Smart Moves

With the onset of summer, housing inventories are tight as a drum in many popular neighborhoods. Indeed, it now takes a typical home seller less than a month to capture a deal, according to a new report from the National Association of Realtors (www.realtor.org).

"Houses continue to fly off the market," says George Ratiu, a top economist and the association's director of housing and commercial research.

But he says current home sellers should "absolutely avoid complacency" because there are a few darkening clouds starting to form over the market. The new report shows that due in large part to rising mortgage rates, home sales fell back for the second straight month in May. What's more, some properties in poor condition are languishing unsold for a lengthy period.

As real estate agents can attest, a home that first goes on the market at a list price substantially over its legitimate value can take an unusually long time to sell. But even well-priced homes can linger unsold for a lengthy period if presented to the public in poor condition.

"Some people just don't have the money to spend for necessary remodeling, or they have to make a quick move for a job transfer and don't have time to make improvements," Ratiu says.

Ashley Richardson, a veteran real estate agent, says a minority of sellers are stubbornly indifferent to the advice of their agents on necessary fix-ups, and these sellers must ultimately accept a sacrificial price.

"In the end, a house in poor condition will probably sell to an investor, who will insist on a discount of between 25 and 50 percent off its potential market value. Investors usually do the necessary improvements themselves and then quickly flip the property," says Richardson, who's affiliated with the Residential Real Estate Council (www.crs.com).

Here are a few pointers for sellers:

-- Seek an agent willing to offer some oversight of your issues.

Homeowners facing financial hardship -- such as a potential foreclosure -- often lack the time and money for needed property fixes. But those with the resources to make the needed changes should do so and often benefit from the help of a listing agent willing to captain their project team.

"The agent can screen contractors, secure proposals and help ensure the work is done right. They can also make sure that the house is kept locked up and secure in your absence," says Eric Tyson, a personal finance expert and co-author of "House Selling for Dummies."

Of course, not every listing agent is willing to coordinate pre-sale improvements. But others will enthusiastically assist, realizing that they, too, would benefit from a successful sale.

However, Tyson cautions that some agents -- including very accomplished ones -- lack the know-how to provide expert guidance on infrastructure repairs, such as major plumbing or electrical work.

"Don't assume every agent is up to the task. Good bets are house aficionados, or people in the business who fix up houses and then sell them for a profit," Tyson says.

-- Recruit energetic assistance for your decluttering campaign.

It's no secret that prospective buyers are turned off at the sight of a cluttered home. Most can't envision the size and scope of a property with overflowing bookshelves, bathroom vanities crammed with toiletries, or kitchen countertops ridden with gadgets.

Still, Mark Nash, author of "1001 Tips for Buying and Selling a Home," says most sellers find the pre-sale process of culling through their belongings both taxing and emotionally overwhelming.

"Well over half the people who've lived in a house for 10 years or longer have accumulated way too much junk. And they have a terrible time going through all those belongings in a methodical way," Nash says.

Nash encourages sellers to post an ad offering to pay for help culling through their possessions -- keeping those they value and casting off or giving away those they don't want.

Chances are your ad will attract neighbors, including students, who are seeking part-time work for extra spending money. The person you hire should help you plow quickly through your accumulations and also help with the physically demanding side of the work.

-- Realize that looking back is a waste of your time.

Some homeowners have for years allowed their properties to deteriorate while they've focused on other issues, such as career challenges, child-rearing or health problems. Others have no explanation for neglecting their homes, except inertia and procrastination.

Also, Nash says, many sellers resist the idea of putting money into a property they'll soon be leaving. This is especially true of cosmetic improvements, such as the sanding and polishing hardwood floors, or kitchen upgrades.

"People ... kick themselves that they didn't make the changes sooner so they could enjoy them, too," Nash says.

But there's no advantage to postponing needed improvements. Resistance to change can be an especially costly error if your place is already vacant and you'll have to carry two mortgage payments until it gets sold.

