The following article appeared in a newsletter provided by the Common Wealth Bank in Australia and is such a thought provoking article I thought I’d provide it here.

Sustainability and Housing
source: CBA

Author: Professor Richard Reed, Faculty of Business & Law, Deakin University, Melbourne

In recent years there has been increasing pressure on homeowners to adopt sustainability and ‘save the planet’, however many homeowners still appear reluctant to spend money on sustainability. For them it is critical there is also a clear financial benefit. It appears the decision to outlay money is directly linked to economic considerations via a cost-benefit analysis, where sustainability is nice but still takes a back seat. In other words, why should I spend money on insulation or a water tank if the financial benefit does not exceed the original financial outlay? To correctly answer this question about sustainability there should be careful consideration given to exactly what financial benefits (and to what degree) can be gained from adopting a higher level of sustainability. Unfortunately most homeowners only equate sustainability to lower energy use (e.g. light bulbs) which eventually results in cheaper electricity bills (note there is research showing that sometimes more electricity may be used since they are perceived to be low energy!). Another financial benefit often completely overlooked are the benefits from using sustainable features to increase the perception of the property and therefore the overall capital value of the home. In other words, a homeowner needs to evaluate how is the ‘capital value’ of a property affected by the level of sustainability by undertaking a ‘before’ and ‘after’ analysis – this is commonly referred to as the business case for sustainability.

For example, the homeowner should ask these questions:

1. Do the sustainable features (or lack thereof) cause my home to be associated with less or more risk from the market’s perspective?

A starting point is to consider what buyers in the marketplace are looking for. In many areas there is now an expectation there will be a water tank in the backyard (much like an ensuite is often a standard expectation). If there are no watertanks, this may decrease appeal (and the perceived value) for the buyer. On the other hand if there are too many water tanks (e.g. 10) this may also detract value (much like having 5 ensuites).

2. Is the level of sustainability reflected in the assessed value of housing in my neighborhood?

It is critical to evaluate how much a typical buyer in my neighbourhood actually cares about sustainability and what type. The local real estate agent would know the exact answer here. There is no point installing a solar panel or full insulation if the market does not fully acknowledge it. It may be nice but ‘does it add value?’ Also it must be remembered that Australia is a diverse country with a wide range of conditions. For example heating is more important in southern states and cooling is more important up north. This also has implications for the design and construction of a wide range of housing.

There are many factors which affect the relationship between sustainability and value which can vary largely depending on a range of influences including:

* the location of the home and the proximity of surrounding buildings, as well as transport and surrounding services and facilities i.e. there is no point having a sustainable home but with high transport costs; the architectural design and age of the home;
* the perception of the market (both buyers and sellers) towards sustainability;
* the prevailing cost of energy, construction and transport;
* and other factors that influence the financial decision e.g. installation costs, maintenance.

It is important to consider the relationship between sustainability and the underlying principles of value listed here, which also affect the highest and best use of the property.

Supply and demand – standard economic theory dictates the price of real estate or property varies directly, but not proportionately, with demand and inversely, but not necessarily proportionately, with supply. Therefore an increase in the supply of an item or a decrease in the demand for an item tends to reduce the price. The opposite conditions produce the opposite effect. This must be factored into the assessment of value for a residential building, where there may be (a) limited supply and (b) increased demand for sustainable accommodation. There are a limited number of sustainable buildings currently in the marketplace, which also ensures that demand exceeds supply. In the future this may change as more sustainable buildings enter the market.

Competition – from a demand perspective this is the interactive efforts between two or more potential buyers or tenants to make a purchase or secure a lease. Sustainability attributes can increase competition via a competitive advantage.

Substitution – when several similar commodities, goods or services are available, the one with the lowest price normally attracts the greatest demand and widest distribution. With regards to sustainability this relates to the original cost of the residential building. For example, what is the trade-off between the cost of sustainable features and the availability of accommodation in an alternative house? On the other hand it is difficult to substitute the benefits offered by a non-sustainable building.

Balance – property value is created and sustained when contrasting, opposing or interacting elements are in a state of equilibrium. This relates to the relationship between different property components as well as the relationship between costs of production (e.g. land, labour, capital and developer’s profit/risk) and the property’s productivity.

