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9-12-18, How Many Ways can a Basement Leak?
Let me count the ways.
Having listed, sold, shown and attended inspections on many, many homes over 28 years of selling them, I have experienced 18 ways for water to find its way into a basement. This problem is one of the most difficult to correct, due mainly to 4 factors: (1) you can't make it rain on demand for the contractor; (2) you can't see behind walls; (3) there are so many potential sources; and (4) water runs downhill.
When you are under no pressure to find and remedy the leak, you are free to experiment with diagnostics and less expensive repairs. However, when you have your home under contract, you are under the microscope to get it done fast, right the first time, and by a professional. Basement contractors have figured out the best repair for most basement leaks - that is the one you will have proposed almost all the time unless there is an obvious leak that does not require it. That common repair is the drain tile and sump pump system. Now certainly that is the repair necessary for some types of leaks, but most basement problems do not fall into this category. However, this repair will catch almost all of the various leaks, regardless of what causes them. Most homes under 20 years old have this system built into the basement slab. Unfortunately, even these drain tile systems can clog up or break down after awhile, and may need repair themselves.
Here are the sources I have seen cause water to enter a basement, and sometimes fixing one does not cure the problem, it may take several:
1. Gutters off, not pointed away, or underground tubes clogged or off - by far #1 cause
2. Basement wall crack
3. High water table, comes in at basement floor
4. Sewer backup
5. Flood waters
6. Outside drain backup at window well or walkout basement door
7. Window not sealed properly, runs down inside wall
8. Roof leak runs down inside wall
9. Hose bib freezes and cracks, runs inside when turned on
10. Sump pump failure
11. Refrigerator water line seeps down inside wall
12. Plumbing supply line leaks
13. Adjacent ground or concrete tilts toward home
14. Roof vent, chimney vent or vent flashing, runs down inside or along outside of pipe
15. Sprinkler head mis-adjusted toward house
16. Gas or other line thru exterior wall not sealed properly.
17. Drain tile system clogged, not directing water to sump pit
18. Drought conditions that caused a large gap between shrinking soil and basement wall, and funneling water in
As the building inspectors say on their report - any basement can leak given the right conditions. A dry basement today can be a wet one next year. My advice is to monitor all areas of your basement periodically to catch any issues early on. Then either competently repair yourself if able, or get 2-3 estimates from reputable contractors. If you are concerned that they are bidding for more work than necessary, then hire a building inspector or other professional who will not be doing the repair. Expect to pay that person, whereas most companies giving bids do so at no charge. You can also offer to pay a company who can do the work, but tell them upfront they will not get the job.
5-7-18, Try a New Home!
With the difficulty that many buyers are running into these days finding suitable housing before it sells to someone else, here is an alternative: New Construction!
The pace of building new homes is about half of what they were in our 2005 heyday, but steadily climbing. Many builders either went out of business or switched to home improvements and renovations to stay afloat during the 2008-11 period. Today, there are good, quality companies ready to build the right home for you. I have represented 32 buyers of new homes over the years, and am very familiar with the process and how to protect you and your interests such as who holds your deposit and how much; what builder to choose and where to build; how much to put into the home without going overboard. Many choices of builders, styles, prices and locations are available. You can start from scratch and choose everything, purchase a "market-ready" home and move right in, or somewhere in between where you choose the final finishes.
I believe one of the main reasons home building has not yet come back to previous levels, is that more often, people wish to stay closer in to the city hub, their workspace, or good schools.. For every one that prefers open spaces and is able to move further out, there are two that are staying near or moving closer in. And closer in there is limited ability to build new. Thus the "tear-down" phenomenon, even reaching West County now, where folks purchase a less desirable home, have it torn down, then contract with a builder for the new one. This can be an exciting process, and you end up with brand new in a mature, close-in location. This has been common for years inside 270, but even parts of West County are considered close-in now! Be aware that some subdivisions and municipalities are more stringent on how the size and architecture fit in with the existing homes, and it can be more expensive.
