Getting Top Dollar For Your Home – Stage, Replace or Remodel

Getting Top Dollar For Your Home – Stage, Replace or Remodel

Often we get asked how to increase the value of a home before selling it. Sometimes the answer is simple, and sometimes the answer if more complicated – especially, if the seller is interested in investing a little time or money. There are some improvements that increase the value of a home and some that just increase the sellability. Most sellers are prepared to get their home staged to sell, but in some cases they can dramatically increase the value of their home by replacing or remodeling. Here is a look at how to get the top dollar for your home by staging, replacing or remodeling.

  The key to create sellability is to create a clean, decluttered, and depersonalized home. Curb appeal, or more importantly, web appeal, while viewing online is critical. When a buyer approaches the home or sees the first photo online they should be visually attracted to the home. For example, groomed front gardens, fresh tanbark, fresh flowers, power washed siding, and a clean or newly painted front door. Once inside, the same theory applies – clean and decluttered surfaces free of personal photos or knick-knacks. We tell clients to start packing and start decluttering to make their home look larger and more inviting to buyers. When a buyer feels comfortable enough to sit down on your living room couch, they have begun the process of envisioning the home as theirs.
  Going beyond staging can yield a higher value and simpler, lower-cost projects tend to return greater value. Every year, The National Association of Realtors commissions a study done by Remodeling magazine on Remodeling and Replacement Cost vs Value, and each year they come up with very similar results. Here is the 2017 list of the return on investment of the top 5 and the bottom 3 replacement projects rated by cost recovered.
Project                                                    Cost Recovered
Garage Door Replacement                                                                    121.1%
Entry Door Replacement                                                                        101.5%
Minor Kitchen Remodel                                                                          100.5%
Window Replacement                                                                               93.1%
Adding manufactured Stone Veneer                                                       89.9%
Bathroom Addition                                                                                    70.2%
Master Suite addition                                                                                67.9%
Deck addition                                                                                             65.5%
  Notice a pattern? With the exception of the minor kitchen remodel, they’re all replacement projects that enhance the curb appeal. In general, replacement costs less and provides a bigger payback than remodels or additions. First impressions are important. The replacements that offer the greatest payback to sellers are the ones that are most obvious to buyers when they first view the house in person or online.

  The remodeling cost vs value report makes it clear that large scale jobs aren’t likely to return sellers their full cost; but, there are remodels worth doing in anticipation of an upcoming sale. Some may return 100% of their cost or more. Others may not have as much of a payback, but they can improve the market position of the property in relation to the competition. In addition, several projects can provide owners with a few years of enjoyment while still offering decent payback down the road. Kitchens still offer the most remodeling bang for your buck.
  Another way of drastically increasing the value of your home is by adding square feet; but, unless you can do it cheaply, you’re not likely to recover your full cost. New construction cost per square foot is high, and in many cases, higher than the resell price per square foot. We have seen some remarkable value added to homes by inexpensively adding square feet – usually by finishing off a daylight basement. We saw one seller double their square feet by simply adding sheet rock, some interior walls, windows, flooring and lighting to finish their basement.  In another case we advised a buyer to pay an extra $30,000 to add a usable daylight basement with a bathroom on a custom built home. Although it is not completed, the owner can complete it at any time, adding another 1200 square feet to his home with very minimal effort or cost.
If you do decide to remodel your home before selling, here are a few words of advice – make sure you complete all projects before putting your house on the market, there is nothing that turns buyers off faster than a house filled with the owners’ unfinished remodeling projects.
  So whether you decide to Stage, Replace or Remodel, just remember to consult your Realtor on values in your area and projects that will yield more than your investment. With the increasing demand for homes, and limited supply, it has led to a sellers’ market, so if you have been thinking of selling, now is as good a time as ever.

How to Build a Retirement in 7 Years   ”My Four Investment Epiphanies”

How to Build a Retirement in 7 Years ”My Four Investment Epiphanies”

My background in investments in the past has mainly been my 401K and my personal stock portfolio. Thirty five years of my life was spent in the High Tech industry so that became the majority of my stock portfolio. I have seen my high tech stocks double, triple and then crash! It wasn’t until it sold my home in Sonoma County and moved to Southern Oregon that I realized I accidentally made more off the equity in my home that I have ever made in all my stocks. This became my first investing epiphany.

