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Wednesday, December 16, 2009


I live in a ranch house. In the best of all worlds, I would have a laundry room on the main level. Sadly, whoever designed my house thought the basement a more appropriate place to do laundry. I hated doing my laundry because the room was so dismal and ugly. I would put it off until I had baskets of things needing to be washed.

While my basement had sort of been finished by previous owners, I had found the experience of going into my basement somewhat depressing – it was dark and uninviting. So recently I had the basement repaired and repainted, replaced a few windows, and updated my laundry room with new machines, flooring, etc. Having gone through this process, I find that basements are on my mind. Like so many others, I really don’t use my basement often, but I do want it finished nicely anyway. While I question whether I have added much to the market value of my home, I do know that I have made my home more marketable, because my basement looks great right now.

For most of history, the basement had one of two forms: a cellar or it was a section of a building containing rooms and spaces similar to those of the rest of the structure (i.e., basement flats and offices). Two images come to mind: Dorothy in The Wizard of Oz scurrying down to the cellar to escape a tornado; or that wonderful PBS series, Upstairs, Downstairs set in Edwardian London with the Belamy family living upstairs and Hudson, Rose and Mrs. Bridges working and living downstairs.

While you can imagine both of these types of basements on the North Shore, cellars are less common. Historically I don’t think basements were not particularly significant. If you wander through the older homes in Wilmette and Evanston, it’s pretty clear that the basement was a place for people to work and not live. With their low ceilings, unfinished spaces, laundry rooms and other storage they made for rather unviting spaces. These older homes usually had basement space that was under the full footprint of the house. Newer houses built during the latter half of the 20th century had the house built over basement and crawl space (aka, partial basement). What I’ve noticed with the newer construction, the basements are full again and are often amazing living spaces.

As a kid, our basement was pretty big but somewhat of a dungeon. It was series of rooms where we kept the ping pong table, laundry area, furnace and boiler; had storage for luggage, Christmas decorations, wine, old magazines and then there was a workroom with hammers and other tools. We even had a functioning toilet in our basement. I can’t imagine how depressing laundry day must have been for my mother: with the ugly old concrete sinks and dismal lighting. But there was also natural light with very big window wells. I had never even heard of a sump pump until I was adult – I have no idea when they became a standard fixture in most homes. Every time there was a major rain storm, the water might back up in our basement and we would scurry downstairs to take things off the floor. I think my folks had only one or two major flooding situations in the basement in over a 40 year period. When that happened everyone worried about getting electrocuted in the basement as you pumped out the water and cleaned up the mess.

Beginning with the development of large, mid-priced suburban homes in the 1950s, the basement, as a space in its own right, gradually took hold. Initially, it was typically a large, concrete-floored space, accessed by indoor stairs, and with exposed columns and beams along the walls and ceilings, or sometimes, walls of poured concrete. Things were dry walled and finished with new living space added for the family. You can find post war homes in Kenilworth Gardens, for example, that there are little family rooms with little fireplaces. The basement became real living space to accommodate growing families.

Often my clients ask me about their basements. I have definite opinions but no facts… I’ll share with you my thoughts. Are you in need of more space? The basement is a logical place to begin, because you are not changing the footprint of the house and the cost of finishing a basement is generally quite a bit less than adding on to a house. A nicely finished basement up to code, with proper building permits is probably much more valuable from a resale point of view than an unfinished basement. However, I think a DIY basement with really cheap materials is probably less valuable to most buyers than an unfinished basement. Another question I get is about putting a bathroom in the basement. Ask yourself, how do you plan to use the basement? Are you going to go down there and hang out for long periods of time and/or is the only guest room in the house in the basement? Then yes, a bathroom might make sense. I question whether you will gain much by having a bathroom in the basement, unless you plan to frequently use the basement.

Some of the basements I see today – particularly in the newer homes – are amazing with temperature controlled wine cellars, home movie theatres, fitness and workout rooms, guest bedrooms and baths, full kitchens and living areas. I’ve seen a basketball court and a golf driving area in the basement. I find that a lot of people make these incredible basements and then never use them. It’s like they are for show, but little else.

Personally, I have no interest in hanging out in the basement, as such the improvements I made were not terribly grandiose or extravagant. A nicely finished basement in the Midwest probably recovers about 70% of its cost. Is it worth it to you to know that about 30% of what you spend, you’ll never recover? I believe if you really are going to use the basement a lot, then do a nice job and finish it… otherwise think twice before investing a lot of capital improvement dollars into space you use infrequently. I found a nice series of articles in that you might want to read before tackling a basement project. Basement Remodeling

So now, I’m off to do my laundry – it’s a lot more fun these days.

Friday, December 4, 2009

My life in real estate: FSBO - Part 2

OK, so my attempt to buy a "FSBO property" was a costly and painful experience. How about selling my own place as a FSBO? Potential clients ask me all the time what I think about FSBO. This is my standard answer. I think it’s a great idea – if you already have a buyer lined up and you're willing to commit to the time and activities that are necessary to getting a house sold. Otherwise, I’m not so sure it’s a great idea.
I’ve owned four homes and have sold two of them without the benefit of a real estate agent. In both cases, the buyer approached me and asked if they could buy my home. How could I say no? Regardless, I can’t say that I actually sold my places as effectively as I could have. I didn’t know what I was doing with the first sale. The second time around, I think I managed it a lot better.

Wrong way:
While the sale of my first apartment to a neighbor was actually easy and straightforward, I have no idea if I sold it for the correct price. I looked strictly at the apartment as what it financially meant to me. How much did I pay for it? How much did I put into it? I made that the sale’s price. Pretty myopic thinking – but I was young and inexperienced and didn’t consider the most important factor … the market.

