Have you over-improved your home?

Excerpted from Bankrate.com

Encouraged by rising property values over the past few years, many homeowners rushed to refurbish their homes, assuming they’d get their money back at resale. But amid today’s sliding prices, many are finding they spent far more than they can ever hope to recoup.

There’s no question, Americans are a home-improvement-happy bunch. The past couple of years saw homeowners, armed with equity loans and gold rush fever from appreciating property values, updating kitchens, landscaping gardens and finishing basements at a frenetic pace — rationalizing that the billions of dollars spent each year with cockeyed optimism would be earned back at resale.  Indeed, many will.

Yet, as the dust settles on the real-estate market and prices float back down to earth, some, too, are finding that they spent far more updating their homes than they could ever recoup at the closing table. It’s called over-improving your home — and millions have made the mistake.

"A lot of people who over-improved did a cash-out refinancing when rates were at a low, expecting housing prices to continue going up and up," says Sal Alfano, editorial director for Remodeling magazine in Washington, D.C.

With an average kitchen remodel alone costing $55,500, according to Remodeling Online’s 2007 Cost vs. Value Report, it’s easier than you might think to turn the cost-versus-value equation on its head.

"These days, projects are expensive," says Alfano. "You don’t have to do a lot of remodeling to spend a lot of money. What usually happens is you’ll get a leak in your bathroom and you figure it’s a good time to do a remodel. It’s magnificent when it’s done, but suddenly the rest of the house looks pretty shabby. There’s a snowball effect where one remodeling project tends to lead to another."

So what’s the danger? Not much, if you plan to stay put. Chances are you’ll own your home long enough to ride out this down cycle and allow annual appreciation to offset your investment.

But if you plan to sell soon, or need to unexpectedly, a danger exists that you could owe more on your home than it’s worth. Remember, home-equity loans come due in full the moment of resale.

"This is an issue because of how aggressive the lenders have been" in approving home-equity loans to cash-strapped borrowers, says Richard Roll, president of the American Homeowners Association in Stamford, Conn. "You could be in a position where you need to get 105% of the total debt on the property and you can only get 98% of that from a buyer."

Those who can afford to sell at a loss, of course, can pay the difference out of pocket. Those who can’t face an unpleasant choice: They can remain hostage in a home that no longer meets their needs, or, in an extreme case, lose the house if they can’t make their loan payments.

"Over the last 10 years, we’ve seen a fairly significant core of the population spending more than half the value of their home on improvements," says Kermit Baker, director of the remodeling futures program at the Harvard Joint Center for Housing Studies. "Some of that is because buyers increasingly are moving into older suburbs convenient to their jobs in the city, and they’re renovating smaller Cape Cod and ranch-style homes."

Many of those homes have never been updated, he says, featuring a single bathroom and formal dining and living rooms. Buyers were tearing down walls to create open spaces, adding large master bathrooms and expanding bedrooms for space. It didn’t come cheap.

The center estimates that homeowners spent almost $174 billion on remodeling in 2007, down 2.36% from 2006. And the numbers are expected to continue to decline through 2008, the center reports, citing the constriction of credit markets and sluggish home sales as major factors.

So how do you know if you’ve sunk too much into your biggest investment? That’s a lot like asking whether you spent too much on your last vacation, says Roll. Those with money to burn can afford to break ground on a pricey expansion regardless of resale value. Most of us, though, should take a long, hard look at our neighbors before dropping another dime on granite countertops.

Comparable sales prices are a good place to get started. A local real-estate agent, familiar with your neighborhood, will often perform a complimentary assessment of your home’s market value. The agent also will provide the all-important maximum sales price of similar homes on your block. If that figure would force you to sell at a loss, it’s time to put a halt to any new construction projects you’ve got planned.

"A Realtor can tell you what additional value would be added to your home in whatever type of remodeling you’re thinking of doing and whether any improvements you might make are out of step with the neighborhood," says Paul Bishop, managing director of real-estate research for the National Association of Realtors.

Remember, too, that investment returns on home-improvement jobs are all relative. You’re least likely to recoup top dollar on a new master suite or third full bathroom if you’re the only one on your block to have one. "You are usually on good ground if you are improving your home relative to other homes in your neighborhood," Baker says. "But you’re on thin ice if you improve beyond the general value of your neighborhood — like adding a third bathroom if all the other homes have two."

You’re also more likely to over-improve if you insist on top-of-the-line materials. Viking stoves and hand-forged copper sinks may make your dream kitchen complete, but buyers won’t pay a premium for someone else’s extravagance.