That epiphany and “accidental” windfall started my obsession for real estate investing. I then invested in some raw rural land that I developed and resold more than doubling my investment. Life seemed great until 2005 when I went through an unexpected and financially devastating divorce that wiped out a lifetime of earning and savings.

Life goes on, and as the real estate market started to decline in 2007, the worst recession I have experienced, my real estate partner and I began renovating and reselling (Flipping) homes. Renovating and flipping homes can be fun and profitable but it’s a full time job managing contractors; and, in 2007, homes were declining in price, so speed was critical to how much profit you would make and we realized we didn’t have time to manage flips and work full time.

In 2008, we realized we had little retirement, so we then changed our focus to creating a stream of passive income that would be never ending and that we could retire on. With my incredible partner, we started buying rental homes seven years ago and we became very disciplined about not spending, but investing, our money. It’s easy to buy that cool new BMW or take a Caribbean Cruise, but being in my early 50’s, building a comfortable retirement income was far more important than material gratification.

Now, seven years later we have built a comfortable passive income stream that we can now retire on which lead to my second investment epiphany. You can create a lifelong income stream that is enough to retire on in seven years!   Yes, for all of you over 40 who have lost money in investments, went through a financially devastating divorce, had to start over in your career, had an expensive medical event, or have enjoyed material gratification and not saved your money, it may not be too late to build a great retirement income. Yes, you do have to work hard, you do have to save your earnings, you do have to minimize the gratification that comes from material belongs; but, you can create an unending income stream with seven years of investing!

This story could end here and I’m so glad to tell anyone who will listen, that it doesn’t take that long of heavy investing before you have a never ending income stream. If we can do it, any hard working couple can do it! But, this story doesn’t end here; it’s not over yet as there was my third investment epiphany and it’s called appreciation. While our focus was on the yearly passive income that each of our investment homes would bring us, a funny thing was happening, each of our homes was going up in value and we were building a lot of equity! Every year the value of each home has risen and our equity in each home has grown past the 25% we have invested. The median price of a home in Jackson County has gone up over 60% in the last five years.  So now we have so much equity, we can borrow against that equity in the form of a HELOC (home equity line of credit) or a refinance and buy more investment homes. Originally we put down 25% to purchase our rental homes and the banks loaned us 75%.  Now we are refinancing and are pulling out more than our original 25% investment, which means we have none of our own money invested which is an infinite return.

My last investment epiphany is if we keep reinvesting our equity we can have more yearly income in our retirement than we did while we were working! That’s an incredible thought from someone who has always worked a 60+ hour week to make a living.

Our only regret is we didn’t start investing in real estate until we were in our 50’s, but to make up for that we are teaching others to invest younger, to do what we didn’t do. I’m happy to say it’s been working and just this month we had one of our employees, who is only 23, closed on a duplex that she will live in one side and rent out the other side. It’s an amazing deal where she purchased the duplex with as VA loan which offers 100% financing and the revenue from renting the other unit will pay for her mortgage, insurance and property tax.  Bottom line she paid zero down and lives for free! In another transaction we are helping one of our clients, who is only 24, and doing a similar purchase, buying a duplex with an owner occupied loan, living in one side and renting out the other side. In his case he’s paying 3.5% down and won’t live for free but his housing cost will be under $500 month after he collects the rent.

We don’t believe real estate is the only way to make money investing; it’s just the path we chose that worked for us. We have two friends that are vigilant at studying Warren Buffet and invest wisely in stocks, we have no doubt they will do well and have a great retirement. We don’t mean to make this sound easier that it is. We have learned in life “the harder and smarter we work, the easier life is”!

We’ll leave you with the most important investment tip we have learned and that is that it’s never too early or too late to invest for your retirement, and if you continue to invest you may have a retirement income that exceeds your expectations!

What’s in Store for 2018

What’s in Store for 2018

Happy New Year!  2017 was a great year for Jackson County real estate. The median sales price for existing single-family residences climbed 10.3 percent last year to $264,700 following a 6.6 percent increase to $239,900 in 2016. The median also surpassed the previous high of $259,000 from before the market collapse in 2007. So real estate in Jackson County is worth more now than it has ever been before!

