The recession was led by housing and will be led out by housing, so it is wise to keep up to speed on where things are heading.  It is critical to know what is going on if you own and invest in real estate. 

The data is in and home sales are steady due primarily to the first-time buyers and investor market.  We did see some significant move-up business in price points below the luxury price range throughout the year due to our great cost of living in the Carmel and Indianapolis area.  The move-up buyer seems to be missing from many other markets in the country.  I know for a fact that the first time buyer incentive offering an $8,000 tax credit is sparking people to move forward who would have stayed on the sidelines especially in the $250,000 and under price points.  The investor buyers are also spurring activity, finding great values, and are able to find a larger pool of renters in this market.

According to new monthly data compiled by RE/MAX of Indiana, we see sales of homes in the Indianapolis market holding steady comparing the previous month.  The median home price in the Indy metro area was off slightly from the prior month at $123,900, meaning that half the homes sold for more, half for less.  However, the value was the second highest since July 2008.  Average price for the Indy metro area was $155,190.  Hamilton County continues to be one of the most stable locations in the area where just 6% of sales recorded were listed as foreclosures.  About 21 percent, or more than one in five sales in the entire Indy Metro market, were foreclosures.  Broker Listing Cooperative provided by MIBOR statistics show that the median price of foreclosures is very low, at $57,950 so this really pulls down the median data of all homes.  Median price in Hamilton County was down about 10% from the same month a year ago, to $184,475 from the same source.

For more information please visit the link on www.JohnPacilio.com of the INDY Channel 6 News report where I discuss the real estate market. 

WHAT’S IT WORTH?

Type:  Ranch

Age:   Built in 1984

Location:   Near 106^th Street and Shelbourne Road

Neighborhood:   Brandywine is an established neighborhood of 30 homes with large lots, mature trees and a pond.

Square footage:  3111

Rooms:   This four bedroom ranch has a bright open floor plan with an expansive great room, living room, breakfast area and versatile upstairs loft.  The spa-like master bath offers dual vessel sinks, a walk-in tile shower and sauna.

Strengths:  Almost an acre in size, the lot comes with a fenced backyard and part ownership of the adjacent pond.  The home has been recently renovated to include modern features and stylish décor.  Nearly everything in the home is new from the roof and water heater to the kitchen cabinets and hardwoods. 

Challenges:  The home’s modern décor has a Soho loft style feel which may not appeal to every buyer. 

WHAT’S IT WORTH?    $340,000

To view a virtual tour of this home click here. 

High quality at a low price never seems to hold true, but this is reality for High End homes in Hamilton County.  If you have money to invest, have stability in your business, or provide a skill set that proves to be in high demand, I recommend that you buy a luxury home right now.  Nowhere is there better opportunity than the upper-tier homes.

Why?

Surplus Inventory.  This is found with a simple calculation determining rate of homes sold each month compared to homes active on the market.  A 6 month inventory is a great balance between seller and buyer.  Right now, depending upon location, luxury home inventory is measured in years.   In most areas there is at least 2 years and some up to 5 years of luxury home inventory.  There are great buys out there that cannot be replicated for the price.  I have never met a home builder that will start a project with a plan to lose money.  Additionally, the cost of building materials has proven to increase over time.

What will you need?

Ample cash or flexible seller financing.  Get a loan at 417K or below for the best interest rates.  Above this loan amount will require 20% down-payment and a higher interest rate.  Seller financing may be a viable option when the seller feels that you may be their only buying option or they gain a better price for the home.

How do you find a great deal?

Compare.  First, take a look at new construction properties on the market.  If the home has had a one year birthday, it is likely that the bank may be involved in the negotiations in a short sale.  There may be no further profit left for the builder, but there are many incentives for them to sell the property prior to foreclosure.  These homes are great investments since they provide modern floor plans and reduce hidden out-of-pocket expenses compared to older homes.

Be flexible in location.  There are certain areas starving for buyers and may be required to offer more land or higher amenities to compete with higher demand areas.

Work with a real estate professional educated and certified as a Luxury Home Specialist.  By working this market every day and understanding the inventory, financing alternatives, and negotiating points, a real estate broker with this experience could save you tens of thousands of dollars.  Call or email my office for target areas and more information on the luxury home market.