A property is rarely sold in a vacuum -- it is sold in the context of the local real estate market. I think this is a concept that many of today's sellers are grappling with; they are looking at their homes with the formula of Cost + Improvements = Value. WRONG. The value of a property is what a buyer is willing to pay for it. When a buyer has a plethora of homes to choose from, they are more than likely going to buy the house that has the best perceived value. Getting the price right is key. FSBO's are not necessary objective in pricing their own homes. I've seen many FSBO sellers eventually list with a realtor, because they either don't price their homes correctly or they get overwhelmed by the process of marketing and showing their own property.

Right way:
I think my second FSBO experience was done correctly. I had a realtor neighbor, who had a lot of listings in my condo building. I pulled together all the information about the capital improvements I had made to my unit and asked her to stop by and take a look at my apartment. She gave me the comparables of all the units that had sold in my building and she brought several colleagues over to see my unit. Together they gave me a ball park figure about what the price I could both list and sell my unit. While it was only an estimate – it was educated estimate. I had a better understanding of the market value of my unit. I suggested a price to the person who had approached me and she accepted my price.

The next step was we put in writing our “understanding of the terms of sale.” We both signed the letter of understanding and then turned it over to our respective attorneys to hammer out the contract. It couldn’t have gone more smoothly. Why? I knew the buyer and I knew she was pre-qualified to purchase the unit…. And we put everything in writing before we got the lawyers involved.

Selling your own home is not as easy as it appears particularly when you DON’T know the buyer. In fact, many FSBO sales fall apart because the buyers are often financially unqualified. Sellers can waste a lot of time with people who don’t have the appropriate credit rating or financial capability to purchase their home.

Second, you can be inviting strangers into your home. With a realtor involved you know that buyer has been pre-screened and should be qualified to purchase your property. I recommend that if you’re determined to sell it as a FSBO, be prepared to pay a buyer’s broker fee (typically 2-3% of the sales price) to any agent who presents a qualified buyer. It can save you a lot of frustration.

According to the National Association of Realtors, FSBOs accounted for 13% of home sales in 2008. The typical FSBO home sold for $153,000 compared to $211,000 for agent-assisted home sales. FSBO not only include a transfer of property between distinct homeowners, but also transfer between family members and trusts. It’s estimated that the number of FSBOs where they are private sales between people who know each other to be about 5% of the time.

Most Difficult Tasks for FSBO Sellers:
· Selling within the planned length of time: 13%
· Getting the right price: 12%
· Preparing/fixing up home for sale: 11%
· Understanding and performing paperwork: 10%
· Having enough time to devote to all aspects of the sale: 8%
Source: 2008 National Association of REALTORS® Profile of Home Buyers and Sellers

People often watch what they see Realtors do and have the idea that the job doesn’t require much effort. I have to be honest, before I started this work, I felt the same way. I couldn’t have been more wrong. To be an effective realtor, you work 7 days a week – often doing work that is not visible to others. It’s work that requires a great deal of studying and analyzing the market, touring and evaluating properties, reading tremendous amounts of information, and developing creative solutions to some unusual situations. Selling a home – particularly in this market -- is not easy work. So unless you’re prepared to focus on the job full time, I would suggest hiring a realtor.

So do I believe that FSBO is a good idea for sellers? Sure, why not? If you’re willing to commit yourself to the time, the work and the process then by all means sell your own home. But, as said before, it sure helps if you already have the buyer lined up.

Monday, November 9, 2009

My life in real estate: FSBO – part 1

Fast forward to my next life experience in real estate....

I decided it was time to move from Scott Street. My income was better, so I could afford a bigger place. I wanted both a change and an apartment with a second bedroom so houseguests wouldn’t have to sleep on a sofa bed in the living room. Because of my first venture in real estate, I had come to believe that real estate agents were not to be trusted and I could do a lot better if I represented myself and bought directly from the owner of the property.

Without the benefit of the Internet, I began scouring the want ads of the Tribune. I avoided any property that had a real estate agent listed and honed in on FSBO (for sale by owner) properties. I found just the right apartment on Lincoln Park West. I went to see it and liked a lot about the place… no electric heat; great views of the park and while the owner seemed reasonable, he was a bit overboard about how great his place was. I made an offer. He didn’t particularly like the offer, but he accepted it. Done deal, right?

Because there was no realtor involved, I assumed my attorney could take care of everything. I didn’t have a real estate contract to complete with the seller, so the transaction was verbal at that point. I suppose I’m dating myself when I say, that at that stage in my life, I really did believe that a person’s word actually meant something.

I called my attorney and asked them to write up a contract. So back and forth my attorney negotiated with the seller’s attorney. Then BANG: the seller had signed a deal with someone else. I was flabbergasted. I had been negotiating in good faith thinking that I was going to be getting a new home. I thought we had a deal; after all we had a verbal agreement.

I guess I’m a little more cynical these days than I was back in 1986. I called the seller and let him know what I thought. He certainly didn’t feel any guilt or remorse about what he had done – his word didn’t mean anything – it had to be in writing.

As a postscript: about a month later, I got a bill from my attorney for $3,000. I was in shock – that was what they charged me for associated time they had spent negotiating and drafting a contract with the seller. No home – just a bill from my attorney. It was bitter lesson to learn.

As you would suspect, my first FSBO experience taught me several things:

  1. Dealing directly with a seller definitely has its drawbacks. They are way too sensitive about their own property and don’t know what they’re doing. They rarely provide the right information; the appropriate disclosures or a standard contract to sign. The two of us couldn’t get it together, mainly because neither of us had knowledgeable agents working on our behalf.

  2. Never believe you have a deal until all the parties signatures are on a contract.

  3. I don’t recommend hiring an attorney from a major law firm to do simple real estate transactions. Hire someone from a small firm or a sole practitioner who specializes in real estate. They charge less and can get the job done quickly, efficiently and with standard real estate contracts.