Contribution – the value of a particular component is measured in terms of its contribution to the value of the whole property, or the amount that its value would detract from the value of the whole property. It is important to identify which sustainable aspects in a home actually add value and how much, if at all.

Surplus productivity – the net income to the land remaining when the costs of the other agents of production (e.g. cost of land and cost of construction) have been paid. If a residential building has been over-capitalised and too much money was spent on the initial construction cost there will be no surplus productivity.

Conformity – real property value is created and sustained when the characteristics of a property conform to the demands of the market. It is critical to closely examine the market to determine if the home conforms to today’s market expectations, otherwise the value may be discounted if it is perceived as being ‘too different’.

Externalities – factors external to the property (e.g. the surrounding real estate market) can have either a negative effect or a positive effect on its value. The high profile of sustainability and climate change has positively influenced the perception towards sustainable living.

Incorporating sustainability into the family home (note: both detached and medium-high density) has the potential to achieve a high degree of ‘future proofing’. The main question today is:

‘can I afford to increase the level of sustainability in my home?’

However this is rapidly changing to:

‘can I afford not to increase the level of sustainability in my home?’

If correctly adopted, sustainable features have the ability to slow down depreciation and obsolescence in a home over the long-term to varying degrees. These steps must be planned and can both reduce running costs and increase capital value if undertaken correctly.

Relevance to market value

From a market value perspective there are two definitions of value that are commonly used to value a residential building, namely the market approach and the cost approach. According to the International Valuation Standards Committee (IVSC), ‘market value’ is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion” . Alternatively, the ‘cost approach’ can be defined as “a set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of, or replacement for, the existing structure plus any profit or incentive; deducting depreciation from the total cost; and adding the estimated land value”.

The actual difference in financial amounts between these two approaches identifies to what degree the marketplace acknowledges ‘green’ or ‘sustainable’ residential buildings. Therefore the market uses the cost approach or depreciated replacement cost is based on comparing the cost to develop a new property or substitute property with the same utility as the subject property although it is important to ensure this is commensurate with open market value. Traditionally the cost approach (less depreciation) and the market approach would be generally similar for a new house – the incorporation of varying degrees of sustainability may alter this relationship. For example, based on the definition of market value would a willing buyer be looking for a fully sustainable building and be ‘willing’ to pay (or close to) the full cost of construction? Or will there be a perceived degree of over-capitalisation that the market will recognise and therefore refuse to meet? It is important that both buyers and sellers must remain fully abreast of such changing perceptions in the marketplace. Whist it is still relatively easy to overcapitalise in the construction of a residential home (e.g. stainless steel guttering, black water recycling), an increasing number of sustainable features are being sought after by a growing band of ‘willing buyers’. This clearly has an effect on both the market and cost approaches to determining market value – the gap between the two, if any, needs to be closely and continually monitored in each street, neighbourhood and region.

eco warm

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intelligent homes

It is important to seek out new home communities that not only fit your financial budget, but to also ensure that the homes were built with efficiency in mind. Affordably built new homes are available and many of these homes did not sacrifice quality and efficiency in order to be very affordable. There are also many enticing incentives on these new homes because of the competitively of the market. In many cases these homes are made much more affordable than older homes.

One of the benefits of a new home community is that you will not have to worry about foreclosures bringing down the value of your home. Where every house around you is new, and just moved into or is still for sale, you will tend to see properties hold their value more. Another great benefit of these custom new homes is that they are built to modern standard, and have efficiency and the environment in mind with the construction of every house. There are also many different floor plans and sizes, including prices, that will fit any families needs.

Many things a potential homeowner is looking at with a new home are how it was built. Some people expect a house that is for sale for fewer than 200,000 dollars was built cheaply, and did not have efficiency in mind. This is simply not true. Studies have shown that these newer homes are much more efficient than older homes that are for sale at a comparable price. Another benefit is the recent green movement will ensure that your home was built with the environment in mind, keeping its carbon footprint low with every home built. There are many benefits to custom homes that people like. Large kitchens, nice sunrooms, and features like these only come with a custom built home that is on the market.

