Know that buyers are less willing to take on fix-up work
BY DIAN HYMER
Inman News
A listing that is advertised as an "as is" sale can be a put-off to buyers. They might assume that something is wrong with the property that will cost a lot to repair. If they have little free time or money, they might decide before even taking a look that this isn't the house for them.
An "as is" sale can mean a number of different things. So, before you dismiss a listing as unsuitable, find out what "as is" means. It could mean that the property is part of the estate of someone who died. In some states, such properties are sold in their "as is" condition and without warranty in order to protect the heirs who might know nothing about the property.
Let's say you inherited your aunt's farm in Lassen County, Calif. You were there once when you were a kid, but haven't seen it since. You are not in a position to make any disclosures about the property. In this case, "as is" means the seller knows little if anything about the property. The property could be in wonderful condition or not depending on how well it was maintained over the years. "As is" doesn't necessarily mean there is a problem.
When a bank forecloses on a property, the sale is usually an "as is" sale. As with an estate sale, the bank might know nothing about the condition of the property. It's up to the buyers to satisfy themselves before buying. Homeowners who let their homes go into foreclosure because they can't afford to make the mortgage payments also might not have enough money to keep the home well maintained.
HOUSE HUNTING TIP: Don't skimp on inspections if you're going to buy a foreclosure property. You may need to inspect the property -- with the owner's permission -- before you make an offer. But, it is money well spent even if the deal doesn't go through if it keeps you from buying a property that needs more work than you can afford to pay for.
"As is" can have a much more benign connotation. For example, in California, most sales are made "as is" subject to the buyers' right to inspect the property. In this case, "as is" tells you nothing about the property except that the sellers won't warrant the condition. Buyers are encouraged to have the property inspected by professionals. And, they are usually able to withdraw from a purchase contract without penalty if they don't approve the inspections.
However, for a buyer to be protected in this situation, an inspection contingency that gives the buyers the right to withdraw without losing their deposit money needs to be included in the purchase contract.
Be aware that offers made on foreclosures or probate properties that require court confirmation often need to be contingency-free. There could be severe legal consequences if you back out of such a contract. Consult with a knowledgeable real estate attorney before considering backing out of a contingency-free contract.
Several years ago, when the market favored sellers and was highly competitive, some buyers made offers without any contingencies. Often in these cases, sellers had presale inspection reports available for buyers to review before they made an offer. The market was so frenzied that buyers often bought "as is" with respect to work that needed to be done. Many of these buyers stretched to buy and didn't have the resources to have the work done. With the change in the market, today's buyers probably won't be willing to take on the work "as is" without a price concession.
THE CLOSING: Sellers will be in a better position to sell in today's market if they have the work done before they put their homes on the market.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Copyright 2008 Dian Hymer

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By Amy Hoak
From MarketWatch
If you're planning to sell a home in 2008, it's time to start thinking about how to make that home stand out from the rest.
But beware: Homeowners aren't able to recoup as many improvement costs as they did in recent years, according to a recent study by Remodeling magazine. In selling a home, "it's more important that it's neat, it's clean and it looks spacious, rather than making sure it's the top of the line," says Cheri Kuhn, owner of Waters Realty in Minnetonka, Minn.
"The thing I find with sellers -- if they do a lot of remodeling -- they will take the cost of the remodeling and add it to the cost of the home and ask the buyer to pay for it," she says. But often they're not going to get that higher price.
To keep costs down and remodel wisely, consider the following tips:
Ask for advice. When Ms. Kuhn first meets with clients -- sometimes six months before listing the home -- she'll make a list of improvements that will make a difference. Cleaning the carpets, painting the walls and removing wallpaper are common fixes -- if they're needed.
But prior to any remodeling, declutter your home and rent a storage unit if necessary to hold extra stuff while the home is on the market, says Shannon Aldrich, a Realtor in Maine and New Hampshire with Keller Williams Coastal Realty.