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

This spring has been a traumatic season for many homebuyers trying to move to popular neighborhoods. And with inventories continuing to shrink and prices continuing to soar, the summer season looks no better.

“This is an especially hard period for millennials who came of age during the Great Recession of 2008. They want to live in prime city or suburban areas, but face huge hurdles in trying to do so,” says Sid Davis, a longtime real estate broker.

According to an extensive new poll conducted for Trulia, a real estate data company, 98 percent of aspiring homeowners age 20 to 36 say they’re encountering barriers.

“Unsurprisingly, financial concerns rank at the top of the list of barriers -- with rising home prices as the most common culprit, affecting 40 percent of this population, and saving enough for a down payment coming in second, at 31 percent,” says Cheryl Young, the chief economist of Trulia.

Many millennials surrender their dream of living in their favored area, instead substituting one they consider secondary. But real estate specialists say such a harsh trade-off isn’t always necessary.

“Don’t sacrifice your top neighborhood choice too easily. Keep hunting in your favored area for a place that other buyers have shunned. That might yield you a happier-than-expected outcome,” Davis says.

Even in communities that are rightly categorized as seller’s markets, he says there are occasionally unusual buying opportunities for eager entrants.

“Look for a property that’s been stigmatized by other buyers because it first hit the market way overpriced and then languished unsold for weeks. Alternatively, consider a place that shows badly because it’s very cluttered, cosmetically challenged or decorated in a highly personal style,” Davis says.

Here are a few pointers for buyers:

-- View someone else’s junk as your opportunity.

Listing agents often have a terrible time convincing their clients to clear through the clutter that packs their homes -- a definite turnoff to most potential buyers.

But Dorcas Helfant, a former president of the National Association of Realtors (realtor.org), says sharp home shoppers realize it’s possible to get a fair deal on a cluttered home -- assuming they’re capable of looking beyond the accumulations to the property’s inherent structure and floor plan.

“The idea is to picture the house as if it were vacant and then decide if it has the ‘good bones’ you’re looking for. This is hard, but it can be done,” Helfant says.

She estimates that at least 60 percent of the home-buying public can’t envision how different a cluttered home would look if all the sellers’ excess belongings were hauled away.

If you can’t picture how a property you’re considering would look without all the extra furniture and clutter, consider asking someone with clearer vision to stop by the place. This could be an interior designer, a professional home stager or an artistic friend.

“A crowded house can represent an excellent possibility for those who can see past all that junk. And remember, sellers are forced to take their stuff with them when they move,” Helfant says.

-- Open your mind to unusual decors.

The home improvement shows on cable TV are one reason more homeowners are now experimenting with eccentric wall colorings and unusual carpet hues. But the raspberry dining room or purple kitchen the owners fancy is likely to send many prospects away.

“Of course, people are free to paint their entire interior in Pepto-Bismol pink. But they shouldn’t expect buyers to want their house if they do something that eccentric,” Helfant says.

Listing agents tire of trying to convince clients to “neutralize” their homes before they go on the market -- repainting their walls in a light, neutral tone and replacing odd-colored carpet with something neutral.

Just like the cluttered house, the flamboyantly decorated house offers opportunity for people with vision to obtain a property for a very favorable price.

“People with the ability to see the potential in this type of a house can really find a diamond in the rough,” Helfant says.

-- Don’t necessarily reject a property on the basis of online photos.

Nowadays, most buyers sift through lots of online ads before deciding to visit a particular property. If they don’t like what they see in the pictures, they’ll decline to visit a house on that basis alone.

But like some people, some good-looking homes are simply not photogenic. Or possibly the photographers who take their pictures don’t know how to portray them well.

Either way, you could be the winner if you’re willing to visit a home that others won’t tour because of unfavorable photos.

“A wonderful and well-priced surprise could await you when you open the door of a house others have missed,” Helfant says.

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

An Ohio couple in their 60s -- a nurse married to a homebuilder -- long dreamed of owning a condo in Hawaii they could use as a retirement retreat. But they feared such a purchase would be imprudent from a financial perspective.