Why settle for the same old average house, that has been used and worn over the years, when you can purchase a brand new custom home in a community that is filled with other nicely built, custom homes at the same price. Families should really look into the market for new homes rather than older homes because it will save them money on the price, the living costs, and the house will typically last much longer because of how well it was built. You do not need to spend an astronomical amount of money to live in a nice custom home, all you need to do is look at what the market has to offer.

Durham Home Builder

New Homes Durham

Author: Paul A Buchanan
Article Source: EzineArticles.com
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It might stand to reason that home ownership would take a hit during the recent housing crisis, coupled with the recession that continues to plague the country, and the world, but what may surprise some industry experts, as well as the host of politicians who are touting a recovery, is that home ownership has reached its lowest level since the close of the last century.

Of course, when you state it like that: the close of the last century, that sounds like a long, long time ago, but it was only ten years. But as anyone who has worked in this industry knows, ten years can be a lifetime when it comes to ebbs and flows. Hitting a low of home ownership can mean many things, but for starters, it means that fewer people own homes now than they did in 1999.

What happened to the tax credit for new home buyers?

The first question this statistic brings to mind is that last year, and up until April 30 of this year, the government had offered an innovative offer to first-time (as well as those previous homeowners who hadn’t purchased a home within the past three year), and yet the number of homeowners is actually lower than it was eleven years ago? The program was designed to get more people into homes, to encourage them to buy to stimulate the market, and the economy.

Millions of people did take advantage of this incredible offer, of course, but there were also millions of people who continued to lose their homes during this time period due to foreclosure or short sales. It can be said, then, that the home-buyer tax credit at least kept the number of homeowners from dropping to critically low levels.

Reading deeper into the figures

If we take a deeper look at this somewhat surprising finding, we can find a host of reasons for this downturn, as well as an explanation as to why home prices have been slow to recover, or even to bottom out. In some markets, the average home prices continues to drop, despite all of the government’s best efforts to stem the bleeding.

The past two to three years has affected almost everyone in the country, regardless of economic standing or geographic location. With all of the foreclosures, there was bound to be a drop in home ownership across the board. This news doesn’t necessarily mean that the trend will continue, but it does highlight something else that has been discussed during the past two years and that is that far too many people who couldn’t actually afford the homes they bought managed to get approved for a mortgage.

Moving forward, what to expect

Now, as we are all aware now, there is a price to be paid for gluttony and greed and that even as the influx of new home buyers and homeowners during the past ten, even fifteen years, was great for business, it was artificially pushing the value of homes up, which helped to force some people who would have normally been able to afford their homes into higher mortgages than they were comfortable with. Some of these families and individuals have managed to keep their homes, despite the rise in interest rates or points or the decrease in their equity, but many more have not managed to be successful in that respect.

As home prices begin to settle down, bottom out, and slowly start to rebound, it stands to reason that those who waited, who couldn’t afford the home of their dreams before, but now can, will gradually step back into the market and pick up some of the many available homes. As this happens, this figure will go back up, as will the prices overall. Housing is an interesting breed: it moves in cycles and ever upward, but sometimes it has to balance itself and check back from time to time.

David

David Reinholtz is a professional Mortgage expert in Real Estate Industry. David is also a sales and marketing expert and trains professionals in every career field. David has personally trained tens of thousands of loan officers, mortgage brokers, real estate agents and individuals through The Close More University Seminar Series, LoanOfficerSchool.com Classes, Correspondence and On Line Learning, and countless private engagements and training events throughout the country.

David is the Founder and CEO of LoanOfficerSchool.com, an approved education provider for The Conference of State Bank Supervisors and The National Mortgage Licensing Systems’ (NMLS) required pre-licensing education and continuing education.

Author: David Reinholtz
Article Source: EzineArticles.com
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Over the years I’ve had many of our builder students ask pertinent questions such as what size home do I build; what do I put in it; where do I build it? Looking back it’s easy for me to make these decisions now, but when I first started building in 1975 these were trial and error situations. And my hindsight is crystal clear. It’s very easy for me to look back and see things I wished I had known when I first started building. That’s what you’re going to learn in this article.