Dig deeper. It also could pay to look below the surface by getting a home inspection before listing the property. That way, problems that could hold up a sale are addressed in advance, says Dan Steward, president of Pillar to Post, a Tampa, Fla.-based home-inspection company. Some estimate that for every dollar of perceived defect, buyers want a $2 to $3 discount, Mr. Steward says. If that's true, it might pay to spend $2,500 replacing an old furnace.
If there's a problem with an essential element of the house, Ms. Kuhn says, a buyer might think "if that was neglected, what else was?"
Look outside: Pay attention to exterior details such as the condition of siding and windows, Ms. Aldrich says. According to Remodeling magazine, a wood window replacement recovers an average 81% of cost at resale and a siding replacement recovers an average 83%, some of the best payoffs in the survey.
Spend time in the bathroom. Freshening up the bathroom doesn't have to be expensive, but can be important. "People will put up with a lot of cosmetic challenges in a house if they know they could use the bathroom right away," Ms. Aldrich says. It's important for the bathroom to be clean, but also consider replacing cracked tiles, as well as the sink and the toilet -- if they need it, she adds. A toilet, for example, can cost less than $250.
Keep it small in the kitchen: Remodeling magazine found that homeowners could recover 83% of the cost of a minor kitchen remodel at resale compared with 78% of a major kitchen remodeling. Ms. Kuhn cautions her clients not to replace refrigerators, stoves or dishwashers. Buyers considering remodeling the kitchen will likely have their own preferences.
Along those same lines, replace a countertop if it's crumbling but not if its only fault is that it's outdated, Ms. Kuhn says. Even then, seriously consider material costs -- there's no need to update to granite unless the competition has granite countertops as well.

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By Jane J. Kim
From The Wall Street Journal Online
Don't be surprised if a lender wants to know if you pay your rent on time or bounce checks before it will let you borrow money.
For many years, loan approvals were determined largely by borrowers' credit scores, which are based on proprietary formulas that include such things as debt levels and loan-payment histories.
Now, lenders increasingly are looking at other factors, such as rent and utility payments, to determine whether potential borrowers will make good on their loans. The financial-services industry began this push so it could lend more to the estimated 50 million Americans -- including many immigrants, young adults and seniors -- with little or no credit history. But as the economy slows and default rates soar for home mortgages, more lenders are using these same tools to evaluate the credit-worthiness of the broader population.
Today, credit bureau Experian Group Ltd. plans to announce an alternative credit score to help lenders get a better picture of how people with little or no credit might handle a loan. Competitor TransUnion LLC rolled out a similar product this past summer, while Fair Isaac Corp., developer of the widely used FICO score, broadened its Expansion scoring system in November to include more information about monthly rent and utility payments, among other data.
Before the subprime-mortgage crisis, most lenders used the Expansion score to get more business, says Tom Quinn, vice president of global scoring solutions at Fair Isaac. "Now, we are seeing more lenders interested in using this as an additional tool to mitigate the risk in their portfolios -- for people in the 'gray zone' or just to do a safety check," he says. Banking giant Wachovia Corp., for example, is using an alternative credit-scoring system from Atlanta-based L2C Inc. to assess the credit risk of its credit-card customers.
All this means that consumers should pay closer attention to whether they pay bills on time or write bad checks. More lenders will study such factors when they price loans or reset credit lines on existing customers, particularly those with lower credit scores, says Arjan Schütte, associate director at the Center for Financial Services Innovation, a nonprofit Chicago affiliate of ShoreBank Corp. that provides advisory services to the financial-services industry.
Yet the new scores could be good news for those who pay their bills promptly but don't have established credit histories. In the past, banks often ignored this group because they had no way of evaluating the risk. The Center for Financial Services Innovation estimates this group could generate between $6 billion and $45 billion in new loans each year.
"The knee-jerk reaction is that the credit-underserved consumer group is overwhelmingly subprime," says Mr. Schütte. But those consumers present a similar range of risk as those with traditional credit scores, he says.
Harvesting Tax Liens
The alternative scores developed by the credit bureaus and other financial-services firms rely on a combination of their own data, as well as third-party databases. TransUnion and Experian have teamed up, respectively, with L2C and eBureau LLC, which specialize in collecting and analyzing alternative payment data. Equifax Inc.'s MarketMax score, meanwhile, pulls information from electronic database LexisNexis to verify consumers' identities and sift through public records for tax liens, bankruptcies or criminal records, in addition to using other data.