Secondly, the price. New homes tend to cost more than existing homes. You should, however, save money in repair, improvement and utility bills the first 5 to 10 years that can offset that difference, if not come out ahead, even after the finishing details. And there is nothing quite like the feel and smell of a new home.
Contact me to explore this avenue if it sparks an interest. It can take some time to find you the right home and lot, plus the building process, especially the tear down scenario, so plan ahead and get me involved early. I can represent you in all aspects of new home construction.
4-20-18, Wallpaper Update
Every few years I re-visit wallpaper - ah yes, good ole wallpaper. And every few years I say "Don't do it". Even though I maintain that as a recommendation, I am starting to see a crack in acceptability IF, and I mean IF, it is a new style. If it is an older style, keep scraping it off. I strongly caution you that most people in our region still do not like any wallpaper in the house at all, that includes me. But there are some out there that have not scrubbed off old shards of paper or realize how difficult stripping paper can be, plus of course the designers are always selling something new.
It seems that wallpaper is becoming somewhat popular in certain areas around the country. That alone would not faze me, as I have seen this trend continuously try to re-gain favor without success for 25 years. However, I have had a local designer this month say she is certain it is making its way to STL. I also have a young buyer who likes the look of certain wallpaper styles, this is what really caught my attention. The designer cautioned to stay with a small portion, such as a bathroom or 1 accent wall if you experiment. The buyer, too, felt that a small area would suit her better. Just remember that paper styles become dated faster than most other features of a home, if it had any significant appeal to begin with, as there are unlimited variations. Additionally, I may be suggesting that you remove it if you enlist me to sell your home.
When I visit newly renovated homes, builder display homes, and see photos on Houzz, they still are overwhelmingly painted wall surfaces only. I cannot stress this enough, that paint is still the way to go. I am only grudgingly admitting that there is a crack in the armor of the "No wallpaper" mantra that I have repeated for 25 years. Please ask me for an update in the future if you are considering doing this beyond a small portion, and I will post again on this in 2-3 years.
Happy stripping!
4-11-18, Appliance Colors
Kitchen appliance colors and styles change like everything else. When one goes kaput, you need to decide quickly what to replace it with. When you are renovating, you have a little more time and can match as desired. What will it be?
Silver stainless steel has been the number one choice for a good 10 years now, black 10 to 20 years ago, and white 20 to 35. The 70s colors speak for themselves! High end kitchen appliances have almost always had silver stainless or wood paneled fronts to match the cabinetry, or even brightly colored finishes. The last 3-5 years, however, has seen 2 noticeable trends: Ice (pure) white and black stainless (dark charcoal); with another - slate (lighter charcoal) - the latest challenger.
My experience in seeing many homes is that silver stainless is still the king; white never caught on (lots of white cabinets right now), plain black is fading unless it is high end and fits your scheme, and black stainless and slate are fighting to be the next long term trend. I believe silver stainless will retain a classic, high end look and stay around for years to come, and it goes with so many things. Matching cabinet panels come and go, right now more in than out *if your cabinets are more in than out*!
After checking with an appliance store and a new home sales center, they agree that silver stainless is still their number one seller, and white is the least. In between, it seems that slate is edging out black stainless and plain black is below those two.
If you are replacing just one appliance, it is easiest and safest to replace it with a similar color and model, although you should consider replacing it with the direction your kitchen is going, even if it is an obvious mismatch in the meantime, and you are not selling the house anytime soon. I have seen some different colors, brands, even styles that still look good overall, especially in the premium lines where different manufacturers specialize in separate components: Wolf and Thermador ranges, Subzero refrigeration, Bosch and Fisher Paykel dishwashers, Miele oven and dishwasher. Also consider repairing if it's newer or you need just one more year out it before gutting the kitchen, or even finding a reliable used model. If replacing all items at once, Samsung, GE, Whirlpool, etc are marketing the four main appliances as a package deal that is worth exploring, but don't hold yourself to that, it can pay off to shop around in price and quality.