Although there were more homes for resale in 2017 than 2016, we still have hundreds of buyers that haven’t found their dream home and demand is stacking up. We could have sold many more homes if the inventory was there.

So, what do we predict for 2018? To answer that, we just need to look at all the factors that create the supply and demand and then predict what will happen.

Demand: A good part of our real estate market is driven by retirees and escapees. There are 10,000 people turning 65 in the United States every day so we will see the number of retirees increasing in the years to come growing our area at a faster pace than before. We will also see a ‘short term’  increase in the numbers coming because of issues faced by Californians such as fires, mud slides, lack of housing and some of the highest prices for both rental homes and primary residences in the country. We are also seeing a slow move out of large crowed metropolitan areas to smaller towns as more and more corporations allow their employees to work from home which allows many people to move to smaller, less expensive areas such as ours.

Rental Prices: Another great determiner of demand comes from those who rent. With rental rates extremely high in Jackson County, and only 1% vacancy, rental rate rates are bound to stay high. In most cases, a rental home with a value of $350,000 or less will cost less to buy than it does to rent! This means that many of the 40% of families that rent are trying to get into a position to buy.

Economy: We don’t have much industry in Southern Oregon; it’s mainly medical, manufacturing and the service industry – that’s the bad news. The good news is our economy isn’t  affected by short term highs and lows in any one industry. For example, Houston is the center of the US energy Industry, with more than 3,000 energy-related businesses which has their real estate prices tied to the ups and downs in oil prices. The good news for Jackson County is that unemployment is at an all-time low at 4.2%, so almost anyone who wants a job can get a job.

Supply: There were virtually no homes or apartments built in the United States during the housing caused recession lasting from 2007 – 2013. New homes couldn’t compete with the price of foreclosed homes being sold by banks. This has caused a shortage of homes throughout the United States as well as a shortage of good, licensed contractors to build them. We are really feeling this in Southern Oregon as new homes are selling as fast as they can be built. We are also seeing many out of state home buyers parked in rental units waiting, sometimes a year, before they find the home they want to buy. All of this compounded with stringent lending to commercial borrowers creates a lack of new homes. Currently there are just over 700 homes for sale in Jackson County, which is a two month supply, where we used to average 2500 homes for sale prior to the 2007 recession, and new home construction is moving slowly.

Interest rates: Although interest rates are slowly increasing, they are still at a historic low. The Federal Reserve has stated they plan on raising the prime rate three times in 2018 which will probably increase the mortgage interest rate to  somewhere between 4.8 – 5% by the end of 2018. Retirees and Escapees aren’t affected too much by interest rate but first time home buyers are. As long as rental prices stay high, and unemployment stays low, first time home buyers will be trying hard to buy their first home.

Income Tax Changes: The new Income tax changes that take effect this year don’t help the Housing Industry, but don’t hurt it very much either. If you are a young millennial buying your first home you probably won’t take advantage of writing off your mortgage or property tax because the new standard deduction will be greater than your real estate cost. But again, as long as renting costs more than buying, the demand for first time home buyers will stay high.

So you can see that our housing demand is at an all-time high and supply is at an all-time low.  This has led to a 6.6% increase in real estate pricing in 2016 and a more than 10% year to date increase in 2018. We see nothing in the short term future that will change the supply and demand, so prices in Jackson County are likely to continue to increase by 7 – 10% a year until supply and demand stabilize.

By Graham Farran

5 Real Estate Myths Busted

#1. My House is Worth!!
There are only two people that ultimately determine what a house is worth – the buyer and the appraiser.  To determine a home’s value, many owners add up what they have spent on their house, add what they owe on their house, look on Zillow, or look at what other homes have sold for. Any of these evaluation methods could or could not yield a correct house value, but really it comes down to what the buyer and the appraiser value the home at.  Currently we’re in a sellers’ market and we have an influx of retired couples and escapees fleeing large metropolitan markets all moving to smaller rural areas such as ours. This is causing a shortage of homes available for sale in Southern Oregon. Because the demand is so high for the right properties we are seeing the median price of homes increasing by 10% this year and we’re struggling with appraisals coming in at the sale value. If the home appraises lower than the purchase price, there are usually three options – The property is reduced to the appraised price, the buyer and seller split the difference, or the property is sold over appraised price at the original agreed to sales price. The value at which home prices are increasing is somewhat limited by appraisals. If we didn’t have appraisals, real estate values would be increasing by more than 10%. So it is the buyers and the appraisers that have the most influence over pricing.

