i.e., not commission-based) investment and insurance advisers.

4. Do shop around. Solin likens our monthly income and expenses to our body’s metabolism. In the same way we gain weight over the years by consuming calories on autopilot, we can lose cash by having our insurance, investment and other expenses auto-debited, making it highly unlikely that we’ll notice when fees and bills rise.

Solin advises checking in on these items at regular intervals, and shopping around to see whether we can find a better deal.

"Smartest" makes a great effort to be comprehensive in terms of covering every area of financial life, but it doesn’t actually go deep enough to be the only book you need. Rather, it is a great start at giving you the rationale for getting motivated to grow up and get serious about your finances, and provides you with a primer and a road map for the work ahead of you.

With 40-plus chapters averaging a couple of pages in length each, "Smartest" feels rather like a collection of Solin’s blog posts; this will leave some readers hungry for more depth and detail, but will certainly appeal to many others who cringe at the density of a more traditional personal finance title.

To its credit, "Smartest" also does a good job of pointing out where you can find tools to execute Solin’s recommendations or learn more about a given subject online, mostly on the wildly popular and free, do-it-yourself money management platform Mint.com.

Generally, "Smartest" is written in plain English — though its approach is a tad bit imbalanced, getting a little bit in the weeds and detailed in the sections of his particular expertise and borderline vague and oversimplified in others.

However, if you are looking to start your proactive financial planning up again, after the trauma of the recession, or if you are just taking control of your finances for the first time, "Smartest" is a smart choice for the starter book you need to put your own personal money train in motion.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

REThink Real Estate

Tara-Nicholle Nelson
Inman News®

Editor’s note: This is the first of a two-part series.

Q: At the top of the market, I owned three properties: my first home (in a marginal neighborhood, now about 100 percent upside down), my own residence (a big fixer in a great neighborhood), and a triplex I bought as an investment (an OK neighborhood, needed some work, fully rented, but now upside-down by about 30 percent).

When the market turned, I had a couple of bad tenants in my first home and the triplex that set me way back financially, and I was unable to borrow the money I needed to fix the house I lived in. I did a short sale on the fixer, got temporary loan mods on the other two, and moved back into my first home.

Problem is, they’re both so upside-down and don’t seem likely to come back up anything soon. I’m 45 years old and have a great job, but I don’t like the neighborhood I live in now and I can barely ever save anything because these properties — which I thought would help fund my retirement — eat me alive.

Also, I just got word that my loan mod on the triplex is going to expire in January. Should I just sell everything and start over?

A: First, know this: You are not alone. More than 25 percent of home mortgages nationwide are upside-down.

While the majority of Americans have held onto homes with declining and stagnant values in the hopes that the market will recover to avoid locking in their losses, the data is clear on the fact that those who own homes worth less than they owe are the borrowers most likely to fold, short-selling, strategically defaulting or negotiating a "deed in lieu of foreclosure" with the bank.

I don’t think data exists on this point, but I suspect these are the borrowers most prone to give up on the excruciating and prolonged path of home retention efforts the most easily. "Why throw good money, time, energy and emotions after bad?" they wonder.

A few years ago, I would probably have fallen into the cheerleader camp, exhorting "Hang on! Hang in there!" Now, though, going into the fifth or sixth year of this real estate recession, depending on whom you talk to, I’m more jaded and realistic.

As I see it, you have two different scenarios that make up your dilemma, and there are a couple of different ways to think about them. First, let’s limit the scope of our conversation to the situation on the home you actually live in. Next week, we’ll look at the broader constellation of issues you have, including both your residence and the investment property.

My advice to people in your situation is to always go through the preliminary step of getting clear on whether their personal residence still works for their lives as a personal residence.

If you own a home that works well for your life, is affordable and seems like it will continue to be a good fit for your life and your finances in the foreseeable future, I’m generally inclined to advise homeowners to avoid making market-based decisions about whether to continue to hold on to it, whether or not it happens to be upside down.

On the flip side, I’ve seen numerous situations in which families have expanded or shrunk or need to relocate, rendering the upside-down home a serious mismatch. In these cases, it makes sense to more seriously consider whether to divest.

I’d encourage you to ask yourself that question — "Does this home ‘fit’?" — regarding your personal residence. You mention the neighborhood weighs against that finding of fit; you might also be thinking that the neighborhood could prolong the "value recovery" timeline.