The recent trend of tight credit has presented opportunities for good real estate investments.  Fewer investment property buyers with less competition increases pressure on those who need to sell.  One of two ways to look at investment real estate is how much will it pay you on a monthly basis compared to your monthly expense of holding the property.  If a fixed loan requires an outlay of $1500 per month and you bring in $2000 per month in rent, you are well on your way to making a continuous solid profit.  The renter pays the full loan payment and provides some extra cash while you are building equity and depreciating the asset. 

A second way of profiting in real estate is by purchasing a property and speculating on a dramatic increase in value due to an unusually discounted price or future changes that will benefit the property.  One example of this is the HWY 31 Major Moves expansion project.  Some of the property near interchanges zoned for residential property or agriculture will undoubtedly be utilized and rezoned for commercial use due to the proximity and access to the highway.  Commercial zoning will drive a higher selling price.  Another example of improved value in Carmel would be properties near the incredible Monon Center, also known as Central Park.  With the ponds, indoor/outdoor pools, workout center, Skateboard Park, and many community events, this is an unbelievable asset that people would prefer to live by.  Higher demand in this case has improved selling prices since the announcement of the 2007 facility.

The key to a successful real estate investment is finding a good property candidate (or finding someone who can) and calculating to the best of your ability how you will profit from the risk that you are taking.  If the upside provides immediate cash flow or good potential future value, real estate can be the best investment available.  If you find a property with both, do yourself a favor and jump on it before someone else does.

Type:  Luxury Carmel Home and 6 Acre Estate

Age:   Built in 1999

Location:   Near 116^th Street and Shelborne Road

Square footage:  7171 including 1757 in the finished basement

Rooms:   This private, gated-access, five-bedroom luxury home has a main floor master with access to the pool and a large master bath with granite counter tops, walk-in shower, and heated floors.  Also on the main floor are the richly appointed office, family room, formal dining room, living room, mud room and laundry room.  The kitchen offers granite counter tops, and two custom islands.  There are four large upstairs bedrooms, and a lower level with built-ins, fireplace, billiard room, full bath, daylight windows, bar and exercise room. 

Strengths:  This home has plenty of room to roam.  It is located on six acres featuring a large barn, four-gar garage, in-ground swimming pool and gated entrance.

Challenges:  Selling a luxury property does have hurdles.  Per the Metropolitan Indianapolis Board of Realtors, only one home between $1,000,000 and $2,000,000 has sold in Carmel in the last six months, however, two are now under contract.  There are currently 52 on the market in this price range. 

WHAT’S IT WORTH?    $1,500,000

High quality at a low price never seems to hold true, but this is reality for High End homes in Hamilton County.  If you have money to invest, have stability in your business, or provide a skill set that proves to be in high demand, I recommend that you buy a luxury home right now.  Nowhere is there better opportunity than the upper-tier homes.

Why?

Surplus Inventory.  This is found with a simple calculation determining rate of homes sold each month compared to homes active on the market.  A 6 month inventory is a great balance between seller and buyer.  Right now, depending upon location, luxury home inventory is measured in years.   In most areas there is at least 2 years and some up to 5 years of luxury home inventory.  There are great buys out there that cannot be replicated for the price.  I have never met a home builder that will start a project with a plan to lose money.  Additionally, the cost of building materials has proven to increase over time.

What will you need?

Ample cash or flexible seller financing.  Get a loan at 417K or below for the best interest rates.  Above this loan amount will require 20% down-payment and a higher interest rate.  Seller financing may be a viable option when the seller feels that you may be their only buying option or they gain a better price for the home.

How do you find a great deal?

Compare.  First, take a look at new construction properties on the market.  If the home has had a one year birthday, it is likely that the bank may be involved in the negotiations in a short sale.  There may be no further profit left for the builder, but there are many incentives for them to sell the property prior to foreclosure.  These homes are great investments since they provide modern floor plans and reduce hidden out-of-pocket expenses compared to older homes.

Be flexible in location.  There are certain areas starving for buyers and may be required to offer more land or higher amenities to compete with higher demand areas.

Work with a real estate professional educated and certified as a Luxury Home Specialist.  By working this market every day and understanding the inventory, financing alternatives, and negotiating points, a real estate broker with this experience could save you tens of thousands of dollars.  Call or email my office for target areas and more information on the luxury home market.