Keep in mind when it comes time to sell, buyers notice your appliances instantly on photos before ever setting foot in your home. Many times, even if they work great, outdated appliances that stay with the home are worth replacing for resale value. The washer and dryer do not matter nearly as much, as almost all sellers take those with them, although I admit a new $2000 W/D set does make a home show better than an old, outdated set, like a type of staging, but certainly not worth purchasing just for selling purposes. As always, contact me if you want a professional opinion on this, I can review with you on the phone, view photos, or visit your home.
Happy shopping!
3-23-18, Wiring Funds is now Risky Business
Scammers have caught up to the real estate transaction. Most of us are familiar with having our email hacked, or know others who have. This is how the home purchase wire fraud begins, by scammers trolling and hacking individual's email accounts. Although not new, our company has been warning clients for several years now, it has become more frequent and aggressive. FBI data reports that $969 million was diverted or attempted to be diverted from real estate transactions in 2017, and wired to criminally controlled accounts. That is an increase of almost 6 times from 2016. Typically, a cybercriminal will access an email account of any party to the sale - buyer, seller, Realtor, title company, even attorneys - to collect details about a transaction, then use that information to send bogus instructions that seem reasonable to transfer funds to the wrong account. Once that happens, recovering it is nearly impossible.
A central issue, according to Theft Resource Center in San Diego, is that many people do a poor job of protecting themselves online with weak passwords for their email accounts. If one party to the transaction doesn't practice "online hygiene", everyone involved can be at risk. A 2017 Data Breach Investigation found about 80% of hacking last year took advantage of passwords that were stolen or easy to guess. Once the thief obtains a few transaction details, they compose a legitimate-looking email to the purchaser, ostensibly from the title company, to transfer closing funds to the fraudulent account. This can result in the loss of not only thousands, but hundreds of thousands of dollars, since people are inclined to follow instructions that appear legit from a title company they trust.
Making sure the devices you use have the latest patches and secure passwords is a good start to deter cybercriminals, and backing up your data on separate devices is critical. Regarding the sale process, all parties should verify by phone, using a known number - not one in a suspicious email, any instructions of where to send money. This is the most critical, as this fraudulent email typically arrives just days before closing when buyers are busy and often don't take the time to consider whether an email is real or not. The receiver of the money, usually the title company, will send "wiring instructions" containing the name of the institution, an account number, a routing number and other brief information that you will relay to your bank. They are hesitant to send this by email now, and may send by fax or even text. You can avoid this issue by exchanging funds with a cashiers or certified check, if feasible. As your Realtor in a transaction, I will discuss this situation with you at least once, and even have a document that outlines this potentially hazardous issue. Even though this is generally a buyer beware item, it can affect a seller who is bringing money to closing, or having their sale proceeds sent to their bank electronically.
Practice Safe Wiring!
3-2-18, Is Brass In....or Out?
How much brass is in your home today? And is it the newer - softer finish?....or the 80s - high polish style? I have not seen a groundswell for bringing brass back in St Louis, at least not yet. I'm sure some will say it is all the rage, and others not so much. Keep this in mind: Most of what you tend to see in photos and opinions is not produced locally. And every item, texture and color in the photo was likely coordinated by a professional. I have seen some new brass lighting that looks very good in a shade called winter or brushed gold, which is a muted yellow color, not loud or shiny. It tends to be installed in modern décor, and lightly colored rooms, although it can be mixed with various materials. This look is working its way into lighting, and faucets in the kitchen and baths. I have not seen it reach shower frames or door knobs/hinges yet.
Still king today in STL is antique/ oil rubbed bronze (dark) metals in most of the home's hardware - doors, bath and kitchen accessories, and lighting. Brushed chrome (soft, not shiny)/ nickel is a solid second. Light fixtures are in flux, as they turned dark first, 15-18 years ago, and the kitchen, baths and door hardware followed. Funny thing about baths, though, is that polished chrome has remained a staple for all bathroom fixtures (except cabinet pulls) for many, many years, and brushed chrome/nickel in the kitchen for the last 20. The only metal that has really been out of style the last 10-15 years was.. .brass. Of course, the brass from way back when, if you have the mass produced fixtures and hardware from the 70s-80s, still is.