Take a more holistic viewpoint and make a decision about whether the home overall still works for your life or not — outside of the context of it being underwater. Whether it does or does not, this knowledge will get you started down the path of cultivating the clarity you’ll need to put a full action plan and decision-making process in place. We’ll discuss what the rest of that plan looks like next week.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Book Review: ‘What’s a Homeowner to Do?’

Tara-Nicholle Nelson
Inman News®

Book Review
Title: "What’s a Homeowner to Do?"
Author: Stephen Fanuka and Edward Lewine
Publisher: Artisan, 2011; 432 pages; $17.95

Nearly every mother will attest that at some point in her parenting career, often while still pregnant, every worst-case scenario that could ever possibly happen to her progeny (or progeny-to-be) has run through her mind.

Laid-back moms take a deep breath and dismiss such fears as fanciful.

But many others take the Scout-inspired "be prepared" approach, taking serious measures against kidnapping by tagging their kids with GPS-enabled trackers; against school admission drama by sticking their toddlers in enrichment classes ranging from Kinder Kung Fu to Mandarin; and against the ills of being whatever the opposite of well-rounded is (ill-rounded? squared?) by enrolling them in hip-hop dance, golf, Latin and Hebrew school — all at the same time, all before they reach grade school.

This is yet one more way in which buying a home has parallels to birthing — and raising — children. Years before they ever buy, when they’ve barely begun padding their down-payment nest eggs, buyers-to-be report tossing and turning, waking up with night sweats, concerned about all the calamities that might befall their home.

What if a hurricane hits? An earthquake? What if they’ve been completely spoiled by apartment living, neglect to spend 10 hours every weekend working on their house and let the place fall into ruin?

What about all the more mundane, and more-likely-to-arise events that go along with homeownership: Will their effort to unstick a window send them to the hospital, or their do-it-yourself efforts to replace a single roof shingle spiral into a bigger leak than they had before?

These nightmarish concerns of homebuyers everywhere are precisely the issues addressed in the meaty little tome, "What’s a Homeowner to Do?" by DIY Network star/contractor Stephen Fanuka and co-author Edward Lewine.

If you’ve ever bought one of those little gift books that has a year’s worth of daily inspirational messages, this book will remind you of one of those — on steroids. It’s a small-format book filled with 442 tips, diagrams, and easy-to-use, bite-sized tutorials for do-it-yourself home improvement, maintenance and safety projects.

Fanuka, the star of the show "Million Dollar Contractor," teams up with Edward Lewine (who writes a couple of home improvement columns for The New York Times Magazine) to comprehensively catalog and address precisely the sorts of items that keep buyers and homeowners awake at night, offering their insomnia-soothing home improvement knowledge in a highly digestible format.

Throughout, they flag items that homeowners need to maintain on a regular basis to avoid disasters, parse out which items owners can do themselves (and which they should refer to the pros), empower them to ask the right questions and have the right conversations with those pros, and walk them through simple instructions for doing it themselves, where applicable.

The book starts out with a "green manifesto" that briefs readers on all the ways in which their homes impact the environment by offering them a long bullet point list of choices they can make to green their homes. It then moves on to cover the down-and-dirty, do-it-yourself tutorials with a chapter on how to assemble and use a basic toolkit, including what not to do (e.g., get "mesmerized by fasteners").

Then, the book proceeds to offer hundreds of mini-lessons categorized by area of a home, from the exterior, to windows, plumbing, electrical, HVAC, and such subjects as carpentry, doors and locks, walls, basements, garages, yards, and safety and security issues.

Many of these lessons, which run from how to locate a roof leak to how a door lock works, come complete with the authors’ "Tricks of the Trade," pithy one-liners with uber-handy suggestions, workarounds, troubleshooting, insider secrets for handling common issues and even warnings for avoiding common complications.

And the range of topics the authors cover maps directly to the range of concerns real homeowners have, from maintaining their roofs to installing baseboards, cabinet doors, landscape lighting and supports for adjustable shelves.

Often, these sorts of tips books can be tough to use for readers who have a high need for information — those who want to know why they should do things a particular way, or why they should trust the proffered advice.

