Smart Moves

Fewer Americans now seek a "show-off" house than a few years ago, real estate market observers say. That means oversized houses are less popular than in the past, in large measure due to cost.

"Middle-class people are far more price-aware, and that's led to a strong pushback against McMansions," says Karen Rittenhouse, a realty firm owner and author of "The Essential Handbook for Buying a Home."

Through her company, Rittenhouse stakes out and buys eight to 10 houses each month. These are soon remodeled and then typically occupied by young families. The business gives her a keen awareness of what people want in a property.

"Buyers are more realistic now," says Stephen Melman, who oversees buyer surveys for the National Association of Home Builders (www.nahb.org).

John Rygiol, a real estate broker since 1971, says it's wise for all buyers to define their search criteria thoughtfully rather than simply visiting an indefinite number of properties.

"The goal is to find a house that excites you. By first creating a short list of houses to visit, you should get to that goal faster," says Rygiol, who's affiliated with the National Association of Exclusive Buyer Agents (www.naeba.org).

Here are a few pointers for buyers:

-- Use price per square foot as a general guide.

Although mega-sized houses have lost their luster for many buyers, Rygiol says square footage remains a useful metric to judge value when comparing properties.

Rygiol says his home-buying clients are often surprised to find that a large house will often sell for less per square foot than will a smaller place in the same neighborhood on a same-sized lot.

"In popular locations, land costs are rising, which makes lot size an important factor influencing sales price. The lot around a house is the one thing you can't change or replace," he says.

If for any reason the square footage of a home you like isn't shown its listing, Rygiol suggests you check the local property tax assessor's website.

-- Count bathrooms before deciding which homes to visit.

In decades past, it wasn't uncommon for several people in a family to share the use of a bathroom. People simply waited their turn to take their daily bath or shower. But these days, many buyers have lost patience with this waiting game.

Granted, homes in older neighborhoods are likely to have fewer bathrooms than those in recently built subdivisions. But wherever you're looking, he says it's smart to favor homes with multiple bathrooms.

"Even if you personally don't mind sharing, the house you buy will hold its value longer if it has more bathrooms," Rygiol says.

-- Take an aerial view of properties that interest you.

The task of screening homes is much easier for the current generation of buyers than for their parents. That's due to Google Maps, an online tool that lets you pinpoint properties by simply typing in an address.

"This aerial view lets you rule out a house that backs up to something unpleasant,like an industrial park, a busy street, a discount store or an apartment complex," Rygiol says.

What about living across the street from a school? For most buyers, he recommends against it, because "schools generate a lot of traffic from parents dropping off and picking up their children."

You can further narrow your search if you drive by available homes in an area that interests you. That can help you preview homes for exterior appeal, another critical factor in helping you decide which homes to visit.

-- Look for a place with "good bones."

There's lots of hidden value in a house that's well designed and structurally sound. As architects say, such a property has "good bones."

Perceptive buyers can readily sort through available homes to find those with good bones, says Rittenhouse. These properties typically give buyers more for their money than do homes that are superficially appealing but have fundamental issues.

"It doesn't cost much to repaint a room or replace carpet. But the owners of homes with serious issues, like structural flaws, can spend huge sums to remedy those problems," she says.

-- Make lifestyle a primary consideration.

Before the recession, Rittenhouse says some house hunters, particularly those in the trade-up market, allowed ego to determine what they bought. But she says your lifestyle should be a more important selection factor.

"It's silly to buy the showiest house in the neighborhood just to impress other people. You're the one who will live there," she says.

When visiting homes, she encourages buyers to trust their instincts. Upon passing through the front door, the place should give you a feeling of harmony. The rooms and major features, including window sizes, should be in proportion.

Notice especially the layout of any home you're visiting because the floor plan can be influential element in your lifestyle.

For example, an empty-nest couple that often has dinner parties will likely want a formal dining room. But a family with young children will probably make better use of a large family room that flows into a country-sized kitchen.

"You've got to go by your own personal needs," Rittenhouse says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

If you offer your home for sale this fall, would you be doing so in a market that favors sellers or buyers? That will depend heavily on the neighborhood where you live, the timing of your sale and intangible factors that even the most seasoned observers can't predict -- like buyers' moods.

"The tea leaves of real estate markets are always evolving," says Mark Nash, author of "1001 Tips for Buying and Selling a Home."

Since the financial collapse that brought down real estate more than a half-decade ago, many homeowners have been happy to see much -- if not all -- of their lost equity restored. Indeed, some neighborhoods have enjoyed sharply rising values in recent years. But in other neighborhoods, values are flattening or even slipping slightly.