But the real lesson I learned was this: maybe real estate agents do serve a valuable role in real estate transactions. After all, they will show you an assortment of properties, help with you with contracts and disclosure information, advise you during negotiations, etc. And unlike attorneys, they won’t charge you an hourly billing rate for all the time they spend working with you. They are compensated only when the deal actually comes together.

So my first FSBO experience left me poorer, without a new home, but hopefully a little less naïve and wiser.

…To be continued.

Wednesday, November 4, 2009

What's the value of curb appeal?

Have you ever had the experience of driving through a neighborhood and then slowing down at a certain house to study and stare at the property? What is it that grabbed your eye – the color? The landscaping? Who knows… some houses just have “it!” Pizzazz, taste, warmth – whatever “it” is. You know it when you see it: curb appeal.

Houses with curb appeal have a distinct advantage over those that don’t. I’ve had clients who, when we have driven up to the front of the house, have refused to go in because the house just didn’t look right to them. Much in the same way a Californian's car is their personal signature, many North Shore homeowners feel the same way about their houses. They want their house to make a statement; they want to be proud of their home and to reflect who they are.

I find that curb appeal can also be personal. For example, I have worked with buyers who won't consider a stucco house. It was surprising to me. I grew up in a stucco house and think it's an amazing exterior: cool in summer; warm in winter; easy to maintain. I think of Tuscany all the stucco facades. I see beauty. But it is personal.

I was talking with one of my colleagues and I asked her the question, "What's the value of curb appeal?" $50,000? $100,000? We had no idea -- I wouldn't hazard a guess. Or can you put a price tag on curb appeal? I don't know that curb appeal in of itself has a market value. However, I do know that the house that has curb appeal is definitely more marketable. In today's buyers’ market, when you feel like you've won the lottery if one of your listings gets an offer, a more marketable home really means a lot.

There are certain styled homes that can always look good, but even a great house can lack curb appeal when the trees are overgrown or the landscaping is messy. The house must draw that buyer out of their car, unto the sidewalk and up to the front door. So many factors go into curb appeal: color, the landscaping, the walkway, driveway and sometimes the neighbors’ houses as well. All these things give the house a feel that can both attract and detract potential buyers.

While we can't all have that darling house on the street, there are some tips to consider if you want to improve the curb appeal of your home. Walk across the street and view your home from several angles. Take a really good look at it.

  • Can you see it? If you can't see your home, you can't sell it. While trees and shrubs are great, they should be trimmed so that you can still see the house.
  • What about the color? Does it blend in with your neighbor's house? Is it a neutral color? While a distinctive color may appeal to you, it doesn't sell well to the masses -- and that's what you're trying to accomplish. If you can't paint the whole house, then consider painting the trim and front door.
  • How clean does it look? If the paint is chipping, it reflects poorly on the house -- it gives the impression that the house has been neglected.
  • What about the driveway? Are there cracks, oil stains, garbage cans? Clean it up and clear everything off. Resurface it if necessary.
  • Look at your sidewalk. Is it obvious as to how to get to the front door? With some houses, it's hard to tell. There should be a clear pathway that leads the buyers to the front door. It should be inviting and draw them in. Walk the sidewalk yourself. If it needs repairs, then make them.
  • How is the landscaping? Make sure that the grass is well watered, edged, and mowed. Flowers, flowers and more flowers. Pots and beautiful arrangements can draw people to the door. It can help if they vary with the seasons -- beautiful bright colors in the spring; bold geraniums in the summer, mums in fall -- and evergreens in winter. Smell is enticing as well. Nothing makes people feel better about a house than that Spring smell of a viburnum or lilac! Look around the yard. Does it need mowing or weeding? The buyers notice these things.
  • Is your mailbox freshly painted and standing up straight?
  • Is the front door clean? Nothing looks less inviting then spider webs or hornets nests around the front door.
  • Check the hardware. Is it clean and polished? Do the keys open the locks easily? If not, get these things repaired.

While your house may never be a showcase or designer's dream, there are things you can do to make it more inviting and appealing. Curb appeal means a place that looks neat and clean, the kind of place a buyer might like to live. In today’s market, you need to pull out all the stops to get that buyer interested in your house and creating great curb appeal maybe just the thing that makes the difference.

Thursday, October 29, 2009

My life in real estate: who represents whom?

Do you remember the first home you purchased? I do; what an impulse buy. Having been a renter for 3 years, I was tired of mercurial landlords and wanted to have some say on my how my home looked. There seemed to be such frenzy in 1977, as the lower interest rates (~ 8%/30 yr fixed) took hold – many of my friends were out buying condos. (This was before the rates jumped to a whopping 17% in 1981.)

In those days before personal computers and Internet access, I blithely went off to look at condos at a Sunday open house. With little research, investigating or understanding, I leapt at the chance to purchase something I had seen: a condominium on Scott Street in Chicago. The owners had ghastly taste with bright orange and purple walls, but there was charm in the vintage building and I found some of the features of the apartment pretty lovely.

When I think back to that first apartment, I’m sort of amazed I lived there for so many years. It had one bedroom, one bathroom, a living room and a closet-sized kitchen (it actually was a closet, before the building converted to apartments). With electric heating – less you forget January ’77,’78, and ’79 are among the three coldest months in Chicago history – my electricity bills were outrageous. (That was the second real estate lesson I learned – never buy a property with electric heating.)

I paid way too much money for the unit… which brings me to my 1st lesson in real estate.

Who was representing whom?
Or why did my agent encourage me to pay full price for the condo?

Prior to 1995, all real estate agents in Illinois represented the seller. They either represented the seller directly as the “listing agent” or they represented the seller as a sub-agent by bringing in the buyer and acting as the “selling agent.” It takes very little to see that the buyer was left out in the cold.