But interspersed throughout the book’s tips on what to do to your home are highly interesting briefings on "how" things in your home work. In short-and-sweet plain English, Fanuka and Lewine answer questions like "What’s so important about rain gutters?" and "How are wooden stairs constructed?"

If you own a home and feel at loose ends when it comes to knowing what you should be doing to keep it in tip-top shape, "What’s a Homeowner to Do" is an accessible, yet smart, primer and reference guide you’ll turn to time and time again. If you’re still in house hunt mode, definitely put it on your housewarming registry — it’ll save you some sleepless nights, and maybe even some money!

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Mood of the Market

Tara-Nicholle Nelson
Inman News®

I was one of those kids who was mortally embarrassed by my parents. (I later realized that their fashion choices were not bizarre — they were just ’70s chic held over a tad bit too long.) My mother seemed always to gravitate to the yellow ‘sale’ signs on top of retail racks — which seemed horrifying back then.

And my Dad? Horror of horrors, he tried to negotiate everything — and I mean every single thing. He would actually bargain for things like TVs and computers at stores like Sears, and I would grow hot with embarrassment, detouring into what we’d now call the "tween" section, hoping no one would know we were related.

Fast forward 10 or 15 years, and you’d find me, at an appliance outlet, getting my washer and dryer for 50 percent off because the front windows had been scratched, and negotiating for them to order and install new windows before delivering the machines to me.

Or maybe you’d find me shopping my favorite consignment stores (where I still negotiate, despite the already discounted pricing) or walking straight into my favorite retail establishments and taking my familiar route straight back to the sale section, and back out when nothing strikes my fancy.

Or haggling for my car, which I bought for 60 percent — you read that right! — of the Blue Book price. Or watching my kid’s mouth gape open when I got the sales clerk to throw in the two flannel shirts he wanted with the sneakers I’d just bought him. Score more notches on my negotiating belt.

No matter how flush with cash I am, I love a deal (no, I mean, I love a deal!). I’ll spend, but I want to feel like I’m getting more than the "average bear" (to quote a famous Yogi) for my dollar.

In my adulthood, my Dad and I have often worked together on strategies for negotiating our largest purchases — particularly when it comes to real estate. (My Dad is a prolific investor, and I’ve negotiated for a hundred or so homes myself.)

I’ve noticed that my Dad and I have distinct negotiating styles. I tend to gravitate toward properties that are already value-priced, get as much information as possible about the seller’s situation, and negotiate a reasonable discount plus as many perks and incentives thrown in as I can.

I like places with major upside potential, so I can control how their value increases, no matter what’s going on in the market.

My Dad tends to run all sorts of numbers and analytics, plus wield the fact that he pays in cash, as major bargaining leverage. And his constant refrain is "Buy it right." He wants to feel that he is buying a place that already has lots of equity and/or cash flow potential because he bought it for such a low price — it takes the pressure off when he later wants or needs to sell.

We share in common that we never make our best offer on our first offer (except in a seller’s market, when all the rules change) and we virtually never accept the first offer we receive.

We both place a strong priority on neighborhoods, have a tendency to avoid getting emotionally involved or attached at all to homes, and insist on starting the negotiation off being very clear and realistic in our own minds about the contours of our own personal top or bottom lines.

As I contemplated how my father’s negotiating skills and my own negotiating styles are similar and dissimilar, I could not escape noticing how other buyers’ and sellers’ negotiating styles can be grouped into profiles, so to speak.

Some I’ve run into more than a few times in my real estate lifetime include:

1. "The Faux-gotiator." The Faux-gotiator makes a minimal effort at negotiating, because she knows that’s what she’s supposed to do. Like my Dad and I, this breed of negotiator tries to abide by the never-take-the-first-offer rule. But the Faux-gotiator caves at the slightest sense of resistance from across the negotiating table. And devotees of this style come in two varietals: lazy (they simply don’t want to do the work of negotiating, so they barely bother) and attached (they just love the house too much — or need to sell too much — to give more than a modicum of negotiating effort).

2. "The Drama Queen or King." These wannabe royals are, in some ways, the opposite of the Faux-gotiator. They make a big hue and cry about how "hard core" their bargaining skills are, about how the other side’s issues or interests are just "not relevant" to them, and about how outraged they are when they receive resistance from across the negotiating table.