You’ll learn the pros and cons of being a speculative or spec builder (as opposed to a contract builder.) If you’re not familiar with those terms, a spec builder is one who will select a site, choose a design, build a home and then sell it to a client. A contract builder is a builder that you hire to build a home for you. By the way, spec building is how I suggest you begin rather than building a home for somebody else. I’ll explain why later.

I’ll begin by showing you how to be one of the best spec builders in your area, even if you’ve never before built a home. I’ll expand this information by discussing points that are unique to spec building. Next I’ll discuss points that are unique to contract building, and points that pertain to both spec and contract building.

A Word Of Caution

I want to stress that when starting your construction business, you must separate your business from your personal life. In the early 70′s I was in real estate commercial sales. I barely survived a major recession. Almost everything I owned was in my name and most of it was repossessed. Had I known then what I know now, I’d have retained that large home, that Mercedes and that airplane.

In the construction industry there are many things that can happen to you, some of which you have absolutely no control over. According to the 2008 Annual Report by the National Center for State Courts, in 2007 Americans filed over 90 million lawsuits, more than a third of which were civil cases. This does not include the volumes of legal disputes that were settled before a lawsuit was ever filed. Based on the sheer number of legal disputes that arise, in and out of court, one could say that most Americans run the risk of being involved in a legal dispute at some point in their lives – for many people, more than once. This is especially true for those who work in professions with high lawsuit vulnerability such as doctors, dentists and, yes, especially builders! You should invest in hiring professionals to help you protect your assets. It’s easier than you may realize. This is one time you can’t procrastinate. I can tell you some great horror stories but I don’t want to scare you this early in the game. Anyway, don’t live in fear of what might happen. You only lose if you don’t play.

I. Speculative Building

A. How To Be One Of The Best Spec Builders In Your Area

Before you buy a lot, before you buy any house plans, the first thing I want you to do is put together your success team. I call this the Henry Ford philosophy. If you read about Henry Ford, you’d learn that some people considered him to be illiterate. He once sued a Chicago newspaper that wrote an article claiming he was illiterate. In the lawsuit, Henry Ford emphasized that he didn’t need to know everything about everything because he hired experts to assist him in all that he wanted to do. This left his mind free and clear to do all the things that he really knew how to do. Well, I’ve learned from that philosophy myself over the years. I realize there is not enough time in this life to do everything. I now hire experts to assist me in my decision-making, and it has been a positive factor in my success building homes.

Your success team should include the following:

1. Real Estate Agent

2. Landscape Architect

3. Artist/Architect

4. Kitchen/Bath Designer

5. Interior Designer

6. Lighting Designer

I’ll discuss each of these team members in detail as we go through the course. Don’t be concerned. When you start out, you don’t need the best. These team members are more affordable than you could possibly imagine.

B. Obtaining Your First Loan

Let me tell you a story. And the further you get away from this story, the harder it’s going to be to borrow money to get started.

Let’s assume that you’re gainfully employed. If you’re not employed, but instead are self-employed, then you have to have a high credit score or produce tax returns for the past three years to qualify for the loan. If you currently rent a home or apartment and you want to build a home for yourself, you’re a prime candidate to borrow money to build a home – for yourself. So, you get the money. You build a home. You put it on the market during construction. You sell it. You go to the bank. You borrow money under the same premise. You get the money. You build a home. Put it up for sale. Sell it. Do it over and over again and pretty soon you walk into the bank and the banker looks at you and says, gosh, you should become a home builder. And you are.

Now, that’s the easiest way to get started. Most every builder I know got started in the industry this way. This method will also provide you with the least risk. Why? Because if you don’t sell the home you’ll simply move into it. In turn, this will make it easier for you to sell because a home that is furnished will normally sell faster than an unfurnished home. You’ll eventually sell it and can start the process again. The bad news is that you may be moving a lot. I remember one couple that wanted to own a home free and clear. They used this method on five homes, plowing their profit back into each home. Their sixth home was constructed completely from cash. They owned it free and clear and got out of the construction business. They simply wanted to do what it took to own their home free and clear.

The further you get away from the above scenario, the harder it is to get the initial loan when you’re just getting started.