"You can easily get into trouble with an upscale project, especially in kitchens and bathrooms, if you’re too high-end or edgy in your design choice," says Alfano. "The majority of buyers are not going to have your exact taste in colors or style. It’s a little risky."

Generally speaking, you won’t recover the full cost of any home-improvement project — though some clearly boost value better than others. For example, you’ll recover nearly 83% of costs on a minor kitchen remodel, 83% on a midrange siding replacement and 74% on a two-story addition, according to Remodeling magazine’s 2007 Cost vs. Value Report.

Jobs that add the least value: a midrange home office remodel, which recovers 57% of costs on the resale market, a new sunroom at 59% and an upscale master suite at 64%. And swimming pools? Forget it. Few buyers welcome the hassle, insurance costs and potential danger if they have kids. Expect to lose big on that expense, unless you’re in a luxury home.

Of course, homes are more than just an investment. Some of what you spend giving your house a makeover is just for you. A finished basement, for example, may not yield a lofty return, but getting the toys and board games out from under your dining-room table can be worth its weight in gold for your sanity.

Yet, with economists predicting slower growth ahead for the real-estate market, the American Homeowners Association’s Roll says you should carefully consider the investment return of any new remodeling job you may have planned.

Improve first those things that yield the greatest return.  "If you are overextending yourself, or going into extensive debt, think twice," he says. "People are well-advised to be clear about what they are spending on home improvement and where that money is coming from."

Which mortgage is right for you?
Excerpted from Bankrate.com

The right loan is out there. You just have to examine its terms and your situation before deciding it is the one that fits perfectly. Mortgage lenders offer many features and restrictions that can be added to a variety of mortgage programs, but the following eight mortgage loans are the basic types you will encounter. No single loan is best for all circumstances; some loan types work better than others, depending on individual circumstances and lifestyles.

Buying for the long haul

Loan: 30-year fixed rate.
Why: Financial peace of mind can be worth the higher interest rate that comes with an interest rate that won’t change for three decades.

Job with good but inconsistent income

Loan: Option adjustable rate mortgage (ARM).
Why: These loans, considered among the riskiest offered in recent years, originally were designed for people with incomes that vary a lot from month to month. Each month you have a choice of payments: the full amount needed to pay off principal and interest as scheduled, an amount that covers only the interest owed that month, or an even smaller amount that doesn’t even cover interest owed.

In a month in which your earnings are lean, you might choose to make one of the lower payments, even though that actually adds to the amount of debt you must eventually pay back. In a month of strong earnings, you could choose to make the full payment. Over time, however, your required payments could rise significantly if you have frequently chosen to make only the smaller payments.

Refinancing (15-20 years before retiring)

Loan: 15- or 20-year fixed or ARM.

Why: You can retire the loan before you retire from your job. A fixed rate generally has a higher interest rate than an adjustable but will give you more certainty in budgeting. However, if ARMs are significantly cheaper and your income can handle possible payment increases, you could save with the adjustable rate.

Recent graduate with strong earnings potential

Loan: One-year ARM.

Why: Stretch your dollars with low interest rates during the years when your income is at its leanest. Your rate can go up (or down) each year, but interest-rate caps will limit that change to a predictable amount, and your rising income should be able to handle it. Watch out for loans that don’t cap the interest rate but instead cap your payment. They could cause your indebtedness to grow even as you make monthly payments. ARMs also come in varieties that adjust — up or down — every six months or even more frequently.

Self-employed

Loan: No- or low-documentation loan.

Why: Though you’ll pay a higher interest rate, not having to produce paycheck stubs or employer references, which you would be expected to supply when applying for a traditional loan, can be a huge help to those with variable incomes.

Planning to live in home 4 or 5 years

Loan: A 5/25 hybrid loan.

Why: If you won’t keep the loan longer than five years, why pay extra to lock in an interest rate for a longer period? If you do end up staying longer, you can either refinance or live with an interest rate that adjusts every year.

Job relocation for a short run

Loan: Interest-only mortgage.

Why: While these loans can be risky for novice borrowers or those stretching to afford a home, they can be a smart tool for financially sophisticated borrowers who already have assets built up. Monthly payments are low because you’re not repaying principal, so you can afford a larger loan. If you eventually sell the home for less than you paid, however, you could have to take money out of savings to pay back the full amount owed on your mortgage.

