Updated: Friday, February 22, 2019
Staged Property: Buyers Beware
Would you like to unload your house faster and for more than you expect? That, in rough terms, is what home stagers promise.
All the Homes a Stage
My farmhouse house, I will disclose, is as backstage as it gets. Books fill the bookcases. This is a big no-no in the staging profession. A vice grip is as likely to be on the dining room table as a floral centerpiece. A vice-grip is not a character flaw. My idea of decluttering is to straighten the pile of reading newspapers by the couch.
Now I find nothing wrong with a seller doing clean up, paint up and fix up before offering a property for sale. I would not be the first to do any of those activities, but I endorse putting onersquo;s best foot forward, given the alternative, with which I have had more experience.
Staging property is like set design in the theater. It leads the audience to look at focal points in ways that lead to certain feelings about the play. Good sets invite the audience to them by invoking emotional responses.
House stagers do the same. They use props like plants, smells, visual accents, space, angles, lights, colors, textures, airiness, and furniture to lead a buyer to imagine living in this set.
They deploy tactical rental furniture and art in empty houses to create the imaginative magic of theater. Staged properties are clean, clutter-free, spruced up and depersonalized. Staging is intended to draw the buyer into its pretend world.
The object of this mind-tweak is to get buyers to become emotionally invested in a staged house, then make a spontaneous offer, then pay more than they should.
A Growing Industry
Staging is now an industry that describes itself as ldquo;self-regulating.rdquo; Stagers can become trained, accredited and join a professional group, such as the Real Estate Staging Assn. At the Real Estate Staging Association, hundreds of thousands of real-estate agents and others have been trained.
Staging is sophisticated, customized marketing. It works. Itrsquo;s not dishonest in the sense of pulling a rug over termite damage in hardwood floors.
But it is intentionally manipulative. Stagers orchestrate the presentation of space to twiddle with a buyerrsquo;s mind so that he does something that he might not otherwise do. Admittedly, our way of doing business with each other often tries to convince buyers that the sellerrsquo;s deal is better than it is.
So how can buyers defend against a Martha Stewartly correct Ficus Benjamina in the entrance, a potted tree so disgustingly symmetrical and repulsively tasteful that sunbeams dance in marching-band formation on its just-spritzed leaves?
Educate yourself about staging, its purpose and how itrsquo;s done. An Internet search will lead buyers to informative articles. Stagers have written books. An agent working for the buyer should be asked to ring a staging alarm when entering a magic kingdom.
Identify stage props as a way to strip them of their persuasive power. Note fluffy bath towels, linens, greenery, wildflowers in dark rooms they suggest sunlight, yellow roses on a dining-room table, compulsive decluttering, clean-plate closets, new furniture, non-casually tossed toss pillows, items arranged in threes, cleared-off counter tops, furniture angles that draw you into a room, a bowl of limes and lemons and other focal points that thrum ldquo;Look at merdquo; using a low C in a harprsquo;s bass clef.
Outside note fresh paint, recently whacked shrubs, new shutters, fancy grill, ceramic yard frogs, rope hammock, an antique-looking weathervane and a new picnic table. The last five vanish at closing, if not before.
The Power of the Prop
The power in these props is that, together, they represent the life>
The stager scrubs away dirt and traces of the current occupants. The stager wants the buyer to think of the sellerrsquo;s house with all props in place, not empty and not full of the buyerrsquo;s stuff.
Once a buyer recognizes staging, it becomes transparent and funny. ldquo;My, my, what a fetching woven rug with bulging knots Is it pre-Columbian? The limes, the limes. [Kiss your fingertips.] Quel limesrdquo;
Consider not looking at staged properties. Stagers boast that their properties get three to ten percent more than unstaged properties. I believe them. On property that is worth 500,000, staging puts an extra 15,000 to 50,000 of buyer money in a sellerrsquo;s pocket. Some of that extra might go for paint and shrubs, things that convey to the buyerrsquo;s benefit.
But the buyer pays most of this staging premium for looking at props like candlesticks and couch pillows that will disappear like a traveling peep show. Staging succeeds in getting buyers to pay for something that often amounts to nothing.
Since all of us are equally vulnerable to the stagerrsquo;s skills, perhaps a buyer should tell agents to eliminate staged properties from his
Consider the Bare Bones
Agents working for buyers might discuss ways to evaluate staged properties with their clients. Donrsquo;t look at the props. If a buyer visits a staged property, imagine the house buck naked and empty. Thatrsquo;s what yoursquo;re buying.
Working farms usually are well organized with a few rough edges. If you find no edges in a farmyard, piles of weathered materials, pieces of equipment, scrap from the last century, Irsquo;d be suspicious. Farmers always need such backup.