Yet all that drama tends to be a front behind which they hide truly poor negotiation skills. After they wax hyperbolic, they tend to cave and strike deals not too far from the original list price or offer. Methinks they doth protest too much; often the drama is driven by a premature attachment to the property or sale, or the fact that they have no basis in market data or facts for their negotiation demands.

3. "The High-Rolling Lowballer." These folks pull up to view a modest starter home in a rapper-style Mercedes Benz, and literally drip logos in their wake as they tour the home. Though they seem to have the highest possible ratio of status symbols per square inch of body area, when it’s time to actually buy or sell a home, they insist on overpricing or lowballing the seller beyond all reason.

These folks cause lots of head-shaking by the agents and other parties in their transactions, as it seems that a slight reprioritization of their real estate matters over high-status consumer goods might make them better able to make reality-based offer and pricing decisions.

4. "The No-gotiator." These are the folks who offer to pay the list price or take the first offer, as a matter of course, even when the market or transaction dynamics suggest that they could get better terms. Some No-gotiators find the confrontational, adversarial connotations of negotiationg distasteful or anxiety-creating. Others are so attached to a certain outcome that they fear the deal falling apart too much to try to push back against the list price or buyer’s offer.

5. "The Reality Checker." Finally, there’s a fifth type of real estate consumer negotiation profile, which I’ll call the Reality Checker. These negotiators do the research. They know how long the place has been on the market, relative to average in the area; and they’re well aware of how much list prices are usually able to be bargained down in that neck of the woods.

They have asked for information about the other side’s priorities and, to the extent they received any, they have taken that information into consideration in formulating their offer or response. They are clear about what they can afford to do, and how much they simply want a particular property or outcome, but they are not overly optimistic about their negotiating prowess or unrealistic about what the market will bear.

And they don’t go in with rules of thumb — always trying to get 20 percent off, or some such. They make a smart offer (or counteroffer), or accept the other side’s position when reasonable and affordable. And, not surprisingly, they often succeed in both striking a good deal and actually getting what they want.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

REThink Real Estate

Tara-Nicholle Nelson
Inman News®

Q: As a buyer, if I make a deal to buy a house contingent on the sale of my house, but my house doesn’t sell, do I get my deposit back?

A: Rarely do I get the chance to give a short, yet accurate, answer to a real estate question, so thanks for the chance! And that short answer is yes.

If you made your purchase contract contingent on the sale of your home, and you are unable to sell your home, you have the right to back out of the sale and recoup your deposit. Of course, there are a number of scenarios that can unfold in any real estate purchase, so let me brief you on how the sale of your home (or its failure to sell) can play out vis-à-vis your and the seller’s rights and obligations under your contract.

See, negotiating to buy a home with a contingency for the sale of your existing home is the real estate equivalent of placing the home on hold for the price you negotiated. Of course, you do have to write an earnest money deposit check, so it’s not a move to take lightly. But because you do have the right to back out with no penalty at any time before your home sells and you remove that contingency, it’s only fair that the seller not be bound any more than you are. Sellers are bound to sell you the home at the price and term in the contract only if you move forward when your home sells or in response to their demand.

Under most contracts that impose a contingency for the sale of the buyer’s home, the seller has the right to demand that you either commit to moving forward with the sale (irrespective of whether your home has sold) or cancel the deal, and that you make one decision or the other within a certain period of time, often 48 hours, after the seller makes the "demand to perform," as it is called in many standard real estate contracts.

Generally, sellers make a demand that you move forward or back out in the event they receive an offer from another buyer.

If the seller makes this demand, and your home hasn’t sold, you can back out of the deal and get your deposit back. Or, you can agree to remove the contingency for the sale of your home and move forward with the transaction; if you do this, though, you should be prepared to handle the financial obligations of both homes until such time as you do sell your current home. Once you remove the contingency for your home’s sale, you lose the ability to recoup your deposit if you later have to back out of the deal because it hasn’t sold.