Active duty military or veteran

Loan: VA loan.

Why: The Department of Veterans Affairs offers loan guarantees that allow qualified military personnel and veterans to take out mortgages for as much as $417,000 with zero down payment. In Alaska, Hawaii, Guam and the U.S. Virgin Islands, that loan amount goes up to $625,000.

How to find a superstar real-estate agent
Excerpted from Bankrate.com

The woods are full of agents these days, and many are beginners. Here are the eight questions you can ask to separate the average agents from the experienced heavy hitters.

Whether you’re buying or selling, the difference between having an average real-estate agent or a superstar can mean thousands of dollars in your pocket. It can mean selling your home for top dollar (stellar) or losing the house of your dreams to a more organized buyer (decidedly not stellar).

You want a pro in your corner when you make what may be the biggest transaction of your life. So how do you spot one among the thousands of people selling real estate? Fortunately, a little legwork and the right questions go a long way.

Referrals: Good as gold
In the recent boom, nearly 600,000 newcomers joined the National Association of Realtors, roughly doubling its membership between 2000 and 2006. That could mean that there are literally hundreds of thousands of agents that have never sold a house or have sold one to (perhaps) a family member or friend.

The best way to find an agent, real-estate professionals say, is by getting a recommendation from someone you trust. Not only is your friend’s experience the best predictor of your satisfaction, but, since an agent’s personal network is his lifeblood, he is likely to work harder knowing that a friend or client will hear about his performance.

But even with a good referral, you owe it to yourself to find one or two other promising candidates to screen. You can locate agents in newspaper ads, by stopping in at open houses or by cruising the area where you want to live, noting agents’ names on the for-sale signs.

8 questions to ask real-estate agents
Interviewing candidates serves two purposes: You get an education about your local market while learning how the agent proposes to represent you. Ask detailed questions. Here are the most-important areas to investigate:

May I see your resume?
Since you’re searching for an above-average agent, look for evidence of advanced training and designations, professional recognition and membership in professional organizations, all signals of commitment to the profession.

There are about 2.6 million real-estate agents in the country. They’re licensed by their states, and each state’s licensing and education requirements are different. (Use the Association of Real Estate License Law Officials’ site to check an agent’s license. Click "consumer" to get started.) About half of the agents belong to the National Association of Realtors. Those members call themselves Realtors. NAR membership doesn’t have to be a deal breaker, but it provides some assurance, since the industry group requires ethics training periodically and members must subscribe to its code of ethics.

Many agents take their education further, earning designations in specialties in such areas as neighborhood zoning, staging properties, use of the Internet, property management, the 55-plus market, diversity, working with buyers or sellers or transactions involving land, farms, commercial investments, resorts, second homes, high-end properties or international properties.

What makes you special?
Don’t settle for someone who just promises to show you homes or list, advertise and sell your place; every agent has to do those things. What you want to know is, "What sets you apart? What will you do to go the extra mile for me?"

How often will I hear from you?
Your agent’s communication style and availability should mesh well with yours. Prepare for your agent interviews by asking yourself whether, for example, you’d need a twice-weekly check-in, even if there are no homes to visit. Do you expect a report after someone tours your house for sale? Do you prefer to keep in touch through phone calls or e-mail? How promptly do you want a response? While you’re inquiring about the agent’s availability, remember to ask who will return your calls and show houses if your agent is out of town.

What’s your plan for marketing my home?
No agent can guarantee she’ll sell your home. But she can tell you what steps she’ll take to bring it to the attention of buyers. Press for details like, "Are you going to post this on a website? Put an ad in free magazines in a shopping center? Will you have give me suggestions to stage my home or help me find someone to stage my home?"

How many transactions did you complete last year?
Some agents keep score in dollars, saying, "I sold $50 million in real estate last year." But property values vary from market to market and house to house, so what you really want to ask is, "How many deals did you complete?"

Super salespeople are a mixed blessing. The bonus is, they’re knowledgeable experts. The more listings he has, the more he dominates that market, the more probability he is a good guy in that area.

But a superseller might be too busy for hand-holding. If a solo agent is selling more than 70 homes a year, they’re not going to have time for you. So, look for a superstar agent who also has a team, so someone is always there to help you.

What do you know about the neighborhoods where I want to live?
A super salesperson is no good to you if she isn’t doing an active business in your target neighborhoods, so ask how many of the homes she sold last year were located where you want to buy and how many listings she has there now.