Unfortunately, very few agents bothered to explain how the system worked to buyers. I naively thought that my agent was representing me, as she was encouraging me to increase the amount I was paying for the apartment. WRONG. Not only was she NOT representing me, it turned out that she was also the listing agent for the seller, so she would eventually be earning both the listing and selling sides of the commission. In retrospect, I also felt she was not only working for the sellers she was very much working for herself.

I never wanted to work with that agent again, after I figured everything out. I felt totally burned by the experience. I see that agent’s name from time to time in the newspaper. Like many long time agents, she saw no conflict of interest in representing both buyers and sellers simultaneously. Even today many agents feel totally OK with what is now called dual agency.

Personally, I don’t like dual agency. It’s sort of like taking two dates to the prom. It just doesn’t make sense to me. Lawyers can’t represent both the plaintiff and the defendant, so how can a realtor effectively represent both buyers and sellers? But the practice is quite legal and many agents feel very comfortable serving as dual agents.

In 1995, Illinois law changed. My guess is that a sufficient number of buyers must have complained that the system was stacked against them and the state changed the licensing law. Today’s law requires that dual agency must be disclosed and approved in writing by both the buyers and sellers before an agent can serve as a dual agent on the purchase of a property.

The law also states that buyers have equal representation and need to sign an exclusive buyer agreement, much in the same way that sellers need to sign a listing agreement.

When beginning a relationship with a real estate agent, it’s important to establish “agency.” When you go to an open house, determine whether the agent at the home is the listing agent of the property. If yes, then pretty much assume that they are going to be working for the seller. If you’re interested in buying the home, then I would recommend that you be fairly confidential with what information you disclose to that agent.

If you’re already working with a buyers’ agent, let the listing agent know right away.

If you are neither working with an agent nor interested in the home, then try to learn something about the listing agent – is this someone you might want to work with in finding or selling a home? Are they helpful and knowledgeable about the area? Take the time to interview the agent – you may want to hire them.

Sellers need to understand that every other Illinois agent might bring in the buyer to purchase their property. They need to be thoughtful about what information they share with friends, neighbors and other Realtors. They should ask themselves, "Would I be comfortable with that information being passed along to a potential buyer?"

For complete information about Illinois agency law, the Illinois Association of Realtors has a great website that can provide a detailed explanation. I encourage anyone interested in buying or selling a new home, to read this over and be familiar with agency.

Now, to finish my story... I lived on Scott Street for 9 years. Because of my initial real estate experience, I had such an utter distrust of real estate agents that I never bothered to call one when I sold my apartment to a neighbor. To this day, I have no idea whether I priced the place correctly. Again naively, I sold it to break even. Which leads me to my third lesson in real estate: FSBO…. To be continued later.

Saturday, October 24, 2009

The emotion of color

I can’t remember where I read it, but I remember reading that yellow houses sell faster than blue houses. I have certainly found that to be the case in my realtor experiences. A blue house seems to be a really tough sell. It’s ironic. Blue is ranked as one of the favorite colors of both men and women.

When I Googled the psychology of color, the search returned over 9,000,000 entries: everything from how to paint the exterior of your house to setting up retailing space that will attract buyers. Color does invoke feelings. For example, one writer indicated:

• Red is the color of energy and immediately draws the eye to the direction where it’s placed. To me that would suggest that it works well for accent pillows or for a front door. I read somewhere that a dining room that is painted red is great for entertaining and conversation.
• Blue is a calming color and helps us to relax.
• Yellow is the color of the sun and can often make people feel happy if used in the right shades
• Brown is the color of stability and friendship. It symbolizes the earthy feelings, making people feel relaxed. Sounds like a good color for a family room.

We all have favorite colors and should paint our homes exactly the way we want. BUT, how you live in a house is quite different from how you sell a house. Not everyone has the same favorites and the more dramatic the colors, the less likely that potential buyers may feel comfortable in that home... after all, they are bringing their furnishings with them and their things may not work in a home of dramatic colors. How will that red bedspread look in a grape juice purple room?

I’ve had many sellers say, “Well the buyer can paint the rooms any color they want.” That's true; the buyer can do that. But buying a house is big outlay of capital, and some people don’t want to continue spending a lot of money after they’ve just bought a new house. It’s a lot easier for a buyer, when the house they are purchasing is a blank slate (e.g., beige, soft toned colors, soft whites) rather than rooms with distinctive colors. To make the house more marketable, I recommend that sellers try to create that “blank slate” that will appeal to the majority of potential buyers. Yes, it requires that sellers spend some upfront money, but a house that requires little modification will more than likely sell for more than one that needs to have the colors toned down.

But don't create too much of a blank slate. Painting everything white is not a great idea. Using colored, rather than bland, white walls is far better. One study showed that a room painted white appeared smaller when compared to an identical room painted in a soft color! Most people also look better when surrounded by color, and feel happier – as long as the colors aren’t too bold or unusual.

Mauve is a color that I can’t stand -- don’t ask me why, because I don’t know why. I am repelled by it in the same way that Marnie, from that classic Hitchcock movie, was repelled by the color red. Color is such a visceral and emotional thing to people – we all love different colors. When I was looking for my house, I found a home in Lake Bluff that I really liked…but it had wall-to-wall mauve carpeting. I wanted hardwood floors but would have settled for a neutral colored carpet. For me, that mauve carpeting was a deal breaker. I hated removing a perfectly good floor covering and wasn’t up to installing hardwood floors. But I just couldn’t live with that carpeting -- it would have clashed with all my earth toned furniture.

So I guess that means, that when I sell my house, that tomato red dining room is probably going to have to go!

Sunday, October 4, 2009

I think that I shall never see....

