By Amy Hoak

From The Wall Street Journal Online

If your NewYear's resolution is to sell a home in 2008, it's probably time to startthinking about how to make that home stand out from the rest.

But beforeplanning any projects, beware: Homeowners aren't recouping as many improvementcosts as they could in recent years, according to a recent study by Remodelingmagazine. In fact, real-estate agents advise clients not to overdo it,regardless of what the local market conditions are like.

"It's moreimportant that it's neat, it's clean and it looks spacious, rather than makingsure it's the top of the line," said Cheri Kuhn, owner-broker of WatersRealty in Minnetonka, Minn. She cautions her clients to bypass projects thataren't necessary.

"The thingI find with sellers: If they do a lot of remodeling, they will take the cost ofthe remodeling and add it to the cost of the home and ask the buyer to pay forit," she said. Often, though, sellers won't get that higher price.

The reason isthat asking prices are based largely on comparisons with similar homes in thearea, Ms. Kuhn said. And in the many markets that aren't exactly booming rightnow, buyers have more negotiating power over the price of a home.

To keep costsdown and spend remodeling dollars wisely, consider the following tips.

1. Ask foradvice. Before makingany remodeling plans, clear your home of clutter and rent a storage unit, ifnecessary, to hold extra stuff while the home is on the market, said ShannonAldrich, a Realtor licensed in Maine and New Hampshire with Keller WilliamsCoastal Realty. Then, get some advice from a local real-estate agent on how thehome stacks up against the competition.

"I see morehouses in a month than most people see in their lifetimes," said Ms.Aldrich, whose blog includes a series about getting rooms ready to sell.Sellers can use that experience to their advantage when deciding what projectsto do.

When Ms. Kuhnfirst meets with clients -- sometimes six months before the house is listed --she makes a prioritized list of improvements that will make a difference.Cleaning the carpets, painting the walls and removing wallpaper are commonfixes. It is wise to budget for these tasks before putting money aside for moreexpensive projects.

2. Dig deeper. It also could pay to look below thesurface by getting a home inspection before listing the property. That way,problems that could hold up a sale are addressed in advance, said Dan Steward,president of Pillar to Post, a home-inspection company in Tampa, Fla.

Some estimatethat for every dollar of perceived defect, buyers want a $2 to $3 discount, Mr.Steward said. If that's true, it might pay to spend $2,500 to replace an oldfurnace.

Also, replacingsomething as necessary as a furnace helps create a favorable perception of howwell a seller took care of the home, Ms. Kuhn said. If there is a problem withan essential element of the house, a buyer might think, "If that wasneglected, what else was?" she said.

3. Lookoutside. Pay attentionto exterior details like the condition of siding and windows, Ms. Aldrich said.

According toRemodeling magazine's 2007 Cost Vs. Value Report, a wooden-window replacementrecovers on average 81.2% of its cost at resale, and siding replacementrecovers on average 83.2% of its cost. The payoff for those projects is muchbetter than for an upgrade that a buyer might not need. A home-officeremodeling, for example, recovers 57% of its cost on average. The estimates arenational averages for midrange homes, not upscale ones.

4. Spend timein the bathroom.Freshening up the bathroom doesn't have to be expensive, but it could beimportant.

"Peoplewill put up with a lot of cosmetic challenges in a house if they know theycould use the bathroom right away," Ms. Aldrich said.

It's mostimportant for the bathroom to be clean, but sellers should also considerreplacing the fixtures, tub, sink and toilet -- if they need it, she said.Replace cracked tiles and curled linoleum.

The replacementsdon't have to be expensive, Ms. Aldrich added. A toilet can cost less than$250, and she recommends taller, handicap replacement toilets to appeal to anaging population.

5. Keep itsmall in the kitchen.The other room that often sells a house is the kitchen, but it might be best tokeep renovations modest. Remodeling magazine's report found that homeowners couldrecover 83% of the cost of a minor kitchen remodel at resale, compared with78.1% of a major kitchen remodel.

Ms. Kuhncautions her clients not to replace refrigerators, stoves or dishwashers.Buyers considering remodeling the kitchen will likely have their ownpreferences, she said.

Along those samelines, sellers should replace a countertop if it is crumbling but not if itsonly fault is that it is outdated, Ms. Kuhn said. Even then, seriously considermaterial costs: There is no need to update to granite unless the competitionhas granite countertops as well.

-- January04, 2008

Daily Real Estate News  |  January 4, 2008

The benchmark ratio of rents to home prices is slowly returning to its long-run average but it could be at the expense of home prices, according to a study by Federal Reserve Board economists and a University of Wisconsin professor suggests.

The ratio, which compares imputed rents of home owners to the value of owner-occupied housing, is a valuation of residential housing that is equivalent to the earnings-price ratio used to value stocks. 

The rent-price ratio ranged between 5 percent and 5.5 percent between 1960 and 1995 but fell rapidly after that, hitting a historic low of 3.5 percent by the end of 2006 as home prices grew rapidly.

In the first half of 2007 the ratio started to climb again, and incoming data suggests that the rent-price ratio has continued to increase, the authors note.

The study, however, suggests housing prices would have to fall 15 percent over five years, assuming rents rose 4 percent a year, to be back in sync. 

Economist Morris Davis of University of Wisconsin-Madison says that "rapid growth in rents" is crucial to justify the current level of home prices. However, he adds, an increase in unsold properties on the rental market could hinder rent increases. 

Source: Reuters News and The Wall Street Journal, Greg Ip (01/03/08)

Daily Real Estate News  |  January 4, 2008

Spurred in part by unexpectedly weak economic data that could signal an impending recession, borrowing costs on long- and short-term home loans dipped during the past week. 

Freddie Mac's statistics show a decline in interest on 30-year fixed loans to 6.07 percent from 6.17 percent last week, while 15-year fixed rates slid to 5.68 percent from 5.79 percent. 

Adjustable-rate mortgages also registered lower interest, with five-year loans settling at 5.78 percent compared to 5.9 percent a week earlier and one-year products coming in at 5.47 percent for the week, down from 5.53 percent the week before. 

Source: San Jose Mercury News (Calif.), Martin Crutsinger (01/04/08) 

© Copyright 2008 Information Inc.