Right now, demand for residential properties for lease, lease to own, and contract sale (seller financing) is improving.  There are several reasons for this, but the primary reason is tougher loan restrictions on credit.  Lack of easy money just a year ago has created a new group of people who want to, but can’t, purchase the conventional way.  Many of these people have stable cash flow incomes, but for one reason or another (ie. job market, medical bills, credit cards, or divorce) have reduced credit scores. 

Traditional Financing and associated challenges:

FHA- A loan limit of $271,000 in Indiana has increased the credit rating cutoff to 620 to mitigate risk.  The FHA (Government Backed) loan is the preferred option right now for properties that are less than $300K.  FHA usually would be slightly more expensive to the strong buyer.  This is not the case now.

Fannie Mae/Freddie Mac- Conventional and insured conventional loans sold to the secondary market with an upper limit of $417,000 in Indiana are much more restrictive.  One year ago, the Fannie Mae loan (estimated at 60% of the current outstanding loans) was the primary option except for a buyer with some serious credit issues or someone who could only put a very small amount of money down.  There is now a rate bump (higher rate) required based upon a FICO credit score less than 740.  A 740 credit score is very, very good.

Jumbo loans- With the major problems with private mortgage insurance providers, there is no capability to borrow above $417,000 without a 20 percent down payment.  In recent past, the optimistic small business owner may have purchased the same property for 5 percent down payment; therefore, the upper end market has lost a pool of buyers.  Additionally, mortgage interest rates for Jumbo Loans are much higher than smaller loans due to the perceived risk and lower demand in the secondary market. 

If their price range sales are sluggish, many motivated home sellers must turn to a new marketing approach to accomplish their goals if the competition and high inventory levels will prevent a profitable short-term sale.  There is a pool of responsible buyers who would love to live in the home and there is another group of sellers with an obvious demand to get cash flow to cover their debt and maintenance requirements.  These sellers likely comprehend the increased probability of selling their property for significantly more money in the future.  There are viable options and you should decide what is best for your situation with professional guidance and expert advice.  Let’s get specific, call Me.

Type:  Traditional       

Age:   Built in 1995

Location:   Near 146^th Street and Hazel Dell Parkway

Neighborhood:   Ashmore Trace is a peaceful east Carmel community with nearby parks and walking trails.  It is conveniently located across the street from a new shopping center.

Square footage:  2556

Rooms:   This four bedroom two-and-a-half bath home offers an open kitchen and family room combination, living room, formal dining room, and laundry room.  An oversize master suite has vaulted ceilings and a huge private bath with a walk-in closet, dual sinks, and separate tub and shower. The two-story entry and 9 foot ceilings give this home an open and airy feel. 

Strengths:  This home has been recently updated with stainless appliances, new flooring, modern lighting and fixtures, and fresh paint. Exterior updates include a custom built deck with fire pit and a raised garden.  The large backyard backs to trees and an adjacent field for added privacy.

Challenges:  There are currently 91 properties on the market in Carmel that are listed between $200,000-250,000.

WHAT’S IT WORTH?  $225,000

Chances are that something may go wrong with your next home improvement project.  According to Consumer Reports, out of 17,129 readers asked about their experiences with 18 common projects ranging from painting a room to building an addition, 44% had at least one problem. 

For Carmel and Fishers residents, the best way to avoid similar problems is with extra planning and patience. 

Take the time to consider all costs.  Unexpected incidentals, purchasing the incorrect products, and surprises such as delivery costs and trash removal fees can increase your expenses.  More than 25% of people asked said they paid for poor planning by a median of $625.  Even projects perceived as simple like interior painting have cost readers a median of $280 extra due to unforeseen issues.

Make a plan and stick to it.  One in 10 people asked said they changed their minds during remodeling.  37% of those who made changes spent a median of $2,000 extra.  For people doing big additions, that number ballooned to $10,000.

Hire a realistic contractor.  Nearly one in 10 readers went over budget because their contractor underestimated expenses, did poor work, or failed to anticipate code requirements.  In today’s environment in Carmel and Fishers Indiana, lowball bids are more common, especially in competitive markets.  According to Bruce Irving, a home renovation consultant in Cambridge, Mass., “In today’s climate contactors are loath to lose a job by being too gloomy about a project.  If a guy underbids, chances are he’ll look to make up the difference.  Watch out for estimates with several open-ended amounts for products. 