If you are considering a change in any of these items, I suggest going with whatever you like on an item that is less costly, like a small light fixture or two, a faucet or two. If you are re-doing everything, you should research it more, to see (1) what you like, (2) what is popular in your part of town (sometimes trends are spotty even around St Louis, like really hot in Chesterfield but not in the city or South County), (3) how it goes with the rest of the room, and (4) what has staying power if you are not selling in the next 3 years. These steps will make you feel more certain about spending thousands vs hundreds. Here is one of the ways I realize whether a style is just a trend or a true mainstay - when clients stop asking if they should use it, and start asking what variation of it to use.
There you have it, brass is in....and out, depending on the style!
2-16-18, Sewer Inspections More Common
Yes, another inspection has made its way onto the "common" list for home sales, the sewer. Costing $180-200, a plumber or sewer company inserts a flexible probe with a camera and light at the end, and records a video of the sewer interior from the main drain pipe, or stack, dropping under the basement slab out to the main trunk line, typically under the street. This can be anywhere from 30 feet to 100 feet or more of sewer on the property that is owned and maintained by the homeowner. The operator voices over the video being made, noting what he sees - pipe composition of cast iron, clay, or PVC; location of clean out; tree roots, and cracks or breaks in the line. He also will record whether he believes repairs are needed, any maintenance to be performed, approximate area under house or in the yard where the issue is, or that all appears to be normal. Sometimes tree roots block the camera, and need to be cleared out before the inspection can be finished. The video will last several minutes, and is sent by link in an email, along with printed comments. The first time you view one of these can make you a bit queasy, I still am! Surprisingly, though, they are relatively clean as they run a lot of water thru before running the camera in.
Here is the main problem arising from these inspections: Cracked lines that are not posing a problem (I am told cracks in clay pipe are not a defect, while cracks in cast iron are), and bows or dips in the line that are not causing a problem. The buyer views these as a potential, if not imminent issue, while the seller sees it as a condition that may last many years before becoming a "real" problem, if ever. Besides, the lateral sewer insurance programs that most municipalities and Counties offer will not kick in until there is a backup. So the seller reasons that (1) a cracked line will not obstruct the flow - no insurance claim - I have to pay for it myself, which can cost several thousand dollars to dig up the area and repair the section, which is not currently causing a problem, and may never. (2) If it gets to the point of obstruction and backing up, (and it is not just tree roots) let the insurance cover the repair at that point. On the other hand, the buyer reasons that (1) they don't want to deal with a backup with their stuff in the basement, or having the basement or yard torn up, plus having to pay the deductible (usually $500); and (2) problems under the house itself are not covered by the insurance programs, only sections from the foundation out to the trunk line.
Who is right? When this began a few years ago, the seller won this debate most of the time, and possibly paid a credit to the buyer for any future repairs. Nowadays, if the issue is under the house itself, the buyer is getting the repair paid by seller more often, and if out in the yard not so much, although partial seller credits are still fairly common either way. It comes down to how much the buyer wants the house, and if the seller thinks they can sell it to the next buyer while disclosing the issue and not having to do it for them, plus all the other stuff that goes with terminating a contract and dealing with other repairs on the list. Note that condo buyers are not getting this inspection done, as the general rule is once the drain goes into the wall or under the floor, it is an Association responsibility. On villas, check the Association documents to see who is responsible for the sewer line. Also, newer homes are less likely to have this performed as sewer pipes are designed to last many years.
Here's to clean pipes!
2-7-18, Do Mortgage Rates Interest You?
