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Do Restrictions on Renting My Condo Help or Hurt Its Value?

Dear Monica: I live in a very nice condo complex that includes in the HOA rules a restriction on renting one’s unit.  I am going to sell my condo this year and am wondering if such a restriction is a good or bad thing from a marketing standpoint.  What do you think? Joan D.

 

Dear Joan:  Whether a rental restriction is a good or bad thing depends on the owner/buyer.  Some owners love the fact that all residents are owners because they feel that owners have a vested interest in the complex and that it is harder to enforce condo rules on a renter than on an owner.   Even if the  lease stipulates that the tenant must adhere to the rules, some HOA owners don’t think this is enough to maintain control if rules are broken.

 

From a marketing standpoint, rental restrictions can be a negative selling point.  Buyers don’t necessarily want to buy a home that they can never rent if, for example, they are relocated and want to keep their condo.  There are also buyers who want to rent for a while until they move in but can’t do this with rental restrictions.  Thus it narrows the market considerably and potentially affects the value of the home.  You will still be able to sell your condo even with this restriction but fewer buyers will be interested in the property.

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Should I Remodel Before Selling?

Dear Monica: I plan on selling my house in two years and there are aspects of it that I don’t like and would like to change, such as remodeling the bathrooms and sprucing up the kitchen.  Should I bother to do this now or do nothing and sell in two years?  I have substantial equity in the property.   Barbara T.

 

Dear Barbara:   It can be a very good idea to remodel before selling, with some guidelines.  First, get advice from your agent about what buyers’ tastes are and then update your finishes to reflect this, while keeping with the general style of the home.  By bringing your home in line with current tastes, you will appeal to a larger market than you would if it is not remodeled. Choose quality appliances and finishes but don’t overspend for the value of the house and the neighborhood.   Try to refresh with new paint, countertops, appliances and plumbing fixtures rather than do large remodels that involve gutting entire rooms.

 

Just before you market the home in two years, make sure the paint, carpets, and grounds are pristine.  Depending on the market at the time you choose to sell, you should appeal to more buyers and enjoy more success than if you would have if you had done nothing.

What To Do With A Pool

Dear Monica:  A house has just come on the market that I love but almost the entire back yard is taken up with a pool.  I don’t want a pool and I don’t know how difficult it is to remove one.  Can you advise me?  Jack B.

Dear Jack:  If you like the property don’t be deterred because the pool is there.  Removing it is neither difficult nor is it expensive.  Depending on the size and accessibility, a pool can be removed in the $15,000 range.  You will need to invest in new landscaping after removing the pool but your garden will be much more usable.   You can create the spaces that suit your taste and needs and your enjoyment of the property will increase tremendously.

Appraised Value is Not Always Market Value

Dear Monica: My father died recently and we had a date of death appraisal completed by a fee appraiser.  The appraiser found a relatively high value, which is good, but our realtor is saying that this value is too high to use as a list price.  What do you think?  James D.

 

Dear James:  If an appraisal is done to support a contract price that was agreed to by a willing seller and a willing buyer, and the sale followed normal marketing procedures, it is safe to say that the appraised value and the market value are the same.  If however the appraisal was done without an actual purchase, then the value found is more subjective and not necessarily what the property would sell for on the market.

 

You and your realtor should discuss market value versus appraised value thoroughly so that you can see where your property falls within the range of recent comparable sales.

You should price the property according to the best recent sales, rather than only relying on the date of death appraisal.

 

Living With A Homeowners Association

Dear Monica: My wife and I almost bought a condo recently but stopped short of making an offer because of suspicion that the HOA might be difficult.  There were disclosures that showed contentious exchanges between the HOA and the seller of the condo.  Did we do the right thing?  Adam C.

 

Dear Adam:  If you own a condo or townhouse, you are part of a Homeowners Association (HOA), whose governing rules are contained in the formation documents known as CC&Rs (Covenants, Conditions and Restrictions).  You own your unit exclusively and own the area outside your unit in common with others.  HOAs can function very well with members making decisions collectively, or, there can be serious disagreements among members.

 

If something alerted you to possible dissonance within the HOA, you made a reasonable decision to forego making an offer.  You don’t want to be uncomfortable in your new home.

 

Are Online Estimates of Home Values Accurate?

Dear Monica: I am selling my home and have listed it at the price my agents have advised based on recent comparable sales.  However, a well known online source values my home much higher.  Which estimate should I trust? Timothy P.

 

Dear Timothy: Your question comes up often because buyers and sellers often consult online sources for information and this often includes an estimate of value.  Sometimes it’s reasonable and sometimes it is significantly off the mark.

 

It’s important to distinguish between information from agents who know your area and have actually seen the properties that are comparable to yours, and online sources who simply aggregate data and never see the properties themselves.

 

You should trust your agent and the market to give you the real value of your home

The Market in 2017

Dear Monica:  I am ready to sell my home of many years but I am not certain the timing is good for sellers.  Would you advise me to market my home now or wait?  Jack D.

 

Dear Jack:  As 2017 begins, there is very little inventory for buyers to consider.  If you list your home now, and price it carefully, i.e., not aggressively  high or low, as well as present it well, you will likely sell it quickly at a good price.  Prices have already risen substantially in our area in the past five years and as a seller in this market, you should no longer expect big multiple offers significantly above your price.  Even though employment is high, salary levels cannot sustain continually rising prices.  Many buyers have been priced out of markets that would have been available to them a few years ago.   However, with inventory so low, buyers are willing to pay reasonable prices in areas they can afford.  Interest rates, too, are still very low, although they have begun to rise.  Higher interest rates will put downward pressure on prices, and if buyers need to sell in a few years, they may not be able to get back what they paid for their home.

 

If you are ready to sell your home, there is no reason to wait.  If the timing suits your needs, you would do well to sell now.

New Water Conservation Law Takes Effect Jan. 1, 2017

Dear Monica:  I have listed my property for sale and it will come on the market in January.  I understand there are new disclosure laws regarding water conserving plumbing fixtures.  Can you confirm this?  David W.

 

Dear David:  California is in the fifth year of a drought and despite some good rain last season which filled many reservoirs, we may never see a “normal” rainy season again.  The California legislature has been phasing in requirements for water saving plumbing fixtures for a few years now.   Beginning on January 1, 2017, a seller or transferor of single family, multifamily, or commercial real property must disclose to a buyer or transferee, in writing, whether the property has non-compliant plumbing fixtures.  If only some but not all of the existing fixtures are compliant, you must specifically list them as to whether they are nor not

If you are not sure whether your fixtures are in compliance or not, refer to the specifications cited in the legislation.  There are online sources to review these.

 

As a seller you don’t need to convert all non-compliant fixtures but if the new owner intends to remodel or upgrade the property, he or she will be required to install only compliant fixtures.

Obtaining the Mortgage Interest Deduction When Paying Cash

Dear Monica:  I have just purchased a home and paid cash so that I could close escrow quickly.  I intend to obtain a mortgage and understand that there are rules that affect whether or not I can deduct the mortgage interest.  Do you have information on this? Greg C.

 

Dear Greg: You are referring to the IRS’ “90 Day Rule” which stipulates that in order to deduct mortgage interest on your home it must be “Acquisition Debt” and to qualify as this it must be obtained within 90 days of purchasing the property.  It is common in this market for buyers to pay cash for properties but if you want to deduct the interest on your tax return, you must get a mortgage within this 90-day window.

 

If you don’t meet the 90 Day rule limitation, a mortgage you obtain will be considered a “Home Equity Loan” and there are substantial limits on what interest you may deduct.  It is best to consult your CPA for guidance on your particular situation.

 

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