#2. Banks Will Take a Low-ball Offer
There is a misconception that banks will wheel and deal on their bank owned properties but that is no longer true. During the 2007 – 2012 real estate and lending caused recession, banks dumped hundreds of thousands of homes in the United States. They sold them off using cash auctions at the court house steps, or by selling them below market value. For the most part those times are over. Banks are very disciplined and smart. They know that home values are going up in most US markets and they aren’t in a hurry to sell off their inventory as it’s worth more every day.  We are now seeing bank owned properties lingering on the market for months and the banks waiting to get the price they want. Banks never really accepted low-ball offers; they typically came on the market with an aggressive price and lowered it quickly until it sold, or they auctioned off the property to the highest bidder. Of all the bank owned properties sold in the last 6 months, over 50% sold for cash and many sold for over list price. We have had many clients who had to self-learn this; they get frustrated when banks reject their low-ball offers without a counter offer, but this has always been normal operating procedure for a bank. We’re not saying there aren’t some good deals that happen to be bank owned, what we are saying is bank owned homes are no longer the deals they once were and don’t expect an answer from them if you send in a low-ball offer.

#3. I Don’t Want a Home with a HOA
We understand that many buyers don’t want to deal with a Home Owners Association, but almost all newer subdivisions have them. In the past, cities would take responsibility for the streets, sidewalks, street lights and roads within a subdivision, but in today’s world, most cities can’t afford to maintain them so they pass the cost onto the homeowners who create a HOA that collects yearly fees to cover the eventual road and sidewalk repairs. So if you want a home in a subdivision without an HOA, your only choice may be an older 70s or 80s home.

#4 I’m Going to Wait to Buy until Real Estate Prices Go down
Real Estate prices are a matter of supply and demand like all other products and services.  We are fortunate that our market appeals to both retirees and escapees moving here from larger metropolitan markets. Currently in the US, there are 10,000 people turning 65 every day and the number of corporations allowing their employees to work from home is also on the increase, so the number of retirees and escapees are increasing. In addition, we have a lot of demand being generated from the 35- 40% of our local population that currently rents. Rental prices have increased drastically in the past few years and we’re seeing an average 2000 square foot home rent for $2,000 month and more in towns like Ashland and Jacksonville.  Our demand for rental homes is at an all-time high and our supply is at an all-time low. Add in our historically low interest rates and in many cases it’s cheaper to buy than to rent.  We are likely to continue seeing prices increase for the near future, until demand slows down or supply increases but this may take a long while. So prices may go up another 30-40% before they ever level or go down.

#5 I Want to Buy in a Neighborhood Without Renters
Throughout the United States, about 35% of all single family homes are rental homes. Unless there are CC&R’s restricting renters, which is not common in Southern Oregon, a large part of all subdivisions and single family homes are occupied by renters.  The percentages of renters are lower for high income subdivisions and higher for low income subdivisions. In our experience, we have not seen a big difference between renters and owners in the way they take care of their homes. We all know examples of both owners and renters that keep their properties immaculate and we all know examples of both owners and renters that fall a little short.

There are many more Real Estate Myths that we will save for another day!

9 Ways to Prepare for Winter

Now that the leaves are falling, you know snow and freezing temperatures are soon to follow. Here are 9 good ideas that we need to get done before winter to prevent costly home repairs.

1. Prevent Plumbing Freezes – Protect your outdoor facets
A ruptured pipe can ruin your home and everything in it. Rupturing occurs when a pipe freezes and the water inside it expands. You can protect your exterior pipes by wrapping them with heat tape or add a faucet protector which can cost less than $10.  Protect your interior pipes by ensuring your thermostat is never set below 50 degrees. Disconnect and drain garden hoses. If your exterior faucets aren’t self-draining, be sure to turn off the water manually at the shutoff valve inside the house so water doesn’t stand in the wall pipes. If you have an irrigation system, it’s important to make sure all the water has drained from the system before the first freeze. If you have a well make sure the pipes in the well house are insulated, or make sure there is a heat source in the well house.