With over 60% of the public owning their own home, and a high percentage of the rest stating a desire to, the interest rates on mortgages should keep your interest. With the holidays, cold weather, Super Bowl and stock market plunge, it was easy to miss the upward creep of mortgage rates the last 4 weeks. Pretty much everyone has been warning of rising rates for many years now, as they have remained historically low since 2008 or so. That's 10 years of ultra low rates. 10 years of homeowners locking in low rates. Will this be the year they truly rise? No one knows for certain, but when they do, lots of people will kick themselves for not buying or refinancing sooner.
Whether a first time buyer, a move-up buyer, relocation buyer, downsizing buyer, sideways buyer for different area; or those refinancing from a rising adjustable rate to a fixed, getting rid of Private Mortgage Insurance, have better credit now, consolidating loans, or just haven't gotten around to it in 10 years. All of these situations may call for a new home loan, and the interest rate can affect your decision of when and how much, especially when buying. In addition, most every year, the fastest home price appreciation happens from March to June, when the highest number of buyers are writing offers, and I expect this year to be the same. Lately, it has averaged a half to one percent price rise per month for those 4 months. If rates stay the same or drop back, you don't lose as much, but if they go up, you may lose twice. **One instance where it may pay to wait 3 or 4 months - if you need a high appraisal to hit that 20% equity number on a refinance to eliminate PMI, it will help to have the higher spring sale prices closed for the appraiser to use.
Today, a fixed 30 year mortgage is running around 4.25% with no points. A month ago they were 3.87%. You can lower that rate with a shorter term loan of 20, 15 or even 10 years by a half percent or more to lock in the 3s. This makes a lot of sense when refinancing a loan that has less than 20 years left on it, as your payment should be similar if not less, you still pay off at the same time (not go back to a 30 year schedule), and you can get a lower rate on the shorter term loan. Pay it down faster and build your equity!
This is The Home Equity Coach talking -- it is early February, buy in the next 6 weeks and ride the price wave. If you have a home to sell, put it on the market after you buy or move and get the best of both worlds! Plus locking in a still-low interest rate? Practically money in the bank. If you cannot do this financially, I will walk you thru your still-good options. Now contact me and let's get to work!
1-16-18, Review on 2017 St Louis Home Sales, Prediction for 2018
Greetings and welcome 2018!
2017 bestowed another solid increase on the real estate market in St Louis, and across the country. Our local residential market notched a 4% annual gain, similar to the past 4 years, and pushed the average sale price for homes and condos to $234,339. Some parts of the metro experienced more, of course, and some less. The number of sales was up 2.3% from 2016, so home supply is really not shrinking, it is a faster increase in buyers than homes coming on market. Average days on market decreased 15% to 44, with median days a meager 16! Months of Inventory (ratio of homes on the market to how many are selling) shrunk 11% to 2.5 months showing the higher demand.
As for submarkets, I compared 4 factors: days-on-market (DOM), average price negotiation (list price to sale price ratio), months-of-inventory, and sale price increase, to determine hot and cold areas of our metro. I found St Charles County and the Central Corridor (Mid STL County) to be in the highest demand with price appreciation between 5.5% to 6%, shorter DOM, and lower supply. The Central Corridor had the highest average sale price in the region, no surprise, at $400,000. South County showed only 3% appreciation but had strong indicators otherwise, so I anticipate a higher price increase there in 2018. North County had the highest value increase at 7%, but the other factors were sluggish - among the highest DOM and most supply, although every category in every submarket across the area improved. I believe the dropping number of distress sales in North Co helped push the average price up. West County showed a 2.3% price increase, and average indicators. My experience here is that homes below $500,000 were selling faster, and higher prices were slower, keeping the average just average. I believe the big spenders in 2017 were staying closer in, as evidenced by the Central Corridor rise. The city of STL (2.3% up) and Jefferson County (4.3% up) were on the slow side, with higher DOM and home supply. Jeff Co, along with their solid appreciation, had a very low negotiation factor of 99.3% list price to sale price (sellers came off price only .7%), a close second to St Charles, so don't expect to get a low offer accepted there!