Some farms are perfectly maintained in every nip and tuck. These farmers take great pride in neatness and upkeep. If you see every fence as tight as a prison door, every road newly graveled, every gate painted thatrsquo;s great. Be prepared to pay for perfection. This isnrsquo;t staging; itrsquo;s compulsive-maintenance disorder.
The reasons to cross off staged properties is that you will pay too much for what yoursquo;re getting, and yoursquo;re likely to be competing against stage-struck buyers who have fallen under stagerrsquo;s Spell.
The seller has paid for the stage show, usually a minimum of several thousand dollars but often much more. Statistics from Home Gain indicate that for every dollar invested in staging, a seller gets 4 to 5 back in additional sales price. Where, a buyer must ask, do those extra dollars come from?
Staging raises seller expectations. Itrsquo;s hard to negotiate with a seller whorsquo;s both out hard cash and hopeful to boot.
Since staging works, it is ever more common. My advice to buyers is to factor out staging and stick with a price that makes sense to them.
For buyers: All of what you see is not all of what you get.
Curtis Seltzer, land consultant, is the author of How To Be a DIRT-SMART Buyer of Country Property at his website.
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HOA Landlord Rules
The HOA has the right to expect all residents, whether owner or renter, to play by the rules. But with renters, its up to the landlord to enforce them, not the HOA. So, the board should adopt a policy that requires all landlords to provide a set of the governing documents and all rules that have been adopted that affect the renter. The Board can also require that all rental agreements specifically make reference to and be subject to those documents. If a tenant violates a rule, the landlord should be informed of it immediately along with the expectation of enforcement. If there is a fine or penalty, the landlord should be levied for it as if he did the dirty deed himself. Its up to the landlord to get reimbursement from the tenant.
There are several exceptions to the landlord middle man enforcement process. If a tenant parks illegally in a fire lane, the HOA has the authority to have the car towed and the tenant will, naturally, pay to retrieve the car. There are some things the HOA should not interfere or get involved with. When a renter crosses the line between HOA rule and civil law infraction, the HOA has the right to call in proper authorities. Those authorities include the police, fire safety, FBI and drug enforcement.
Short vs. Long Term Rentals.
Most HOAs deal with renters who have entered into long term rental agreements 30 days or more. Most governing documents, in fact, require that the rental agreement be long term to avoid what would be a hotel operation. In resort areas, mountains, beach, etc. the HOA may have been expressly built and sold allowing owners to rent their homes short term. These homes or units are owned outright and are not timeshares with professional site management. However, unless virtually every owner has that in mind, there will be an ongoing clash between permanent residents and short term renters. Short termers have no allegiance to the community, dont know the neighbors and frequently are in party mode.
These factors point to ongoing problems with the locals. If this is a reality, its important for the board to press for consensus among the owners. If the majority want the flexibility to short term rent, it makes sense to have an onsite manager to control these issues and others like key exchange and housekeeping. The manager could be funded partly by the HOA to handle regular maintenance and partly by landlords to care for rentals. Its a win/win.
Renters generally are no better or worse than owner residents. Ongoing problems result from lack of landlord standards or enforcement of those standards by the HOA. Here are Landlord Standards, which all HOAs should adopt:
bull; Landlords must provide a set of governing documents CCamp;Rs and rules to renters before move in.
bull; HOA rules amp; regulations must be a condition of all rental agreements.
bull; Landlords are held accountable for renter infractions.
bull; Renters must communicate requests to the HOA through the landlord.
bull; Board may demand termination of a tenant with multiple rule violations.
bull; Landlord must provide a copy of each rental agreement to ensure compliance with the HOAs standards and for emergency contact purposes.
Renter Surcharges amp; Fees.
Some HOAs impose a Move In/Move Out or Renter Fee on landlords. Unless this fee is imposed on all residents, owner or renter, it is discriminatory. If a particular renter causes damage to the common area moving in or out, the landlord should be charged for it. Never surcharge >
Communicating with Landlords.
All tenant violations should be directed to the landlord in writing along with specifics, including date and time. The communication should be clear on what the landlords course of action should be. It should also reinforce that its up to the landlord, not the HOA, to deal with a renter.
At one time or another, someone may press to limit rentals. There are right reasons for doing so, but avoid the wrong one: The belief that renters are undesirable. While some tenants may be problems, so are some owners. Each must be dealt with as individuals, not a >muster with most lenders. Falling below that level causes closer scrutiny by some lenders. When lenders scrutinize, it usually means the interest rate or fees go up. Restricted financing options cause market values to fall.
Limiting rentals to protect financing is a worthy rationale for doing so. However, placing a system in place that allows some owners to rent but not others has many problems. The board must oversee the rental restriction policy and establish guidelines for who gets to rent and when. Also, there will be hardship cases disability, job loss, down real estate market, etc. that will press the board to bend the policy.