2. Tune up your Heating System
Don’t wait until the first cold snap to discover the heat isn’t going to work. Turn your furnace on and make sure it runs. If you have a monitor heater make sure you have lots of heating fuel. Do not allow oil to run low – you run the risk of running out and freezing pipes.  While you’re at it, don’t forget to replace the furnace filter, which cleans the air in your home.

3. Fireplace
What better way to beat the cold than the heat of a wood burning fireplace! Prep your fireplace by clearing out any debris that might be left over from last season, have the chimney cleaned once a year if you use it a lot. Lastly, be sure you screen is still in good shape to shield your flooring from any flying sparks.

4. Windows Air-Conditioners
You should not have any air conditioners in the windows. If you do, remove them and replace the windows in their proper positions.

5. Roof & Gutters – Don’t be lazy
Check your roof for loose or broken shingles. Be sure your gutters have been cleaned free of leaves, sticks and debris, so you will have proper drainage. It can be so tempting to skip gutter cleanups as winter nears. It seems like as soon as you clear your gutters, they clog right back up again. So what’s the point? Well, if it looks like you’re living inside a waterfall when it rains, water is missing your gutter system completely and it may be directed to your foundation instead.

6. Smoke Detectors, Fire Extinguishers and Carbon Monoxide Detectors
Test your detectors to make sure they work. Replace batteries if needed. Have spare batteries available.

7. Fill in the Gaps

Finding the places where cold air sneaks into your home can drastically reduce your heating bills this winter. Cracks can be easily and inexpensively sealed with a simple tube of caulk, and it’s available in hundreds of colors to match your window panes, outside siding, and even brick. Not sure where to caulk? Look for visible cracks around:

  • Window sills
  • Baseboards
  • Fireplace or dryer vents
  • Anywhere something inside pokes a hole to the outside

If you have a real chimney, don’t forget to close the damper to prevent cold air from billowing down and into your home.

8. Get Personal with Your Thermostat

We all know we should, but we seem to have some mental block when it comes to programming our thermostats to align with our schedules. It’s not that hard and sometimes all it takes is buying a new one that suits you. Maybe you’ll like a Wi-Fi thermostat that’ll give you a little money-saving thrill each time you swipe your app or maybe you will like the Nest Thermostat that learns your temperature likes. Top of Form

Bottom of Form

9. Prep your yard

Your yard may take a beating this winter, but a little prep now can help your lawn be lush and green again once the warm weather comes back. Spend a few hours fertilizing and ridding your lawn of leaves now, and reap the benefits later.

Lastly, enjoy the best that winter offers in Southern Oregon. The great downhill skiing of Mt Ashland, snowmobiling, cross country skiing, a drive to Becky’s café, guided hikes at Crater Lake, ice fishing at frozen high mountain lakes, or just a reading a book by the fireplace.

To Rent or to Buy-That is the Question!

To Rent or to Buy – That is the Question! 

 To Rent or to Buy – That is the Question! 

Rental prices have been increasing since the real estate crash in 2007, but home prices didn’t begin to rebound until 2013. Rental prices are now running at an average of $1 a square foot for a suburban home in Medford and higher in Ashland and Jacksonville or for rural and view homes. With rental prices so high, it is not unusual for tenants to pay $1800 a month or more.  The question is, at what point does it becomes cheaper to buy your home instead of renting it. The answer depends on your tax rate, loan rate, current rent you’re paying and the price of the house you want to buy.  What follows are the actual numbers showing the cost to Rent vs. Buy on a home in Medford located in Hampton Place. 

The tenants are married and they make a little over $50,000 year combined. They rent a home that is a newer 1680 square foot home with a two car garage and their rent is $1660 a month or $19,920 a year. 

Cost to rent their home for the next 5 years:  

  • $99,600 to rent their house for the next 5 years ($1660 month). This assumes their rent will not go up, but they don’t have to pay for any maintenance or pay any property taxes. They are paying for renters insurance.