Looking ahead to 2018, economic indicators are almost all positive. With the STL unemployment rate now at 3.4%, and running below the national average, now at 4.1%, for about 2 years; the stock market at all time highs, wage growth increasing, the global economy strengthening, and our region's reputation for affordability, I anticipate an increase of 5%, maybe 6% in home values this year. Now is the time to be planning and prepping for a move in 2018 - contact me now to take advantage of the best market we have seen in 12 years!
Go Home Values!
12-20-17, Drop Ceilings - Love 'em or Hate 'em
Go into a recently finished lower level/ basement and look up. Will you see painted drywall or ceiling tiles on a grid, known as a drop or suspended ceiling? Chances are good it will be drywall. How about one from 20 years ago? Chances are it is a drop. That's the direction ceilings are moving. We bought our house 20 years ago with a drop ceiling in the finished part of the basement. When we renovated it this year, the decision was easy to have drywall installed. It becomes rather obvious after walking thru hundreds of homes, so you can take my word for it - this is what buyers will want in the foreseeable future, a basement that does not look like a basement.
Reasons given for staying with drop include easy access to pipes and wiring, by far number one. Followed by easier to install for DIYers; lower cost (?); and more design choices. Reasons for drywall include much better appearance, by far number one. Followed by higher ceiling height; matches rest of home style; and better resale value. You will need to decide which is better for you, but I implore you to go with drywall, as my guess is 75% (and climbing) of owners are going this way. Yours will stand out that much more in the future if it is drop style. If you need help deciding, get 2 or 3 bids and ask the contractor for pros and cons. When I considered how often I had to access underneath the main floor joists over the last 20 years that was not in the unfinished area or would not have an access panel for a shut off, it was very infrequent. The cost of installing it was not all that much, I am estimating it cost $1600 for 750 sq ft of ceiling for materials and labor, as it was lumped in with the other drywall areas. How much would that area cost for a drop? I am getting online estimates starting at $1000 for materials and labor and going up sharply. It may even cost you more to pay for a drop ceiling to be installed, although if you can do a professionally looking job yourself, you should be able to keep it under. But for the amount of $500-750 of savings, is it worth it? I estimate a gain of $2000 in an average price home by having the ceiling drywall vs drop upon selling the house, and $5000-7000 on a large home. More if your ceiling tiles are over 20 years old. Even with paying a contractor to break into your new ceiling to fix a leak or run wiring, and someone to repair it, I believe you are still coming out ahead in the end, plus the enjoyment factor in the meantime. You can compromise by drywalling the main part and do the drop in one room where you need more access to things.
The lighting may cost you as much as the ceiling finish. Can lighting is used almost exclusively now in lower levels, whether drywall or drop. This is a nice improvement from the 4 foot fluorescent fixtures from years past, so at least install cans as part of your lower level renovation project. You may be able to save some money buying and installing the fixtures yourself, and have the electrician run the wiring. But if something goes wrong after the drywall is installed, oh boy. I just paid the electrician to do all of it for proper spacing and to head off future problems.
Happy drywalling!
12-11-17, Home Repair Permits
Does the thought of getting permits for mundane jobs around the house make you groan? That would make you perfectly normal. Unfortunately, when you go to sell your home, you may be groaning even more.
Depending on where you live, your city or county planning & zoning or public works department controls building permits. This differs from a code inspection and occupancy permit (which can be required by your city/county and fire dept) upon transfer, which is an overall safety inspection. A building permit is issued for specific repair and improvement jobs done to your home during your ownership. They can be very large or very small, and typically include structural, electrical, plumbing and heating/air conditioning work, but also for fencing, solar panels, termite damage, some drywall installations, exterior drainage, even tie walls and playsets above a certain height. Most of us understand and comply with the permit process for major renovation projects on kitchens, decks and room additions. Some are questionable like minor remodeling projects. And then there are those that don't make much sense - replacing the toilet seal or replacing a window with a smaller one. Many folks think this is just another revenue producer for the government. I believe that most of this is for our safety and protection, but can be conservation related (some plumbing regs) or for aesthetics (which way the fence faces). The revenue certainly offsets the cost to the city/county, but I do not believe it makes them any money in the end after paying their staff and can even be a financial loss. This process is mainly for the health and benefit of the resident population.