Remember that Joyce Kilmer poem we had to learn in school?

I think that I shall never see
A poem as lovely as a tree...

I'm reminded of it as the leaves start changing colors and the trees begin shedding their bountiful foliage everywhere. One of the challenges (and perks) of being a homeowner on the North Shore is dealing with our beautiful, mature and majestic trees.

When I was young, I remember how dramatic the view was down Kenilworth Avenue as we would walk to the beach. The magnificent towering elm trees formed a cathedral-like canopy all the way to the lake. Then we eventually heard the constant buzz of chainsaws destroying the scene. Dutch elm disease had taken hold and the avenue was never the same again.

Few people consider trees as part of the purchase price of their new house. They examine the furnace and the fixtures and the roof and the appliances, but rarely look closely at their new trees.

Having planted some trees and having lost some branches here and there, I have a few thoughts to share about trees:

  • A word to buyers, investigate ALL of the trees on the property. During the summer months, any problems tend to be more obvious, while it’s a little harder to determine the health of deciduous trees in the winter. During the inspection phase, consider hiring an aborist to examine the trees and to verify their viability. You’re not only buying the house, you’re buying all the plants and vegetation that come with the house. Removing a diseased tree is a huge expense and it’s good to know up-front whether there is an ailing tree on the property.
  • Whether buying or selling a house, make sure the gutters are completely cleared of leaves. During the winter, an ice damn can form and create a blockage so that when it melts there is a real problem. Water can seep into the interior of the house causing damage to walls and insulation.
  • Consider how close the trees are planted near the buildings. Root systems can cause havoc to the foundation of a house.
  • Analyze the species that are on your property. While mighty, oak trees drop acorns all over the place (which can stain or leave dents in the roofs of cars); when the cottonwood pods split open, the cottony masses are easily airborne and their mess is everywhere; willows absorb lots of water -- check out the drainage issues of the house; maples with their shallow root systems can steal the water from near-by perennials; or that dreaded buckthorn – while it provides great screening --is terribly invasive and can kill other trees. A knowledgeable arborist can teach you about both the health and the issues surrounding each of the trees on the property.
We are so lucky in this area. Not only do we have the Chicago Botanic Garden and University of Illinois Extension plant information resources, but not far from us in Lisle is the spectacular and renowned facility, The Morton Arboretum. It's a great place for getting any questions answered and actually seeing various trees in a natural setting.

Finally, if you're thinking about planting new trees -- know your soil and identify which trees with thrive in the spot where you plan to dig. Also, nature provides lots of diversity of species and it's instructive for us to keep that in mind when planting trees. I believe that planting a tree is a gift to yourself, your family, your community and to future generations. Plant thoughtfully and enjoy our beautiful fall season!

Thursday, September 24, 2009


The gift my parents gave me when I graduated from 8th grade was that I could have my bedroom decorated. (Less you think that my parents were extravagant in their gift, keep in mind, I had been sleeping in that room since I was 9 and the room probably hadn’t been decorated since before the Depression. My room was the next one in the queue to be decorated.)

Regardless, I was thrilled. Jane Derrick, the decorator who helped my mother, took my mother and me to the Merchandise Mart for a day. I was fascinated with all the rooms of wallpaper and fabric and carpeting. We went through so many racks of wallpaper until I found just the one I wanted. It had soft blue and white vertical stripes with beautiful yellow roses. I loved that wallpaper.

Years later, after I bought my first condominium, I would take my lunch breaks and go over to the home decor floor at Marshall Fields on State Street and pour over the wallpaper books. It took months, but I finally found just the right wallpaper to hang in my kitchen. In retrospect, it was a very '70s wallpaper: white with a little bold green sketch pattern and bright yellow dots. Hard to describe, but I loved that wallpaper, too.

Fast forward 10 years - when I was working in London. On Saturdays I would wander around the city and tour the various decorators' shops: Designer’s Guild on Kings Road or Jane Churchill on Fulham Road or the Zoffany showroom. I had now found the ultimate wallpapers – English wallpapers. I was in love with their dramatic monochromatic use of color and the various designs. One of the Victoria and Albert Museum's special exhibitions showcased William Morris. It was simply fantastic. The craftsmanship that went into creating these masterpieces was amazing.

I loved these wonderful papers and still do: I have a Zoffany paper in my bedroom, a bold Designer’s Guild paper in my guest bedroom, Colefax and Fowler in my hall and dining room. I actually bought the wallpapers in the retail shops in London and lugged them through Heathrow and O'Hare..far less expensive than ordering through a distributor in the US.

Do you see a theme here? I love wallpaper. I guess that’s why it was such a shock to me to find out that a lot of home owners don’t like wallpaper. When I would take clients through homes or sit open houses, I would listen to these potential buyers complain about the seller’s wallpaper. I remember one house that had a fantastically beautiful Greeff wallpaper (which must have cost the seller a small fortune), and my buyers hated it. I couldn't help but let them know, it was a very good paper. Didn’t matter to them. They were mentally deducting from the house's list price, the cost of taking the paper down and painting the room beige.

Like any decorating choice, using wallpaper is a very, very personal decision. So a word to sellers… if you love wallpaper like I do, remember that using wallpaper is a decorating option that probably has zero return. It may even lose you a sale. Buyers sometimes deduct from the purchase price, if the house has wallpaper. Worse, they sometimes eliminate the house all together, because they don’t want “the hassle” of removing wallpaper. Sellers who remove their wallpaper and repaint the room to a neutral color before they put the house on the market, often have a much better resale value than the ones who leave their wallpaper up.

Of course, the sellers might get lucky -- someone like me might fall in love with their house.

Sunday, September 20, 2009

Home as Shelter...