Check references.  Make sure your contractor has insurance, including workers’ comp, and an up-to-date license.  Scrutinize the contract closely.  It should list each product down to the model number.  If this seems too picky, consider that the survey revealed more than 1,600 complaints of unexpected incidentals costing an additional $200, such as hardware and finishes.

Do some investigating.  Unexpected surprises such as rotting joists, rusted pipes, and frayed wiring were experienced by 16% of the respondents and cost a median of $1000 to fix.  A good contractor will check for potential problems.  Wisconsin based contractor, Dean Herriges, says “during the planning stage, we’ll do some exploratory work to see what’s going on behind those walls.  Telltale signs include water-stained walls (leaky roof) and sawdust along the baseboards (termites).  Your contract should include a clause for unforeseen conditions. 

Examine the financial details.  Unexpected closing costs and extended interest payments costing a median of $1,900 were incurred by readers who refinanced a project.  If needed, be sure the work has permits and conforms to local codes.  Greg Johnson, a building inspector in St. Paul, Minnesota, says a contractor who asks customers to get their own permits “is always a red flag” and “there is a good chance he’s ducking a licensing requirement.”

Below are examples of the hidden costs of home improvement.  These show median overall cost overruns based on a survey conducted by Consumer Reports for eight popular projects:

Bathroom remodel:  60% went over budget, overrun:  $600, main causes:  changed plans, needed to upgrade systems and structural problems. 

Kitchen remodel:  56% went over budget, overrun:  $1200, main causes:  changed plans, contractor underbid labor, and needed to upgrade systems (plumbing, wiring, etc.).

Deck addition:  45% went over budget, overrun:  $700, main causes:  changed plans, cost of materials increased and needed special tools.

Room addition:  55% went over budget, overrun:  $2000, main causes:  changed plans, contractor underestimated labor, and cost of materials increased. 

Basement finishing:  56% went over budget, overrun:  $1350, main causes:  changed plans, needed to upgrade systems, and needed special tools.

New windows:  33% went over budget, overrun:  $600, main causes:  changed plans, structural problems, and water damage.

Interior painting:  31% went over budget, overrun:  $280

Major landscaping:  45% went over budget, overrun:  $735, main causes:  changed plans, increase in cost of materials and needed special tools. 

Source:  Consumer Reports May 2009 Issue

Unfortunately, even here in Carmel and Fishers Indiana, statistics show that most people ignore an unfriendly letter or call from the bank after a missed or late payment(s).  Take action now before it’s too late and the bank takes over the property.  One solution to this difficult situation is a real estate Short Sell.  A Short Sell is a case where a bank can avoid an expensive foreclosure by accepting an offer for an amount less than what is owed on the property prior to an expensive foreclosure.  For the owner of the property, a short sale is an attractive alternative to a foreclosure, which can be personally and financially devastating. 

According to The Distressed Property Institute, LLC the ramifications of a foreclosure include:

• Current Fannie Mae Loan rules prohibit another mortgage for 5 years after a primary residence foreclosure and 7 years for an investor property. 
• Interest rates can be increased due to risk for a purchase as it is now noted on the application if there has been a foreclosure in the last 7 years
• Credit scores could be lowered 250 to 300 points for over 3 years and will remain public in credit history information for 10 years or more. 
• A challenge to Security Clearance and a negative fact that may be available to an employer.
• The bank has the right to pursue a deficiency judgment (loss) due to foreclosure.

Alternatively, the benefits of avoiding foreclosure through a short sale:

• Fannie Mae loans potentially can be gained in as little as 2 years.
• Credit scores will indicate only late payments and after sale the property will show paid or negotiated, which may lower credit scores as little as 50 points if all other payments are made and credit score dips can be limited to 18 months.
• A short sale is not reported on credit history like a foreclosure, it will show paid or settled.
• Most Security Clearances will not be challenged.
• In some cases the lender can be convinced to give up the right to pursue a deficiency judgment (bank loss).

Armed with this information, it is easy to see why you would want to sell your property prior to foreclosure by gaining insight from expert REALTOR with the proper Short Sale training.  Be ready to step through a streamlined process that will enable you or your friends to move out from a difficult financial situation.  Take action now!  Call me or another Certified Distressed Property Expert.  Time is critical to avoid a foreclosure!