For example, let’s say that you currently own a home and you want to borrow money to build another home for yourself. A banker will generally be negative. They tend to look at the downside and might comment something like this. “That sounds real good but you currently own a home. What are you going to do with your current home?” Your response is, “I’ll put it up for sale during the construction of this new home and then I’ll sell it.” The banker comments, “That sounds pretty good, but what if you don’t sell your current home?” The banker generally looks at the downside – that is you’re going to be stuck with two house payments. If you’re able to show you can afford two house payments, you may very well get the money.

You always have to have a successful conclusion to your story you tell the banker. Never look at the banker and say, “Well gosh; I’m only borrowing 70% of the appraised value. If the bank had to repossess the home the bank would have a bargain. The bank could sell the home, and make a good return on its investment.” Never use this kind of logic on a banker. Bankers don’t want to be in the homeowner business. Never imply or even think in your mind this will happen.

If you’re not gainfully employed or you have a problem with your credit or you have no cash, your next best method is to find an investor that will joint venture a project with you. I’ve done this on many large projects when I didn’t have the finances to afford it myself. What I normally did was to structure the investment so that the joint venture partner would put up very little or no money. Investors really like that! What I needed was their strong financial statement. Understand, there are many investors, such as medical doctors, who have tremendous financial statements but they have very little cash. So if you can structure the investment so that it requires very little or no cash, it becomes a relatively easy investment to sell. When I’ve worked with a joint venture partner, after selling the investment, the investor would be repaid any cash he had invested, plus a fair interest rate that was agreed upon up front. All remaining profits would be split 50% to me and 50% to the investor. Normally in a situation like this, the investor would let me deduct any out-of-pocket expenses but, understandably, they would not let me take any salary.

You would not believe some of the wild, crazy, ridiculous investments requiring large amounts of cash I’ve seen these people put money into. Many of them have the same luck in the stock market that I have. These people should feel blessed that you came into their lives with a viable real estate investment. I’ve found these people by talking to friends, going to investment seminars and running ads in the paper.

Tom Harrison is the Founder of The National Institute of Home Building in Atlanta, Georgia. http://www.nihb.com Tom is a native of Atlanta and a graduate of Georgia Tech. Tom has taught over 8,000 people how to build their own home without doing the physical work and about 30% of those students went on to become professional home builders.

Author: Thomas R. Harrison
Article Source: EzineArticles.com
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There are three types of home builders in America today. There is the “high end custom home builder”, the “production builder”, and the “small, hands-on builder”. While there are variations and hybrids within these three categories, these are the basic types at work today. The trick for the prospective buyer is to identify which one is the best match for their pocketbook and home style demands.

The High End Custom Home Builders normally work out of expensive offices and drive new vehicles and maintain all the trappings of success and professionalism that the upper class feels comfortable with. They tend to be very good at what they do, but their overhead and expertise come at a high price.

A custom home’s plan is often drawn by an architect who spends a lot of time interviewing the customer, drawing rough drafts, and making revisions before coming up with a final draft. Normally, a professional designer will be part of the decision-making process involving colors and finishes. The customer usually secures the construction loan and land. The building process is always lengthy and requires a lot of focus on the builder’s part to assure quality and coordination. In other words, it is not something most new home buyers can afford.

What they can afford is some variation of a Production Home Builder’s model homes. This is the way it is now and always has been in modern America. In the old days Sears and Roebucks sold thousands of homes by way of mail order catalogs. There is nothing wrong with the system, it enables the masses to afford the American Dream. Customer dissatisfaction normally occurs because buyers often want and probably deserve more attention paid to their individual home.

The problem is not that Production Home Builders are not good at building homes that follow normal building procedures within their system. That is what they have become proficient at and chances are that a new home buyer will end up reasonably satisfied if they stick to the builder’s stock plans and options. The problem with most builders that build more than 15 or 20 houses a year is that they are not good at making changes outside their box.

Many Production Home Builders are aware of their limitations in customization as well as their strengths in production home building. The popular term “pre-sold home” is commonly used to get the notion of “custom” out of the buyers mind. The buyer is allowed to buy the builder’s product any time before completion and select from a list of options when possible, but it is the builder’s home until the customer pays for it with their final mortgage loan. It is a fair way of doing business.