Recently I was reading Kiplinger’s Magazine, a favorite of mine. Knight Kiplinger, the Editor in Chief, had an opinion, entitled, An Investor’s Manifesto. It was actually a series of statements that related to investing. For example, “I know that every kind of asset entails risk -- even cash, which can be eroded by inflation.”

As I read through the list of statements, one of them popped out and resonated with me:

I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings.”

Wow, did he have it right. I think so much of what homeowners are facing today, is that somewhere along the way, their house stopped being shelter and became a financial instrument. When I deal with both buyers and sellers, they talk about their house as an “investment.” Clearly it is something that we invest our money in, but is it an investment?

Last week, in the Wall Street Journal, there was an article by M.P. McQueen, called Your House: Just a Home, which hit really home (sorry for the pun) the idea that a house is first and foremost shelter.

“It's time to face facts, if you haven't already: sometimes your house is just a home.

“For most of the last decade, Americans treated their homes as sources of ready cash and as brick-and-mortar retirement plans… Foreclosures and short sales, where homes are sold for less than the debt outstanding on them, comprised 31% of total sales in July, according to the National Association of Realtors, helping depress prices for all…”

We need to get back to the idea, that our homes are meant to be our shelter, our refuge from the storms and our places of enjoyment and comfort. They’re personal – not business instruments, where we expect “a return on our investment.” A home is no substitution for a 401K account or an IRA. We will always need a place to live.
My brother and sister-in-law bought a house in a wonderful neighborhood in their hometown in central Michigan. It’s located in a real estate market that appreciates at glacial speed. They gutted the house and made it their own – everything was redone to perfection – it’s a stunning, wonderful house which they have lived in for nearly 20 years. Today’s value of the home is nowhere close to what they have put into it over the years.

Recently my brother and I were talking about it. I think he was feeling he was “never going to get his money” out of the house. But as we talked, he told me how much he loved their home. I asked him whether he regretted any of the improvements that they made to the house. His answer was no. I assured him, “Then you haven’t lost any money.”

Because that’s what your house is… it’s your home and unless you’re planning on flipping properties and moving every few years, then you have lost nothing when you improve a home to make it your own. But making it your own may mean, that when you do need to sell your home, not everything that was put into the house will come out. The market may be down. The buyers may not like the decorating choices. Or in my brother's situation, the improvements may never be recoverable, given the size of the house or neighborhood where it is located.

Hopefully, when that time comes, the seller will believe they have no regrets; they have lived in and loved their home.

Wednesday, September 16, 2009

Selling your home quickly

Recently I was watching a movie, where the heroine was selling her apartment. When it sold quickly, her comment was, “I must have priced it too low.”

I chuckled. I’m always amused how sellers want their home to sell, but when it sells quickly then they feel like something is amiss – like they made a pricing mistake. Wrong! When it sells quickly then they priced it exactly right.

Research has consistently shown that the homes that sell quickly usually net more money for the seller than those that remain on the market for a longer time period. In other words, the sellers should jump for joy if their house goes under contract in the first 10 days on the market and not second guess themselves for an instant. This could not be more true than today in our buyers’ market. When list and sale prices are dropping, getting ahead of the pricing curb is utterly imperative for sellers.

Every house has a "bingo" price: the price where a buyer will get off the sidelines and make an offer. Early offers are usually the highest offers. The buyer wants that house and will pay a little more to get it, because they know that there is going to be stiffer competition for that house.

“Can’t we test the market?” is the question realtors are frequently asked. I hate to say it, but the MLS is glutted with properties where their owners tried to “test the market” and, unfortunately, flunked the test. Why? Buyers are out there studying the market -- in fact, I would argue that most buyers understand the market far better than most sellers do. Ready, willing and able buyers are circulating around and religiously studying and other websites to identify new properties coming on the market. If something in their price range comes on the market, they pounce, study it, drive by the house, call their agent, etc. and either consider the house or eliminate it. If they think it's priced fairly they will act quickly. If they think its price is out of whack with market values, then they either watch it until the price is dropped or eliminate it all together.

At times, unfortunately, a seller's ego goes into pricing a property. One time I had a client tell me, "I’m not going to sell my house for less than $2M,” so he priced the house to meet that expectation. As the clock started ticking away, they had few showings and eventually realized the price needed to be lowered. Six months later they found themselves accepting an offer for less than $1,825,000. To this day, in my heart of hearts, I think they could have sold it for considerably more if they had priced the house properly at the get go. Why? The best buyers are the ones who are the most motivated. If your house is overpriced, they will compare it to others in the same price point and your house will be perceived as lacking... those buyers will just go ahead and purchase something that is viewed as providing better value.

One way to tell if the house is priced correctly is to analyze the showings. If as a seller, your property is having lots of showings and second showings, then both the agents and the buyers are perceiving value. If you are getting showings but few second showings, then the agents feel it's priced OK, but the buyers simply don't see the value. If you're getting no showings, then the agents basically don't want upset their clients by wasting their time looking at a house that is clearly overpriced. There are exceptions, of course, but this barometer is pretty accurate.

On a final note, the other thing I like my clients to consider is net versus gross profit on the sale of their home. This is especially true for people who find themselves owning two homes or for sellers who want to downsize. I recommend that a seller calculate the average daily rate of running the property – this would include (but not limited to) mortgage interest, maintenance, taxes, landscaping, utilities, etc. For every day the seller needs to carry those costs, the less they will net on the sale of the house. In cases lke this, a quick sale is, more often than not, a more profitable sale!

So if you're thinking about selling your home... price your house to sell and be delighted if the first showing is the last one.

Friday, September 11, 2009

How important is a home inspection?

Should a buyer have the property inspected for a home they are buying? Should a seller order a home inspection prior to putting the property on the market? In our market, it’s pretty standard that buyers have an inspector come in to inspect the house – not so common for the sellers.

