Taking Action – Home Budgeting & Planning
One of the biggest traps new home-buyers fall into is using the maximum amount a mortgage professional qualifies them for instead of making sure they buy within their actual comfort zone.
In other words, buying within their budget.
You can’t buy within your budget unless you have one, so let’s get at it.
Step 1 – Making a Household Budget
We give you a guide & checklist that will go a long way in getting you started and on the right track. Be sure and download it, trust me.
The first and most important step is to create a household budget, which allows you to see how much money is coming in and how much is going out.
Your budget will help you determine how much mortgage payment you can really afford. However, the guidelines for loan approval may actually let you borrow more money than you can afford.
The guidelines look at your debt to income ratio by comparing your gross income to your new housing expense and only the bills you have that are listed on your credit report.
A budget will look at all your bills and use your income that you actually take home, not your gross income. This will help you answer the most important question of all: Can you afford the mortgage payment?
How to Create a Budget
- Write down all your income on a monthly basis
- List all your expenses as monthly amounts
- Add up all your expenses
- Compare your expenses to the benchmarks.
- Housing – 35%
- Transportation – 20%
- Debt Budget – 15%
- All other expenses – 20%
- Savings – 10%
- Maintain Records & Track your budget
Steps 1 – 4 are an irrelevant waste of time if you do not put effort into accurately tracking what you’ve spent, where you spent it and was it inside you budget.
Using pen and paper is fine for short to-do lists and scratching notes down, but it is not suitable to track your budget and spending.
There are several full-on budgeting software products and plenty of smaller and more accessible online / cloud based tools that will serve the same purpose at a fraction of the cost.
Mint, Freshbooks, Quicken; there are plenty of tools and zero excuses not to use one.
Step 2 – Get a Credit Check
The next step is to get a credit check. It is extremely important that you check your credit immediately because repairing bad credit takes time to fix. If you have insufficient credit, it takes time to establish it.
You need to get a tri-merge credit report that provides your three FICO scores in one report from the three major credit bureaus: Transunion, Experian, and Equifax.
If you find errors on your credit report, it usually takes at least 30-45 days to fix anything with the credit bureaus because request must be done in writing.
If you find you don’t have sufficient credit, it will take time to build it.
Step 3 – Set up an Emergency Fund
The next step is to set-up an emergency fund. An emergency fund is money you save in a short term savings account to be used in emergencies only.
If you have nothing saved right now in the bank, your first goal is to save one month’s worth of bills in a savings account.
How do you know what one month’s worth of bills are? You should have done a budget in step one that would tell you your monthly bills.
You should make your savings automatic. You should setup an automatic deposit with your paycheck into a savings account that is not linked to your normal checking account.
If it is linked to your checking account, you will be tempted to spend it. I recommend setting up a separate savings account.
Step 4- Write Your Financial Plan
“If you fail to plan, you are planning to fail!” ― Benjamin Franklin
The first step is accomplished by taking out a piece of paper and brainstorming what you would like to accomplish financially in the next 1-5 years.
Better yet, wad that tired old paper into a ball and fire it toward the nearest trash can. You should really – and this is one of the strongest suggestions I will give throughout the entirety of this book – use a cloud based tool.
Evernote tends to be one of the more popular FREE choices, but there are thousands more. There are some very slick speciality budgeting tools – MINT being my favorite – that you can also use.
Don’t get me wrong, I always scratch my to-do list by hand at first.
Once or twice a month I grab the high points from my notebook and scan them into the cloud.
Then organize this list into time frames of when you want to accomplish them.
Break it down into goals you would like to accomplish in the next year, next 1-3 years, and next 3-5 years. This gives you your short-term, medium-term, and long-term financial goals.
Once they are penciled in old-school paper style, head over to Evernote and/or your email account and stick a few calendar reminders with the pop-up enabled so that you have ample reminders and no excuses.
Once you have organized your goals you will need to put an action plan in place to help you follow them.
This first-time homebuyer manifesto is specifically designed as an action plan that will work for the bulk of the first-time homebuyer set.
Follow the plan. Do it.
If you still have doubt that you are ready, keep reading to see if you meet the criteria that indicates you are “not ready to buy” right now.
You Do Not Need 20% Down to Buy Your First Home
The 20% down myth, purveyed by uneducated media, scares far too many would-be homebuyers out of purchasing. Here are 5 very legitimate ways to avoid the 20% down myth.