When Rich McEldowney of Bozeman, Mont., and his wife, Phoebe, applied for a mortgage in February 2007, their mortgage broker told them that his wife didn't have a credit score anymore. Among the reasons: They had paid off their auto loan several years ago, and she didn't have any credit cards. In fact, except for a credit card that Mr. McEldowney uses for his job as an ecologist, he and his wife don't use credit cards, preferring instead to use their debit cards and pay for things with cash or checks.
"It seems like the more debt you have, the easier it is to get credit," says Mr. McEldowney. "We don't have credit cards, and we try to be responsible with our debt."
Engineering a Credit Score
On their broker's suggestion, they turned to Pay Rent, Build Credit Inc., also known as PRBC, a credit bureau in Annapolis, Md., that specializes in collecting rental and bill-payment data. It studied Ms. McEldowney's history of paying other household bills -- such as rent, telephone, and auto insurance and her daughter's day-care bills.
She ultimately received a decent credit score. As a result, the McEldowneys were able to qualify for a 6.5% rate on a $350,000 mortgage -- roughly half a percentage point lower than the rate that Mr. McEldowney says he would have been able to get on his own.


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By Rebecca Smith
From The Wall Street Journal Online
Utilities are turning to a new tool to help consumers conserve energy and cut costs: the monthly bill.
For many consumers, the utility bill offers little more information than the total due -- not even a breakdown of that figure, which includes not only fuel charges but often a dozen or more other costs, including delivery charges, taxes, and charges for special programs like pollution controls on power plants or subsidies for low-income households.
The problem with such a simple bill is that it doesn't give consumers any way to calculate how much they can save by cutting back on their energy use, or which measures on their part will save them the most. And that blunts a major incentive for conservation.
The Ideal Utility Bill
Monthly statements are often opaque or lack details. Here's what a utility bill ought to include:
THE IDEAL UTILITY BILLCost per unit of energy used (kilowatt hour, therm or ccf - hundred feet of gas)
• Meter readings
• Usage comparison with prior periods, the farther back the better
• Weather adjustments to show if change in usage is related to the weather or some other factor
• Compare usage with usage history for other similar homes
• Give examples of how energy-saving devices could cut usage and cost (Energy Star refrigerator, energyefficient furnace, etc.)
• Show how changing temperature settings can cut usage
• Itemize cost components in bill to show how much the consumer controls and how much he or she doesn't
• Tell where one can take complaints, such as the state utilities commission
Source: WSJ reporting
Now, many utilities are in the process of revamping their bills to give consumers detailed information, along with basic tips on how to reduce energy consumption. Some are going even further, testing advanced meters that allow consumers to monitor online the energy usage of the furnace, the air conditioner and other household appliances continuously, so that they can adjust their settings accordingly.
It's an uneven transition. Many utilities say they're still trying to figure out what information consumers need and how best to present it. But more are making the effort as they face growing complaints from consumers about energy prices and increasing pressure from regulators to help reduce energy consumption.
In the Dark
What is it consumers are missing? For starters, without an itemization of charges, consumers can't tell how much of their monthly expense is fixed and how much is within their control. Also, without knowing how much they're paying for each unit of gas and electricity they consume, it's difficult for them to know whether they could get more benefit, for example, from buying a new Energy Star refrigerator or replacing a funky, old gas furnace. And without knowing how the prices of gas and electricity change according to levels of usage, consumers can't gauge exactly how much any conservation effort on their part will save them.
Consider the bill the Georgia Power unit of Southern Co. sends to its residential customers. It simply breaks down the total amount to be paid into two components -- taxes, and a service charge that lumps all other costs together.