As most of you know, a home inspection is a visual examination of both the physical structure and major systems of the entire home including: walls, ceilings, floors, decks, exterior covering, the roof, foundation, insulation and ventilation, plumbing, electrical, heating and air conditioning. It is not an appraisal to validate the value of a home, nor a pass/fail exam. A third-party inspector will give a report on the physical condition and will often make suggestions for repairs. Illinois requires that home inspectors be licensed, so if you are buying your house, while having “Uncle Fred” or “Dad” come through the house may bring you some peace of mind, if they aren’t licensed, their opinion is not considered a "licensed third party.”

For buyers, a home inspection clause in the written offer makes the purchase contingent upon the findings. If a serious problem is found, it allows room to possibly renegotiate the purchase price, ask for a credit at close or "opt-out" of buying the home altogether. The contract that we use in our market is very specific about what a buyer can consider as part of the home inspection contingency clause:

“Buyer agrees that minor repairs and routine maintenance items of the Real Estate do not constitute defects and are not a part of this contingency. The fact that a functioning major component may be at the end of its useful life shall not render such component defective… The home inspection shall cover only the major components of the Real Estate, including but not limited to central heating system(s), central cooling system(s), plumbing and well system, electrical system, roof, walls, windows, ceilings, floors, appliances and foundation. A major component shall be deemed to be in operating condition if it performs the function for which it is intended, regardless of age, and does not constitute a threat to health or safety.”

Usually inspections reveal less serious defects that rarely warrant backing out of the transaction. With that said, one of my least favorite parts of being an agent is the exchange of letters and reports after an inspection. Sellers are often feeling like their house is perfect and not in need of any repairs – buyers are often expecting every little item to be addressed by the sellers. I’ve seen it cause some very hard feelings between both the buyers and sellers.

What I advise my sellers is to agree to anything that appears like a health and safety issue. (For example, if the inspector says the bathroom outlet needs to be replaced with a GFCI outlet (ground-fault circuit interrupter) or the house needs a carbon monoxide detector, those are health and safety issues and should be addressed.) What I tell my buyers is if they see a routine maintenance issue before they make an offer, then they should ask for it before the inspection. (For example, a door is jamming or shutters are broken would probably appear on an inspection report, but would be considered routine maintenance.) I feel both parties need to be reasonable and look for the "win-win" in every situation.

To me the biggest advantage to having a home inspection is it offers buyers an opportunity to become familiar with their new home and learn about maintenance to help in its upkeep. Although not required, I always recommend to my buyers that they follow the inspector around and be present; to ask a lot of questions, and find out how their new house works.

For sellers, while certainly not required, I think it’s great when they have an inspection before listing their homes. When the buyer’s inspection finds problems, it can impede negotiations and cost the seller more in repairs. By having a pre-listing inspection, the seller can help eliminate any surprise findings after an offer has been made. The seller can make repairs before placing the home on the market and possibly even increase the value of the home.

A pre-listing inspection can also serve as a great marketing tool. Sellers are required by law to disclose any known defects in the home. Having a pre-inspection report available for buyers tells them that the seller has nothing to hide. It also gives them a clearer picture of the condition of the home. If there are major problems found during the pre-listing inspection, it gives the seller an opportunity to disclose the condition up-front, making it less likely for the buyer to pull out of the deal or try to renegotiate a price.

Knowing the true condition of a home can bring peace of mind to both buyers and sellers; and be one less hurdle in the home buying and selling process. While there are many capable inspectors, I suggest inspectors who are affiliated with the American Society of Home Inspectors (ASHI).

As an aside note, I have had a home inspector come to my house every five years. In same way, one goes to the doctor to get an annual physical, I like to give my house an inspection so I can find out what preventative issues I may need to be addressing. Every house has issues – even new construction. Knowledge is power. The inspector’s report helps the homeowner schedule and prioritize maintenance.

Thursday, September 3, 2009

What's the value of my home?

One of the biggest confusions that I see in this job is how people (primarily sellers) misunderstand the “value” of their home. I think it’s because there are so many ways value is assigned to a property. In an effort to clear up the confusion, let me try to explain the differences between the three major ways we encounter value as real estate professionals.

What is Market Value?
Market value is like reality TV.
It’s a constantly moving picture in real time. The market value of the home is tied to current market conditions – just in the same way commodities and stocks are. Market value is subject to interest rates, available financing, unemployment, housing trends, demographics, and all the other factors that go into setting market conditions. One day the market value may be up – the next day down. Because with our North Shore real estate market we have been accustomed to seeing housing values go up, it's it's a bit hard to absorb the fact that values of homes can also go down.

Market value is based pretty much on supply and demand. When demand goes down, generally sales prices do as well. So even if you paid $900,000 for your house in 2005, put in a new kitchen and new bathrooms, you may still find out that your house is worth $850,000 in today’s market. It’s just like buying Google at $500 a share yesterday and finding out it is worth $450 a share today. As with stock, all housing "losses and gains" are just on paper until you actually sell your house. While your house may have been sell-able for $1,000,000 in 2006, that "gain" was just theoretical; not reality. Until you sell the house, you really won’t know what the market value is, because the market value is what a buyer is willing to pay for your house on a given day. It has nothing to do with what a seller wants or needs from the house. The buyer determines the market value – not the seller.

What is Appraised Value?
Appraised value is like a snapshot. When you look through a photo album, a woman can be depicted as a baby, a teenager, a mother, etc. She is still the same person, but at a different point in time. That’s what appraised value is: on this day, in this year, by this appraiser – the house was appraised at $850,000. While appraisals provide an objective opinion of value, it’s not an exact science so appraisals may differ. For buying and selling purposes, appraisals are usually based on market value — what the property could probably be sold for on that day. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.