Cost to buy their rental home or one similar and live there for 5 years: 

  • $285, 000 is the value of the home. They are pre-approved to put 3% down which is $8,550 down, Borrow $276,450 and have been quoted 4% interest rate. 
  • -$81,000: 5 years of mortgage payments ($1317.67 month) 
  • -$16,000: Cost of property taxes and home insurance over 5 years. We are assuming they will go up 3% a year
  • -$10,020: Maintenance costs over 5 years ($167 month). This is a national average for maintenance costs but can vary drastically based upon the year of the home. 
  • +$19,440: Tax savings over five years (15% Fed / 9% State). They get to deduct the interest on their mortgage from their gross income, so this is based on their combined earnings of $50,000 and filing a join return. 
  • +$26,815: Debt Reduction or the amount of the principal being paid off in 5 years and the reduction in the mortgage owed.
  • So it will cost $60,765 to buy the home over 5 years without factoring in appreciation. 

Appreciation on the home in 5 years: 

  • +$51,026 at 5% appreciation. Currently we are experiencing about 10% appreciation but let’s be conservative and do the numbers based on 5% appreciation and 7% appreciation 
  • +$77,370 at 7% appreciation   

Is it more to rent or to buy?

These renters will spend $99,600 over 5 years if they continue to rent, but if they buy, they will spend $60,765 for a savings of $38,835! If you factor in appreciation, they will save $89,861 if there is 5% appreciation, and $116,205 if there is 7% appreciation. This is quite a difference and a huge advantage to buying because you’re paying off the home as you go and paying fewer taxes as you go! 

Other financial factors: 

We are assuming if they continue to rent that their rental rate will not go up in the next 5 years which may be unlikely, so we may have underestimated their cost if they continue to rent. This is also a scenario for a couple making $50,000 a year combined income. Keep in mind, the more you make the less your home will cost you because the higher your tax bracket, the more you save from the mortgage deduction. If your Federal and State tax rate adds up to 40%, then each $1000 of deductions you have saves you $400 in tax dollars. The great thing about appreciation is that it compounds, so if you leave your appreciation in the house the next year, you have appreciation on the original cost of the house plus last year’s appreciation. The longer you live in the home, the faster your equity builds up as you pay more principal and less interest as time goes on. We see this as a silent savings plan, and have dealt with countless retirees who have retired with the help of the equity in their home. 

How do you save your down payment to buy your first home?

Most renters know it’s cheaper to buy the home in the long run, but they don’t know how to save the down payment to get started. It’s never easy to save, and it takes a long time, especially when you’re young, but there are some great loans out there to help home buyers. Here is a recap of the major loans available – two loans require zero down and three loans require 1% – 3.5% down. 


  • No down payment – 100% Financing 
  • Stable 30 year fixed loan 
  • FICO credit score: 620 or greater 
  • Debt to Income ratio:  About 28% available for house payment 
  • Closing costs can be included in the loan amount 
  • No manufactured homes 

VA Loan

  • No down payment – 100% Financing 
  • No mortgage insurance 
  • FICO credit score: 600 or greater. Manufactured home 620 or greater 
  • Debt to Income ratio: Really based on “residual income” but have seen  Up to 68% based on size of family 

Guild 1% down – 2% gifted to you loan 

  • 1% down payment required 
  • Guild Mortgage will gift you 2% down 
  • FICO credit score: 680 or higher
  • Debt to Income: up to 50% 
  • Must make less than the Median Income in your County: 
    • $53,500 Jackson County 
    • $47,800 Josephine County

FHA Loan 

  • 3.5% down payment required
  • FICO credit score: 580 or greater
  • Use this loan for a single family home or up to a 4-plex 
  • Debt to Income ratio: Up to 57% 

Conventional Loan 

  • 3% down payment required 
  • FICO credit score: 620 or greater 
  • Debt to Income ratio up to 50% 

Medical Doctors and Dentists Loan 

  • 5% down required 
  • FICO credit score: 720
  • Student loan must be in deferment or forbearance 
  • Debt to Income ratio 45%

Most of our clients are surprised when they find out how much they qualify for, how many different types of loans are out there, and how much renting may be costing them vs. buying!   So it may be time to stop reading this article and see what renting is costing you.