The couple in this true story consulted both their financial planner and Matthew Allen, the CEO of a company that helps consumers maximize their Social Security benefits. A thorough analysis revealed that they could indeed afford the luxury.

“Many people spend more time planning a vacation than their Social Security. But people who maximize their Social Security can take more vacations and maybe even buy a vacation home,” Allen says.

Here are a few pointers for retirees:

-- Try to avoid taking Social Security benefits early.

Lesley Brey, a certified financial planner, says once they’re eligible, many people find the notion of tapping Social Security benefits tantalizing. This is especially likely if they’re eager to buy a second home.

“At age 62, the temptation to start drawing Social Security benefits right away can be very, very strong,” says Brey, the president of a fee-only financial planning firm.

She urges anyone who can hold out for larger retirement benefits at age 66 or beyond to do so. And she says it would be particularly unwise to claim early -- with diminished benefits -- for the purpose of helping fund a second home purchase.

“You won’t get rich collecting Social Security. But it’s a strong, government-backed annuity with cost-of-living adjustments that you can collect for the rest of your life. In case you live to 94, you want to be sure you have a sufficient financial buffer,” Brey says.

Still, she says that too many older Americans hinder their financial plans because they began claiming their Social Security benefits at age 62, when they’re first able to do so.

“It’s much better to wait to age 66 -- your full retirement age -- when you can collect a larger benefit check. Social Security benefits are for the rest of your life. You shouldn’t give up this longevity insurance lightly,” says Brey, who’s been in the financial planning field since 1997.

-- Run the numbers before committing to a property purchase.

Eric Tyson, a personal finance expert, recommends that before older boomers start searching for a vacation property, they should ask an accountant or financial planner to help them create a retirement budget.

Alternatively, they can create their own budget with the use of one of the free retirement income calculators available on the Internet through such investment companies as Vanguard or T. Rowe Price.

In making your calculations, Tyson strongly recommends you assume you’ll survive into your late 80s or even 90s.

“You want to project forward for your income needs for as long as you think you’ll live, even if that means retiring somewhat later than you’d like,” says Tyson, co-author of “Personal Finance After 50 for Dummies.”

The only people who can afford to assume an abbreviated life span, Tyson says, are those who’ve been diagnosed with serious medical issues.

“Whether or not you’re buying a second home, be sure to plan long-term, unless you have good reason to believe your life will be cut short due to major health problems,” he says.

-- Don’t let political rhetoric distract you from your goals.

One of the hottest topics of the current political season is whether the government should cut Social Security benefits to help reduce the ballooning federal budget deficit. Such talk has many older baby boomers fearful their benefits could be slashed, says Craig Copeland, a senior research associate with the Employee Benefit Research Institute in Washington, D.C.

In the belief that cuts could be imminent, Copeland says many older boomers think they should claim their Social Security benefits as soon as they’re eligible, at 62. That way, they reason, they can “lock in” benefits while there’s still time.

But Copeland and other Social Security experts contend that for political reasons it’s highly unlikely that older boomers -- those born between 1946 and 1954 -- will ever face benefit cuts from Congress. And he thinks it’s even more doubtful that the benefits of those already receiving Social Security will ever be cut.

“Remember that older people represent a powerful voting bloc,” Copeland says.

-- Factor lifestyle into your retirement planning.

Tyson says older boomers who are already well funded for retirement can still take advantage of relatively low mortgage rates, though such rates are expected to rise as the year progresses. But he recommends that seniors ideally enter retirement without mortgage debt.

As he notes, some financial planners are biased against buying real estate in the years prior to retirement. After all, many planners (except those who work on a “fee-only” basis), make their living on commissions from the sale of investment products and insurance and not real estate.

But Tyson says people who’ve amassed a large war chest of retirement assets or who are entitled to benefits from a healthy traditional pension program, or both, may now be well positioned to buy the dream, second home they’ve long wanted.

“Preparing for retirement is not all about numbers. It’s also about having a great quality of life going forward,” he says.

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