Appraised value is not a fixed number. Changes in market conditions can dramatically alter appraised value. So if you had your house appraised in 2007, the number would more than likely be very different today. Appraised value does not take into account special considerations, like the need to sell rapidly. Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.

What is Assessed Value?
Assessed value is almost like a composite photo. This is what the theoretical market value of the house was in 2006, 2007 and 2008. So if we put that all together then this is a "photo-shopped" picture of the house – in retrospect. It feels a little backwards in some ways – when properties values are going up, then the assessed value often seems a little low; but today, when property values are going down, then the assessed value seems a little high.

I got a newsletter from the Shield’s Township assessor that I thought explained assessed value very well. If you would like to read further, go to

What does value mean to buyers and sellers?
If you are planning on selling your property, then the only way that it makes sense to price it is based on today's market value – you’re putting your house on the market. Buyers could care less about how your house may have been appraised in the past or even what it might have been worth 3 months ago -- it's all about today. Consider a house that was on the market on September 10, 2001 versus the very same house on September 12, 2001... the landscape of the market shifted radically due to no actions taken by the seller and yet sellers needed to adjust to the market.

Just as an investor might evaluate buying shares of Proctor & Gamble versus Kimberly Clark, home buyers are comparing your house to every other house on the market, therefore they need to "e-value-ate" it in that way. Hope this helps explain value.

Monday, August 31, 2009

Top 10 Tips to Sell your House in a Buyer's Market

I wrote this article a year ago for Make It Better. As I was rereading the article, I realized that the information is still relevant this year, so I'll post it again as we begin our Fall market.

Are you one of the many North Shore residents trying to sell your home right now? Then you know -- only too well -- that it is a challenging time to sell real estate. Anyone affiliated with this segment of the economy is affected, including mortgage lenders, builders, brokerage firms, real estate agents, home inspectors, title companies, real estate attorneys and - especially - home sellers. The only lucky souls in this process are the motivated and able home buyers. They are having a swell time with lots to choose from as they deliberate carefully to find just the right home.

So how do you make your home the next one to win over that motivated buyer in this very competitive market? The following tips will help:

1. Price it right from Day 1. Don't waste precious market time to "test the market" – the buyers know and understand the market value of your home. In this market they will just wait it out until you drop the price. Use comparable and recent sales to set your price. Price is still the single most important factor that affects which homes sell and which don't.

2. Recognize and understand the value of your location. Be realistic about your location. If your home is near a highway or train, on a busy street, or, in some cases, on a corner lot, you may need to aggressively adjust the price lower than you would in a better market. Location is second only to price in importance when it comes to selling real estate!

3. Detach yourself emotionally from your home. You want your home to become someone else's home. Buyers will often devalue rather than value a seller's decorating. It's not personal. In a buyer's market, the clever seller understands that they need to create a home that many buyers might want. Let go of your home and begin moving both physically and psychologically.

4. De-clutter and depersonalize. Buyers are essentially "buying space." Clutter and your personal items make the rooms feel smaller. Go room to room and trash, pack, or put away "stuff." Clean closets and clear out cabinets. Get rid of dust collectors like silk flowers and useless knickknacks. Limit the number of "things" on tables and in shelves. Organize your book shelves and desks. Lock up valuables and important papers. If necessary, rent a storage locker until the home gets sold.

5. Paint. You can do yourself a big favor and probably come out financially better on the sale on your home with just a little paint. Neutralize the very distinctive rooms. Check the trim, windows, doors, etc. If paint is chipping and marked up, then touch it up and make it look fresh and clean. If windows are painted shut, consider "un-sticking" them and repainting. Make sure the front door is clean and freshly painted. Paint the mailbox, too.

6. Clean. This is the most important action you can take. A clean home is perceived to be a loved home and buyers want to believe the home has been loved. Consider your home as a sensual experience for potential buyers, so make sure everything looks clean, smells pleasant, sounds repaired, and feels nice and smooth!

7. Create great Curb Appeal. Don't kid yourself, first impressions are important. Home buyers do judge a home by looking at its cover and sometimes won't even look inside if they don't like the outside. Make sure the front door is inviting and visible. Pretty pots of flowers or a small bench can add wonders to a front door. Make sure the home numbers are visible and clean. Make sure that the key and lock work effortlessly. Eliminate spider webs, repair steps and sidewalks, trim trees, and mow the lawn. Make sure that your house creates a fantastic first impression.

8. Stage the Interior. How you live in a space is quite different from how you sell a space. Remove excess furniture – make sure people can move down hallways and from room to room easily without bumping into furniture. Make sure the doors open and shut easily without any barriers in the way. ADD LOTS OF LIGHT throughout your home. Live plants and soft music helps just about every home!

9. Remain Flexible. Showing your home to strangers can be tiring and nerve racking. Buyers are sometimes impatient and downright inconsiderate. Regardless, make every effort to let potential buyers into your home at a moment's notice. Be flexible with the close date. Be flexible and creative with buyer financing options. Consider credits or paying points, etc. – anything that might be viewed positively by potential buyers.

10. Respect every offer. Finally, treat any offer you receive with gratitude and utmost respect. Offers are rare, precious and valuable. There is no such offer that is "an insult." Out of all the many homes on the North Shore – they picked yours! And something else to keep in mind: more often than not, the first offer is usually the best offer you're going to get!!! So make sure you have hired an agent with superb negotiating skills, who will work tirelessly with that buyer's agent to get the "deal sealed."

One final thing to consider: The Internet is now ranked as the number one source for buyers who are looking for homes. When interviewing real estate agents, ask them about their Internet marketing strategy. How they market on the Internet should be a primary consideration in your agent selection process.

So price your house well, dazzle the buyers and you will make your home the next one to win over the motivated buyer in this very competitive market!