So permits - Did You or Didn't You? Upon selling your home, the Realtor will have you complete a seller's disclosure. This is very detailed and (the STL version) includes a section addressing repairs to structural elements and "all significant additions, modifications, renovations and alterations to the property during your ownership"; and asking if required permits were obtained. Many of us assume the contractor applied for any required permits. Unfortunately, that does not always happen. Time and money are two important commodities in business, and contractors like to save both, besides not having a regulator nitpicking their work, and wanting to give a competitive bid. Some ask if you want one, or even require YOU to apply for it. Read your agreement with them. There are also many jobs that don't seem big enough to require one. In fact, St Louis County, which does unincorporated areas and many municipalities that contract with them, posts a list of things that do NOT need a permit in addition to the list that does. Seems like they are the same length! See http://www.stlouisco.com/YourGovernment/PublicWorks/Permits/BuildingPermits.
** A common misconception is that you do not need a permit if you don't "move the plumbing", which is not always the case.
** Some appliance stores are charging for permits for dishwasher replacement. St Louis County requires a master plumber for this job, and to submit a Certificate of Replacement in lieu of a permit, unless it is in a different location which does require a permit.
** St Louis County allows a homeowner to do their own plumbing work that requires a permit if they can pass a test.
** I have had two client cases where a city or fire department, being called by a seller applying for a code inspection after going under contract, realized that a recently finished basement or plumbing work was not permitted, and required some drywall to be removed to check things out. This cost one owner $800 and the other $2500 to redo and patch. This is rare but can happen.
If you ask me, I would have to advise you to get the permits as needed. If you decide not to, or have already completed work without, just answer the question honestly and say no, or I don't know. Be aware that the public can call a city or county and ask for the permit history on your home. If it is a common area not to get permits, most buyers do not consider this an impediment to buying, especially if you produce the paid receipts and lien waivers from professional contractors. And the longer ago it was, the less likely to be an issue.
Happy permitting!
11-29-17, Who Rules the Roost? Home Rentals Become More Restricted
Greetings! I hope you had a wonderful Thanksgiving.
One benefit of owning your home is having the ability to rent it out, whether that is your intent from the beginning as investment property, or when you move out and wish to keep it as a rental. That may be simply as an investment at that time, or you are "underwater" on the mortgage, as happened to a lot of folks 2008-2012, or you want to build more equity before selling. There are several layers of restrictions that come into play on this decision, so please take the time to know your rights.
** Your Homeowners Association (HOA) may limit or disallow your ability to rent either short term or at all. Many condo and villa developments have this spelled out in their rules and regs, called bylaws or indentures. It is rare for a single family subdivision to restrict it, but I am sure it is out there. When you are purchasing a home, you can make the sale subject to your review of these documents and a right to back out, but make sure your Realtor includes this protection in the offer.
** Municipalities are becoming more active in prohibiting or limiting short term rentals, usually defined as 30 days or less. This is targeted at the Airbnb industry which allows individuals to advertise for rent as little as one night, either part or all of their home. St Louis City allows it with a code inspection - occupancy permit process. Maplewood allows it but requires the owner to spend the night on-site and post their contact information in case of problems, while also applying for a business license and occupancy permit. Chesterfield, Hazelwood, Ladue and others have passed laws this year prohibiting any home rentals for less than 30 days. Most municipalities require code inspections and occupancy permits for home rentals of any length, even when they are not required for sales. Check with your local government as the short term rental ability is changing rapidly.
** On a normal home loan, your lender will require you to move in and occupy the property as your primary residence within 60 days or as provided on the mortgage documents. The loan typically allows you to rent it out after you have occupied it for a certain amount of time, ask your lender on this. If you are going to rent the home right after purchase, you need to get a loan for "non-owner occupied". It will require a higher down payment and higher interest rate.