- an initial payment made when something is bought on credit
- is typically indicated as a percentage of the sales price
Your down payment can come from your bank accounts, investments, stocks or mutual funds, inheritance awards, your retirement portfolio, a gift from a family member and even a bridal registry.
Requirements vary based on loan type and home buyers purchasing a primary residence will always have lower down payment requirements than an investor or second home buyer.
Conventional 97% LTV Program
The once dormant Fannie Mae 97% loan-to-value program has arisen from the ashes as of December 2014. Thankfully, the Federal Housing Finance Authority (FHFA) who controls Fannie and Freddie, realized that many Millennials were staying on the home-buying bench due to lack of assets.
They also found FHA financing pricier than they preferred, and lacked a reasonable conventional mortgage alternative.
As it happens young people in the millennial demographic have had a hard time saving during the Great Recession. Working a job that you are overqualified for typically means you are not making the wages you had hoped. That makes it difficult to save the funds needed for a robust 20% down payment.
It does not, however, indicate that savings-challenged millennials are a greater credit risk. In fact, many have impeccable credit that often works in combination with upward job mobility potential to make them a very low credit risk.
The conventional 3% down mortgage is a solid option to FHA financing. The 3% down payment program is limited to loan sizes of $417,000 or less. Loans in high-cost areas are permitted, but loan sizes remain capped at local conforming loan limits.
FHA – Federal Housing Administration
In 1934 the Federal Housing Administration was launched to provide an alternative to private market mortgage options. The period, although more severe, was not unlike the one from which we just emerged. Bankrupt banks, foreclosed homes, general housing despair… these were the commonalities of the day.
Since they launched more than 80 years ago, FHA loans have consistently provided access to mortgage funding with private capital would not. HUD currently requires 3.5% down payment for most borrowers. They also provide flexibility in how and where you obtain that 3.5%.
Gift funds from parents or close relatives are common. FHA even allows for “Bridal Registry” down payments which allow the bride and groom to request and document funds to purchase their first home instead of garden variety small appliances or china that is deployed once every 5 years.
With the recent changes bringing FHA mortgage insurance back to more reasonable levels, FHA loans continue to be a great option for first-time buyers.
VA – Veterans Administration Loans
A well-deserved reward for serving in our Armed Forces; VA mortgage loans have consistently provided the preferred financing option for borrowers with that option.
To be eligible for a VA loan, you must have served in the U.S. Armed Forces, or have been a member of the National Guard or Reserves. In some cases, spouses of deceased veterans are eligible as well.
VA loans typically offer 100% financing for qualifying veterans. Speaking of qualifying. VA underwriting understands the challenges that families with deployed members often face. VA underwriting guidelines provide enough wiggle room to work through those issues as long as they can be documented and explained.
USDA – US Department of Agriculture
The “Farmer’s Loan” has served America’s rural communities for decades. Funded by the he United States Department of Agriculture (USDA), this rural housing incentive is a very solid mortgage product for those that qualify.
USDA loans generally come at rates at or near the going market interest rate. Offering a low interest, low down payment mortgage option for low to middle income families, USDA mortgage loans are one of the last 100% financing mortgage products available on the market.
With mortgage insurance rates that are 1/3rd of what FHA charges and significantly less than the private mortgage insurance (PMI) fees required for conventional financing – a USDA rural mortgage generally smokes that of FHA loans at 3.5% down. There are geographic requirements for the property itself, and a lender can definitely help you figure out if your dream home qualifies for this program. The USDA program is commonly used in towns with a population of 25,000 or less.
State and Local Assistance Programs
The federal government is not really in the “assistance” game directly, although they do provide funding. They defer housing incentives and down payment assistance programs down the ladder to state and local governments.
It is the right call too. Real estate is local, and not an area that can be micro-managed from Washington. The local nature of home-buyer assistance and down payment programs means that every state varies a little bit differently from each other on the quantity, quality and variety of down payment assistance programs.
In other words, check your local, state, city, and county websites to get up-to-date and accurate information for where you live.
The majority of the programs available from state housing and finance agencies are geared to low and middle income buyers. However, there are also programs designed to stimulate neighborhoods and revitalize areas of your city that have potential for growth and home value appreciation.