And consider if a landlord simply ignores the restriction and rents his unit. The HOA has control over the owner but not tenants who are protected by Landlord-Tenant laws. For a variety of reasons, if limiting rentals is desirable, it should apply to all owners. A total ban on rentals doesnt completely eliminate the boards oversight, but it at least makes it fair to all owners. For a sample Rental Restriction Policy, see www.Regenesis.net.
Renters Have Rights.
After considering the various issues, its important to remember that renters have rights that must be respected. Besides the state Landlord-Tenant laws, the Fair Housing Act speaks to unreasonable rental restrictions. Never impose restrictions based on sex, faith, culture or race. When it comes to HOA renters, do the right thing.
For more innovative homeowner association management strategies, subscribe to www.Regenesis.net
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HELOC or Home Equity Loan: Which One Is Right for You?
While there are definite advantages to accessing your equity over taking out a personal loan or using credit cards, especially if yoursquo;re intending to use the funds for home improvement, the No. 1 thing to consider before you take any money out of your home is whether you can really afford it. Take out a home equity loan or use the funds from a HELOC and your monthly obligation will increase. But thatrsquo;s not all. Should you have a change in circumstances like a job loss or simply extend yourself beyond your financial comfort zone, causing you to miss payments, you could be putting your home at risk of foreclosure.
ldquo;Because the loans are secured against the value of your home, home equity loans offer extremely competitive interest ratesmdash;usually close to those of first mortgages. Compared to unsecured borrowing sources, like credit cards, yoursquo;ll be paying far less in financing fees for the same loan amount,rdquo; said Investopedia. ldquo;But therersquo;s a downside to using your home as collateral. Home equity lenders place a second lien on your home, giving them the right to eventually take over your home if you fail to make payments. The more you borrow against your house or condo, the more yoursquo;re putting yourself at risk.rdquo;
Should you want to move forward, itrsquo;s important to know the difference between a home equity loan and a HELOC so you can make the decision that best suits your need.
ldquo;HELOCs and home equity loans extract value from your home but add to your debt,rdquo; said NerdWallet. ldquo;The loan is a lump sum, the HELOC draws money as you need it.rdquo; Both loans typically offer a shorter term than borrowers have on their mortgage. ldquo;Home equity loans and HELOCs are paid off within five to 20 years, while 30 years is typical of a first mortgage,rdquo; said Bankrate.
Letrsquo;s break that down a little further.
About home equity loans
Borrowers who choose home equity loans often do so because of the fixed interest rate. The stable payment schedule means they donrsquo;t have to worry if rates go up. But, the fact that this type of loan is given in one lump sum doesnt necessarily track with everyonersquo;s needs. If you are the type that wants more flexibility in your loan, a HELOC may be the better choice. If you get a loan for 25,000 and only use 5,000, yoursquo;re still required to pay on the total amount loaned.
A home equity loan can also be problematic if your homersquo;s value drops after you have tapped all your equity. In this situation, you could find yourself underwater, or owing more than the home is worth. Homes in some hard-hit areas remained underwater many years after the market crash, with ldquo;more than 820,000 underwater homeownersrdquo; who owed more than double what their home was valued for, according to CBS News.
About home equity lines of credit
With a HELOC, you are still borrowing against the available equity in your home, however the funds are provided differently. Instead of having a lump sum, you use a HELOC like you would a credit card, accessing money as you need it and only paying interest on what you use.
ldquo;As a line of credit, a HELOC allows for flexibility around both borrowing and paying back the money you borrow,rdquo; said Credit Karma. ldquo;But it can also require borrowers to stay especially disciplined when it comes to taking out the funds and repaying their lenders.rdquo; Thatrsquo;s because HELOCs typically offer adjustable rates; if the interest rate rises, so does your payment.
ldquo;A HELOCrsquo;s interest rate is usually variable and can change. The interest rate is often tied to the prime rate and can be affected by market forces that could change quite a bit over the life of the HELOC,rdquo; said Credit Karma. ldquo;There may be limits to those changes though, like a periodic cap a limit on rate changes at one time or a lifetime cap a limit on rate changes during the loan term.rdquo;
Most HELOCs also have ldquo;two phases,rdquo; said Investopedia. ldquo;During the draw period ndash; typically 10 years ndash; you can access your available credit as you see fit. Many HELOC contracts require small, interest-only payments during this period, though you may have the option to pay extra and have it go against the principal.rdquo;
At the end of the period, borrowers have to start repaying the principal in addition to the interest, and, ldquo;From here on out, you can no longer access additional funds and you make regular principal-plus-interest payments until the balance disappears. During the 20-year repayment period, you must repay all the money yoursquo;ve borrowed, plus interest at a variable rate.rdquo;
Payment shock often hits at this point because, ldquo;The monthly payment can almost double. According to a study conducted by TransUnion, the payment on an 80,000 HELOC at 7 annual percentage rate will cost 467 a month during the first 10 years when only interest payments are required. That jumps to 719 a month when the repayment period kicks in.rdquo;
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