Now consider what those customers could do with more information. Georgia Power charges its residential customers 4.657 cents a kilowatt hour for the first 650 units of electricity consumed, year round. The price rises to 7.738 cents for the next 350 kilowatt hours in the summer, but drops to 3.998 cents for those next units in the winter. Above 1,000 kilowatt hours, the price rises even more in the summer, to 7.976 cents, and drops even more in the winter, to 3.931 cents. In other words, a person who used 1,200 kilowatt hours of electricity a month would pay about 40% more in the summer than in the winter.
That means that measures that cut summertime electricity use, like buying more-efficient air conditioners or keeping the house a couple of degrees warmer, have more value to the consumer than measures that reduce wintertime use, like cutting back on lighting or electric heating. Knowing the rate tiers also would allow people to figure out how much they could save by cutting their use by, say, 10%. But the current bill doesn't make any of that clear.
Georgia Power says it hasn't offered detailed bills because its customers and regulators haven't asked it to do so. But the utility says it is looking for better ways to communicate with customers and sees the bill as an underutilized tool.
Making Changes
Many other utilities already have made changes. DTE Energy Co., parent of Detroit Edison Co., revamped its bills to itemize charges and spell out its rate tiers. Vectren Corp., a utility based in Evansville, Ind., recently added charts to its bills so customers can quickly see how their gas and electricity use has varied over a 13-month period. The utility also added weather data showing the average temperatures for the current billing period, prior month and year-earlier period, so customers can get a sense of what role weather played.
"We felt there was a real need to help consumers understand their personal consumption better," says Jeff Whiteside, a Vectren vice president.
Southern California Edison, a unit of Edison International, tapped bill consultants and focus groups to come up with a more readable, useful format for its bills. For instance, consumers told the utility they find the different rate tiers confusing, so the new bill will include a simple graph that shows where a household's usage falls in the tiers and how close it is to lower-cost tiers, as an incentive to conserve.
Lynda Ziegler, the utility's senior vice president of customer service, says the utility aims to customize bills eventually by suggesting steps customers can take to conserve energy, based on their particular usage patterns. "This is something we want to continually refine," she says.
The Next Step
Over the next few years, consumers in many markets will receive much greater detail on their energy use than they do today, as utilities install advanced meters that can measure a household's consumption continuously and communicate with devices in the home to measure and even control the energy use of furnaces, air conditioners and other individual appliances.
The ability to measure each household's energy use throughout the day -- rather than simply capturing a usage total once a month, as most meters now do -- would allow utilities to charge different prices for peak and off-peak use, something they already do with many business customers. The idea would be to encourage consumers to spread out their energy use or reduce it outright so that utilities could avoid building costly new plants to handle peak demand -- plants that consumers ultimately pay for. New bills could show consumers what they're paying at different times of the day, giving them the information they would need to adjust their consumption.
Advanced meters also can allow consumers to go online and find out how much juice the refrigerator is using or how much gas the furnace is burning. Some consumers can already do this in pilot programs. Eventually, utilities aim to give consumers the ability to adjust the settings of their appliances and energy systems online, and to see immediately how those adjustments affect their costs and the utility's carbon footprint.
Utilities have tried smart-meter pilot programs for years, but few gained much momentum until recently. With energy prices surging and concerns over global warming growing, there's more incentive now to develop advanced meters. Utilities say they're still feeling their way forward on this front, as they are with more-detailed bills. "There's still work to be done to figure out what people want to see," says Jim Rainear, general manager of energy services for Duke Energy Corp. The utility is conducting smart-meter pilot programs in North Carolina, South Carolina and Ohio.
Duke Energy also is exploring a number of other ways to encourage energy efficiency. For instance, by midyear it hopes to have an online tool available that will allow people to log in and answer a questionnaire about the details of their energy use. The utility will then use that information, along with its own record of the customer's energy use, to help it suggest conservation measures.
Chicago-based Commonwealth Edison Co., a unit of Exelon Corp., already has moved in that direction. Its customers can go online and conduct home energy audits based on personal information and even compare usage against people who live in similar homes. ComEd and Duke reached the same conclusion: "We have got to get more personalized," says Casey Mather, Duke's director of mass-market strategy.
-- Ms. Smith is a staff reporter in The Wall Street Journal's Los Angeles bureau.

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