This year, one factor that's had a significant effect on home sales has been the tightening of federal regulations on mortgage lenders. These have made lenders more cautious about their underwriting practices, which in turn has made it harder for would-be buyers to qualify for home loans.

But other factors are improving the picture. In particular, the gradually improving employment rate has helped more young families move into homeownership.

"The housing market is currently in pretty decent shape throughout the country. But some pockets of weakness remain," says Eric Tyson, a personal finance expert and co-author of "House Selling for Dummies."

Because real estate values are so variable, it's tough for would-be sellers to peg the right asking price for their property. To avoid guesswork, Tyson says there's no substitute for a listing agent with an ear-to-the-ground knowledge of price trends in your immediate area.

Here are a few pointers for sellers:

-- Avoid overpricing like the plague.

Sid Davis, a real estate broker and author of "A Survival Guide to Selling a Home," says that even in markets where the supply and demand for property are roughly in balance, buyers are very price-conscious.

As Davis notes, some home sellers want to "test drive" the market with an high price during the first couple of weeks of a listing, figuring they can simply cut the price later with no harm done. But he says that's a mistake.

"People who overprice on the front end quickly find that their property gets a stigma at the very time when buyers are most excited about the listing," Davis says.

-- Seek a general idea on local values before engaging a listing agent.

There are now a number of websites that offer free and instantaneous assessments of home values. Among the best known are Zillow (zillow.com) and Trulia (trulia.com).

It's unrealistic to look to such "fast pricing" sites for a definitive answer on the current worth of your place. After all, they typically rely heavily on publicly available data on recent home transactions. And some jurisdictions restrict or delay the release of such statistics. Still, Davis says such sites can be a good starting point.

"At least they'll help you get into the right ballpark on the current value of your house. This should give you a starting point for a pricing discussion with the agents you interview," he says.

Another way to gain a feel for prevailing prices prior to hiring an agent is to attend open houses in your neighborhood.

-- Interview multiple agents before engaging one.

When it comes time to sell, many homeowners instinctively turn to a friend or relative in the real estate business. But Tyson cautions against hiring someone in your inner circle -- even if that person is an active agent in your neighborhood.

"We all want to hear how wonderful our house is and how much it's worth. That makes it very hard for your friend or relative to recommend a realistic price tag," Tyson says.

He says prospective home-sellers should interview at least three agents working in their area before selecting one to list their home.

"Tell each one you want an honest evaluation of both the condition of your property and its present value. Also, make sure you ask each agent to show you the comparable sales they used to make their price recommendation," Tyson says.

-- Review each agent's track record on pricing.

Given that real estate markets are always subject to change, many sellers don't receive their full asking price at the closing table. But if their property was marked accurately from the start, they should still come fairly close.

One way to assess an agent's pricing capability is to look at a few key numbers that reflect his or her track record. If the agent is routinely making accurate price recommendations, there should be relatively little disparity between the original list price and the final closing price, Davis says.

"Sellers shouldn't have to knock down their price just to get their property sold. In most cases, their home should sell for no less than 5 percent under the asking price," he says.

He suggests you ask prospective listing agents to show you "list-to-sale" numbers for all the homes they've sold during the last 90 days.

-- Don't let your pride get in the way of accurate pricing.

Some people assume that real estate agents are motivated to underprice with an eye to quick sales. But Davis says the greater risk is that they'll recommend too high a price in hopes of flattering you into working with them.

"We call that 'trying to buy a listing,'" he says.

Overpricing can be particularly costly to homeowners trying to sell in a community with an excess inventory of unsold properties. But it can also hurt sellers in an area with very few homes on the market.

"It doesn't matter if you're selling in a neighborhood that's hot, cold or lukewarm. Asking way too much can easily kill your chances for a fast and successful sale," Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

As a homebuyer, how can you pinpoint a property that will gain value in the future rather than decline? Instead of relying on hunches, Allan Weiss suggests you take an analytical approach.

Weiss is founder and CEO of a new company he contends can help buyers (and sellers) avert costly timing errors. Called Weiss Residential Research, the firm was started to help Wall Street better track real estate values. But its reports are now available to consumers, as well.

"Before you buy any house, you want to be sure it's not weakening in value -- unless you're getting a tremendously good deal or plan to live there for a very long time," says Weiss, an economist by training.

Weiss is no stranger to the science of property valuations. He was involved in the development of a price tracker that's widely used to chart the direction of home values. Now known as the Case-Shiller Index, it follows pricing patterns in more than 5,000 U.S. ZIP codes.