Note, though, that even after you remove the contingency for the sale of your home, you most likely retain the ability to recoup your deposit if you later exercise another contingency as a reason to cancel the deal. These inspection, loan and appraisal contingencies typically expire or must be removed within a fairly finite period of time — 17 days or so — unless you and the seller agree to a longer time period.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor

Book Review: ‘Laughing at Wall Street: How I Beat the Pros at Investing …’

Tara-Nicholle Nelson
Inman News®

Book Review
Title: "Laughing at Wall Street: How I Beat the Pros at Investing (By Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too"
Author: Chris Camillo
Publisher: St. Martin’s Press, 2011; 240 pages; $24.99 (hardcover), $11.99 (e-book)

I’m constantly fascinated by how widely approaches to Facebook seems to differ, from my own personal vantage point.

My entrepreneurial friends mostly use it to broadcast their business goings-on; my church friends to publicize upcoming events and pics from the annual cookout; and just about everyone I know published photos of their kids, dogs or loot this holiday season. Some people mostly post "meme"-y images; others post inspirational quotes; and still others lurk, only commenting when I post my own monthly canine pics.

And then there’s my mom, who is nowhere near old and loves her iPhone, Kindle and laptop, yet is very concerned that there’s a fine line between simply signing up for a Facebook account and actually becoming a Kardashian sister.

Enter Chris Camillo, a family man-turned amateur investor who, looking to lock down his finances in 2007, made a $20,000 investment and grew it to more than $2 million using his own homegrown market research techniques, including using Facebook as a "trend-spotting network."

In his new book, "Laughing at Wall Street: How I Beat the Pros at Investing (By Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too," Camillo seeks to demystify stock market investing and share his own approach to money matters and investment strategies.

Here are three of the strategies Camillo used to "beat the pros":

1. Simplify your money thinking. With all the investor newsletters, advisory reports, market indices out there — not to mention the complicated portfolio strategies, reallocation recommendations and such — Camillo advises readers to focus on two buckets of money: the lockbox account and the "Big Money" account.

The lockbox account is "a relatively risk-averse pool of money to which you make regular contributions with a goal of providing long-term financial security for you and your family," which Camillo recommends managing age-appropriately, not using his investment strategies.

The Big Money account is "a risk-tolerant" pool of money (gleaned from saving on investment fees, among other cost cuts) "that is leveraged and invested to provide you and your family with the opportunity to reach your desired financial goals within a concise time frame."

Your lockbox money could be a savings account, low-fee and low-risk mutual funds or, if you’re older, cash and certificate of deposit accounts (CDs). Your Big Money account is money you find by cutting current monthly costs and investment fees or even selling stuff on eBay. However, instead of funneling it into your latte fund, you are willing to invest aggressively for the potential to change your family’s lifestyle.

2. "Buy when you know something that others don’t." Camillo believes that Wall Street investment advisers might possess the skills of technical and fundamental stock-price analysis, but that Main Streeters like you and me can beat them when it comes to discovering trends in gaming, food and fashion by simply by doing our own research and observing what’s trending in the consumer habits of the people we know and watch everywhere from the mall to on "TMZ."

Camillo calls his approach "information arbitrage:" using your Big Money account to buy stocks when you see potentially game-changing information in the marketplace that Wall Street hasn’t yet seen and selling "when the game-changing information becomes widely accepted as fact on Wall Street."

Camillo’s easiest-to-understand example: When Michelle Obama dropped J. Crew’s name on "The Tonight Show" during the 2008 campaign, J. Crew stock was around $9 — that would be the time to buy. A few months after "Mrs. O" also dressed her daughters in the brand for the inauguration, the stock price had climbed from around $9 to more than $25, and financial press was blaring headlines about the uptick; a year later, it was at $50 a share.

Camillo provides a deeper, more systematic approach to following up on such pop-culture observations with research before making an actual investment decision.

3. Believe what you see. Whether you’ve noticed that every preschooler in your kid’s class is obsessed with an otherwise little-known character, or that everyone on your Facebook page is buying a particular mixer, mattress or phone, Camillo exhorts you to pay attention to these cues from your own networks as to trends in buying behavior that the stock experts simply cannot yet see.

Camillo encourages readers to begin practicing the discipline of cutting costs and compartmentalizing savings into Big Money and lockbox accounts, and to get familiar with the research and action steps he provides for following up on trends spotted and executing investment decisions in advance, so that they can act nimbly on new investment opportunities as they become apparent.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

                                                   

Contact Tara-Nicholle Nelson:
Facebook	Twitter	Email	Letter to the Editor