Really great professionals specialize in one — or maybe two — communities. Nellis says he declined a friend’s request to help her find a home in a nearby city because he didn’t know the place and could not help her unearth the particulars she needed — everything from planned airport flight paths to zoning-regulation changes to freeway expansions — that determine a property’s true value.

Agents have a wealth of data at their disposal from local multiple listing services. Good ones will share it, educating you about the median income and educational level of a neighborhood’s residents, for example, or telling you what proportion of residents work close to home or suffer long commutes. They can’t discuss school performance or crime — that would violate fair-housing laws. But they should point you to Web sites where statistics on crime and school performance are listed, one of which is Sperling’s Best Places.

Are you a solo agent or part of a team?
There’s no right answer to this question. Teams are growing in popularity. They’re good for engaging several individuals’ expertise at once and for allowing high-powered salespeople to concentrate on what they do best, offloading to associates tasks like filing and tracking documents, dogging details and showing houses. Being part of a team lets a salesperson handle more listings.

But a team is only as good as its players. You can have a team with a crummy Web site and no designations, but you have a solo agent who just sparkles, and then that’s your answer for you — go with the solo agent.

It’s that sparkle that distinguishes the superstar agents, and there’s no way to find it without sitting down with a few of them and asking questions.

3 Centuries of Mardi Gras in Mobile, Alabama

Part of what gives Fairhope and the entire Mobile Metro Area so much of it’s charm is Mardi Gras!  A celebration preceding Lent, Mardi Gras culminates on Shrove (or "Fat") Tuesday, the day before Ash Wednesday. For nearly 300 years, Mobilians have observed this pre-Lenten celebration.  If you live in the area, you are sure to love this celebration and if you have never been to Fairhope or the Mobile Metro Arrea, you will surely want to visit during Mardi Gras!

The first carnival observance occurred at 27 Mile Bluff in the year 1703, continuing the cultural traditions settlers in Mobile (the "Port City") began back in their homeland of France. Celebrating Mardi Gras gave Mobilians the chance to enjoy a fine meal, some wine, and reminisce with families and friends.

Many years later, in 1830, Mobilian Michael Krafft, one one-eyed Pennsylvania Dutch transplant, celebrated the season with friends at a restaurant in downtown Mobile. Following the meal, these tipsy revelers "borrowed" some agricultural implements from a sidewalk display outside a downtown hardware store. Then, with cow bells, rakes, and hoes in hand, Krafft and his friends paraded through the streets of the town and thus was born the Cowbellion de Rakin Society, the first parading Mystic Society.

In 1866, after the Civil War, during the period when Mobile was still occupied by Union Forces, another group of gentlemen, led by Joseph Stillwell Cain, decided to revive the Krafft parade (which had been on hiatus during the war). They "borrowed" a coal wagon from a local business, and dressed in improvised costumes depicting a legendary Chickasaw Indian chief, Slacabamorinico, they paraded through the streets of town on Shrove Tuesday, thus giving rebirth to Mardi Gras, which has been observed in Mobile ever since.

Highlights of Mobile Mardi Gras history include the crowning of "royalty." In 1872, Daniel E. Huger first reigned as Carnival King Felix I, and a carnival association was established. Ethel Hodgson ruled as Mobile’s first Mardi Gras queen in 1893. Later, in 1939, The Colored Carnival Association (later to be renamed the Mobile Area Mardi Gras Association) selected a king and queen and elected the "Mayor of Colored Mobile," later retitled Grand Marshal. In 1968, Joe Cain Day was established as an all-inclusive street celebration that anyone was welcome to join.

While originating in Mobile, the Mardi Gras celebration quickly spread to other locations throughout the Gulf Coast. Mobile’s Mardi Gras reputation as an major tourist attraction is reaching international proportions. More recent events in Mobile Mardi Gras tradition include, in 1993, the organization of the International Carnival Ball as a joint effort including both the Mobile Carnival Association and the Mobile Area Mardi Gras Association. In that year also the only public Mardi-Gras style ball was begun to salute the Port City’s carnival and international heritage.

The Museum of Mobile has documented the history of Mardi Gras in several of its galleries, including the Queen’s Gallery which houses 18 magnificent outfits — gowns, trains, jewels — worn by queens of carnival over a period of 30 years. Also on display is the attire of a 1920’s flapper queen, as well as costumes of several jesters of well-known parading societies. The Museum of Mobile’s collections also include original Mardi Gras art and posters by various area artists, doubloons, tableaux designs, and ball invitations.