In contrast, the new Weiss index seeks to provide more precise reports on individual houses. These are designed to predict if a property will rise, fall or stay the same for a period of at least one year into the future. In essence, Weiss, which now has 50 million homes in its massive database, offers an early warning system for what's ahead.

To make its predictions for a particular property, the new company draws on widely available data -- such as tax assessments and appraisal reports -- for like homes near the subject property. Weiss says that's a more precise approach than taking an average of varied properties within the same ZIP code.

"Suppose that within the same ZIP code you have some houses worth $200,000 and others worth $2 million. They're going to have very different supply-and-demand economics. You've got to watch out for averages, which can be very misleading," Weiss says.

For a $25 fee, you can purchase a trend report for a particular property through the Weiss website (www.weissres.com). This is designed to tell you -- in percentage terms -- how the value of the property has changed in recent years and what to expect within the next year or longer.

But as the company's founder acknowledges, a Weiss report won't give homebuyers a dollar estimate of the current market value of a house they're considering. To obtain that, he recommends they turn to a real estate agent who works in the area on a day-to-day basis.

"All real estate is local, so there's no substitute for a good buyers' agent from the neighborhood," Weiss says.

Here are a few other pointers for homebuyers:

-- Try to purchase for a long time horizon.

Merrill Ottwein, a former president of the National Association of Exclusive Buyer Agents (www.naeba.org), says more buyers now view real estate as a lifestyle purchase than an investment. But he says all purchasers should factor in a property's resale potential.

Though resale estimates aren't always entirely reliable, you can increase your odds of a good outcome by buying to hold rather than as a short-term purchase.

"If your time horizon is too short -- say just a couple of years -- you may not even recoup the transaction costs you paid to get into your house in the first place. In general, it's better to plan to stay for at least three to five years," Ottwein says.

"Select the property as you would a growth stock," says Ottwein, a real estate broker who heads his own family firm.

-- Buy in a neighborhood with a high velocity of sales.

Clearly, those seeking to buy for appreciation should avoid places where foreclosure signs abound. But evidence of a high velocity of closed sales normally indicates the desirability of a neighborhood, Ottwein says.

As a homebuyer, how can you find out about the speed of sales in an area you're considering? Ottwein suggests you ask your agent for statistics on closed sales for a period spanning at least two to four years. If sales volumes are increasing, that's usually a favorable sign.

-- Look to popular urban centers for potential price increases.

Fred Meyer, a real estate appraiser and broker who sells property near Harvard University, says more Americans are becoming like Europeans in their preference for in-town living. And that bodes well for values in popular urbanized areas.

"Many people are sick of long commutes by car. They love to live near work," Meyer says.

One way to identify up-and-coming city neighborhoods is to look at data from the U.S. Census Bureau.

"The best choice for buyers is often a less expensive house surrounded by more expensive ones. That way, you should eventually get an upward progression in value for your home," Meyer says.

Besides consulting census data, another way to analyze the income levels of a community is to see if high-end retailers have a presence there. That's because such retailers do lots of due diligence before entering a market.

-- Factor school data into your thinking.

Unlike singles and empty nesters, homebuyers with school-age children are usually highly attracted to close-in suburbs where playmates are plentiful and schools are well rated.

"For families, good schools are a hard qualifier --meaning they're at the top of the 'must-have' list," Ottwein says.

Even if they don't have offspring, he says buyers can't afford to ignore data on school quality. That's because houses in neighborhoods with top schools are much more likely to hold or grow value than are those served by mediocre schools.

What data should you consider when judging schools? Ottwein says it's wise to look at test scores and the percentage of graduates who go to college. Also, an increasing number of states and localities now issue comparative school rankings.

-- Search for an area with rising employment.

Though property values are expected to stay strong in many walkable city centers, Ottwein says you can also find property prone to appreciation in selected suburbs where high-tech start-ups are proliferating.

"Employment is what these start-up communities are generating. That's what makes them promising for homebuyers," he says.

-- Seek an area where pride of ownership is obvious.

Though sales statistics and census data speak volumes about a neighborhood, subjective information is also meaningful, Ottwein says.

In particular, he encourages homebuyers to stroll through any community they're considering to look for indications that residents are committed to upkeep --including the greenery that surrounds their homes.

"Rule out a neighborhood where paint is peeling and weeds are overtaking grass. And remember that even in a wealthy area, you could be hurt by an eccentric multi-millionaire who keeps junk cars in his driveway," Ottwein says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)