Trouble often arises when Production Home Builders ignore their limitations and attempt to customize a home outside their comfort zone. Most Production Home Builders started their careers building just a few houses a year and were able to build anything that came along and so they reason they should still be able to even though they are no longer “hands on” and have to work through their staff. They also want to give their customer what they want and so they bend their rules to make the customer happy and get the sale.

The customer wanting special features or techniques in their new home are often frustrated with the Production Home Builder’s parameters. They would be better served to look outside the big new sub-divisions where Production Home Builders have all the lots tied up and search for the Small, Hands-on Home Builder. Some of these builders are new and may be on their way to becoming production builders, but the majority are seasoned builders who prefer to build as few as 3 or 4 houses a year. They are not interested in running a big business, but instead just want to make a good living doing something they are good at and enjoy doing.

They are not as easy to find, but every city has many of them and they have been building the American Dream far longer than Sears and Roebucks and their modern day counterparts. They are the craftsmen builders who are often proficient at several trades and have a firm grasp on all the rest involved in home building. Many began as laborers on a framing crew and spent years learning the carpentry trade before gaining the experience and where-with-all needed to build their first home.

While the High End Custom Home Builder takes care of the upper class and the Production Home Builders take care of the masses, the Small, Hands-on Home Builders are the ones taking care of the new home buyers looking for something in between. It is often a perfect fit because they need each other. The Small, Hands-on Home Builder needs the work these customers provide and they have more time to pay attention to each project because they are usually physically working on it and not running a large home building operation. The customer with special demands and desires needs the small builder who welcomes their requests for individuality and sees them as challenges to be carried out with pride and proficiency, resulting in profit for them and satisfaction for the home owner.

Craig Swanson is a second generation home builder in Spokane, Washington. to learn more about him or his company, Craig’s Building Services, go to http://spokanevalleyscoop.com

Author: Craig Swanson
Article Source: EzineArticles.com
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The baby boomer generation are hitting their 60′s and building an affordable 2 storey home is a path many are now choosing to take. Most have lived very full lives with many life experiences through raising a family, travelling the country and in some cases the globe. Now, as retirement is becoming closer, baby boomers are looking to downsize and add a bit of money in their pocket in the process. So what are their needs at this phase in life?

Retirement is a very real concern for many who are looking at diminished super funds thanks to the GFC. Hundreds of thousands have been wiped from share portfolios in recent years which has even caused many retirees to enter back into the workforce. Because liquid funds, that is, cash, is so valuable many baby boomers are thinking of selling the oversized and mostly underutilised family home. This will give them a pocket full of equity that can be used in real ways to benefit their lifestyle today and for a number of years on.

But they will still need somewhere to live right? Exactly. If you speak to a lot of retirees they’re not wanting to go into ‘over 55′s’ villages, but would rather remain more independent in their own residence. Location is even more of a factor as the desire to spend less time commuting is high on their priority list. So urbanisation wins, and inner city suburbs are now being sought after for new homes.

To keep more money in their pocket they are looking for a reasonable sized home that will suit them, and perhaps have an additional room with a bathroom or ensuite for their family or friends to stay when they visit. It also gives them even more pull for the grandchildren to stay every now and then. One living area is all that is needed and minimal, easy care gardens are still wanted as the greenery makes living closer to the city still feel like you’re breathing fresh air.

So what does building a new affordable 2 storey home on a budget mean? It means designing a modern smaller sized home typically with three bedrooms and two bathrooms with affordable fixtures and fittings. One main open plan living area and alfresco along with perhaps a reading area will suffice. Generally this will bring the newly completed home in under $400,000 with a small amount used to fit out with some new pieces of furniture to suit the home.

This option will generally mean the baby boomers can end up having a reasonable amount of money from the sale of the family home to utilise for their retirement, whilst they have cut down on energy costs due to the cheaper home and reduced their outgoings even further through less commuting, which all adds up to a nice amount of regular savings.

Steve Fitzpatrick is the Managing Director of Your Building Broker in Perth Western Australia and has over 20 years experience in the residential construction and building industry and over the last 15 years has worked almost exclusively as a custom home builder of fine homes.

Author: Steve Fitzpatrick
Article Source: EzineArticles.com
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