Real estate holds a great deal of financial significance, but it’s also a source of emotional value.
As a financial asset, real estate has certain risks. It can be costly to buy and costly to maintain.
Unlike a stock or bond, it’s generally illiquid, meaning it can take some time to sell. This can be hazardous to a homeowner’s financial health if money is needed quickly.
Gone are the days when people readily professed such axioms as, “You can never go wrong with real estate.” The recent recession, sub-prime fiasco, the advent of “negative equity” and an increase in “superstorms” and other coastal hazards have shown that property ownership can be a losing battle.
Real estate investments do offer other advantages, however. Real estate still generally appreciates over the long term, particularly in luxury markets as we have here in the Hamptons. Also, owners can typically borrow against property, as it remains one of the best forms of equity available, offers various tax deductions and can provide one with a great deal of comfort and joy.
But whether one has a stately home or piece of undeveloped land, an oceanfront condominium or a fixer-upper on their hands, the new year can be the time to get plans in order to bring property to its next and ideally more useful stage. As 2014 approaches, would-be buyers, sellers and others may be seeking answers for a variety of different questions: should I buy, sell, rent, renovate or refinance in 2014?
“There’s a difference between a house and a home,” says Steve Kaczmarek of the financial-advisory firm East End Wealth Management in Hampton Bays. “A home is where you live. It’s tough to put an economic value on that. A house is something that’s bought and sold.”
“If you’re looking to buy a home or borrow to renovate or refinance you should probably lock in rates soon,” he added. “If you’re looking to sell, there’s such a thing as time value when it comes to money. It can pay to take the proceeds even if they’re slightly less than what you want, and invest elsewhere.”
This last strategy can work for anyone looking to downsize; that is to sell their current property for something that’s usually smaller, easier and less expensive to maintain, according to Mr. Kaczmarek. He reported that the 10-year treasury bill is paying slightly less than 3 percent, which, compared to the Consumer Price Index of 1.5 percent, is a real rate of return of nearly 3 percent.
Diane Saatchi, an associate real estate broker at Saunders & Associates in Bridgehampton does not see any drastic changes in the upward sales trend for Hamptons real estate, providing certain conditions are met.
“If there are no major shifts in monetary policy, no natural disasters or other significant outside influences, our market will likely stay on its current course,” she said. “I don’t see the supply of new or speculative construction keeping up with demand. Serious buyers need to be prepared to act swiftly.”
Borrowing rates for mortgages or renovations are low by historic standards and many anticipate them to remain competitive for the foreseeable future. Banks and alternative lenders continue to offer various programs depending on one’s designs for the property as well as one’s credit rating.
According to the experts, it often pays to initiate a relationship with a lender before money is needed. This can expedite things when deciding to move forward with financial plans.
Nancy Hardy of Halstead Property in Southampton also offered advice for those who been trying to sell their Hamptons home with no luck.
“Take a step back and ask yourself if you’re priced correctly for the market,” she advised. “Ask a real estate professional to review recent comparable sales and look at the other comparable homes currently on the market. Make sure you are priced competitively.”
She said that homeowners should take a realistic look to see if the home is in its optimum showing state.
“Are the windows clean, beds made, kitchen spotless? It is always best to leave your home for showings and let the real estate professional do their job,” she said. “It’s also smart to address environmental hazards or issues. Is there an underground oil tank that needs to be removed and replaced? Are there cracked windows? Leaks? When was the cesspool last serviced? It can pay to have your home inspected before listing it and promptly making any necessary repairs.”
While repairs are good to make before a sale is in the works, renovations may not be, said Ms. Saatchi. “Renovating a property before listing it is not always a good idea. Often buyers will want to make their own mark on a home and not be inclined to pay for what the seller did.”
Many buy Hamptons real estate with the idea of renting it, especially to vacationers who are willing to pay high fees for a few weeks of fun in the sun. But what does one do to avoid becoming a Hamptons rental horror story?
At the minimum, Ms. Hardy advised to Google prospective tenants.
“There is a lot information available online about people today,” she said, adding that homeowners should insist on being paid in advance by vacationers.
She also suggested that references from previous landlords are a good idea as well. But, she warned that one should never accept bad news at face value without investigating.
“Sometimes there has been friction that has nothing to do with the quality of the tenant so don’t let that be your only guide,” she said.
She also warned that those who are looking to rent their homes have an explicit lease covering every kind of potential hazard. A good tip, she advised, “have tenants use your housekeeper. This puts an extra set of eyes on the property.”
No real estate discussion would be complete without mentioning insurance. For those who might be displeased with their coverage, or don’t fully understand their policies, now is the time to get informed, said Kevin Luss, a certified financial planner and founder of The Luss Group in Southampton.
“Most homeowners renew their policy on an as-is basis,” he said. “By doing so they’re frequently missing out on getting more efficient coverage … Now is a good time to revisit policies.”