** Your insurance carrier will designate a different type of policy once it becomes a rental. It is generally a little less cost, as you are not insuring your own personal property, but still covering the structure and liability. The tenant should have a policy too.
** There are taxation policies regarding rental income, what expenses you can deduct, and capital gains when you sell it. This is one of the bright spots of investment homes in that the expenses and depreciation of the home can help you take a "loss" toward your income tax. When you sell, the depreciation is "recaptured" but you can delay the potential gains tax indefinitely thru 1031 exchanges.
** Certain disclosures must be made to tenants, such as the presence or possibility of lead based paint (built before 1978), and noise disclosure in Chesterfield (Spirit airport).
** Tenant rights are a separate area of the law, although I do not know it well enough to detail it. Treat the tenant right, as you would want to be treated.
Having said all of this, purchasing and holding homes for rent is still quite popular and can be very profitable, just realize there are rules to play by and we can all live in peace.
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There was a home buying surge in November, I had 4 homes go under contract in the last 30 days, one offer even coming in on Thanksgiving Day! This bodes well for January - February 2018, you do not have to wait til March or April to list your home. Contact me now to be ready for the New Year!
11-17-17, House passes tax bill
How does the pending income tax legislation affect homeowners? It is a bit premature perhaps to discuss as the Senate must still agree, but hey, why not. I am viewing this as a real estate pro, not a tax pro, please consult a tax accountant to verify any information discussed below.
The current House version keeps the real estate property tax deduction but caps it at $10,000, which will not affect most people here in STL. It also keeps the mortgage interest deduction but lowers the cap from $1,000,000 to $500,000, which again will not affect most homeowners in STL. Bear in mind, these deductions only count if you have enough to itemize on Schedule A of your tax return to include mortgage interest and property tax on your principal residence, charitable donations, high medical expenses, and various other expenses, over and above the standard amount granted. With the standard deduction almost doubling to $24,000 for married couples, it takes a lot more expenses to top that standard. This, in effect, will make the valuable homeowner deductions meaningless for many more folks in years to come, assuming this configuration goes thru. Your tax bill may be lower on the bottom line, or it may not, but are there enough incentives to purchase and own a home? Are they even necessary?
I know our industry - Realtors, lenders, home builders, and others connected to residential homes - is fighting cuts to homeownership benefits. Our National Association of Realtors is reporting a possible 10% drop in home values. While I find that a bit dramatic, it certainly could stall the current expansion of purchasing activity, and even cause a slight drop in values in the short term on fear of the unknown. Long term, however, I feel that the overall desire to own your own home will remain high and prevail over renting. Even if rental activity did pick up, as it has the last few years, someone has to own the home to rent it out, keeping a certain level of demand for housing purchases. It is even feasible that since no one is talking about changing tax cuts for investment property, that more investors buy up single family homes to rent them out, and drive demand higher.
Another facet of income taxes that face homeowners is the capital gains tax. Currently, you owe no tax on the gain you make between buying a house and selling it at a higher price, up to a difference, or a "gain" of $250,000 as a single person and $500,000 as a married couple, and taking certain expenses into account, if you lived in it at least 2 of the previous 5 years. This is a very important exclusion now in the tax code, and will affect many people at all price ranges if not retained. There was talk of adjusting this to having lived in the home 5 of the last 8 years, disqualifying anyone who moves out in less than 5 years and subjecting them to a surprise tax, although I am not aware of the current status on this issue.
Another possible outcome is this: High end homeowners stand to lose more of their deductions on the mortgage interest and property tax caps. If they scale down in price, it puts more buying pressure on homes under $600,000 or so, and conceivably more folks will move from high cost metros to lower price ones, like St Louis. Being one of the most affordable regions in the Top 25 around the country, our area could actually come out a winner in this tax overhaul!
Happy taxing!
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