If you serve the community as a firefighter, policeman, social worker or teacher then you’ll want to look at FHA’s “Good Neighbor Next Door Program”.
Good Neighbor Next Door allows for 50% off the purchase price for qualifying buyers. Yep, you read that right. Your $150,000 house will cost you a mere $75,000 if you qualify.
Don’t celebrate just yet though, there are a couple gotchas. Number one is that the home must be a HUD foreclosure and located in a HUD designated “revitalization” area. You can check what you have available on HUD’s website.
Individual communities and even neighborhoods allocate funding toward housing assistance and neighborhood revitalization too.
Your Pre-Approval Matters. Seriously.
You do not have to search hard to find mortgage horror stories. Lost earnest money, broken moving arrangements and countless hours of wasted time; all because one piece of the home-buying process was half-heartedly completed – the pre-approval.
Sometimes the loan officer is at fault and other times the borrower fails to disclose deal denying information.
Set aside and focus on how to avoid costly issues that can often pop-up on a weak pre-approval.
Start Early & Have a Plan
The first and most important step is to create a household budget, which allows you to see how much money is coming in and how much is going out.
Your budget will help you determine how much mortgage payment you can really afford. However, the guidelines for loan approval may actually let you borrow more money than you can afford.
Having a good idea of what you are comfortable paying every month is important. Don’t be tempted to exceed your comfort zone amount just because you can.
No matter how minute you think a financial detail may be; disclose it regardless.
It is much easier for a savvy mortgage professional to fix a potential issue rather than fixing an actual in-process issue.
Proactively addressing a potential landmine upfront, whether it be with additional or alternate documentation or simply a thoughtful explanation letter, will save time and possibly even your deal.
Only Use a Loan Officer Who Asks for Full Documentation
While intentionally taking the more difficult and time consuming path may seem counterintuitive, I can assure you it is not. The documentation is the documentation and you will need to provide it at some point. Smart mortgage originators know that and will convey it.
You are not working harder to provide the additional documentation; you are front loading the inevitable. It’s better to document something 45 days before closing then to try and document it 4.5 hours before closing.
If you are issued a pre-approval without providing any documentation then you are working with a lazy loan officer. The 1/8th you saved on interest rate doesn’t mean much when you don’t have a loan. Be smart.
Start Planning 6+ Months in Advance
Start by pulling your tri-merge credit report. Checking your scores, but most importantly check for errors, especially collections and liens. Upwards 65% of all credit reports have at least 1 error.
By checking this early you can address any errors and address legitimate derogatory credit too.
Home Warranties: An Extra Layer of Protection, or a Waste of Money?
When you buy your first house the offers will descend on you like a plague of locusts: yard services, cleaning services. home security and, of course, home warranty offers.
Chances are you might have even received a home warranty paid for by the seller or real estate agent when you purchased.
It will eventually expire and you’ll have a decision to make just like those that are considering one of the offers received in the mail.
Home Warranty 101
Warranties vary from company to company in both what they cover and how much they cost. In general they cover:
- Kitchen appliances such as your range or oven, dishwasher and built-in microwave
- Garbage disposals
- Plumbing including a whirlpool tub
- Water heater
- Ceiling fans and exhaust fans
- Heating and electrical system components
If you want additional items in your home covered – air conditioning system, refrigerator, washer and dryer, and a garage door – then expect to buy an “enhanced warranty.”
The upsell lives even with home warranties. Of course, you can also pay for optional coverage of items such as a swimming pool or septic system. $350 to $700 for a one year warranty is the expected price range, although longer and more extensive warranties will run more.
Are they worth it?
My suggestion is to take a longer look at the fine print for the warranty being offered. What is excluded? What are the special stipulations? Exemptions? Loopholes? The fine print is important because, in my personal experiences, they will be deployed by the warranty company more often than not. Twice I tried to use a home warranty benefit personally, both times I was denied on semantics. Many of my clients have had similar experiences.
Do your homework and don’t assume that what a builder or real estate agent provides you at closing is immune from issues.
Selecting Your Target & Making Your Offer
At this point we will work under the assumption that you have followed – to the letter – our other fantastic guidance.
You have used our formula to narrow your search to the homes and neighborhoods you can afford, you have used the tools provided to check out the neighborhood variables and potential and you have an awesome loan officer with a rock solid pre-approval.
You did do all of that right? Good.
Making the Offer
With the fact that you are generally prepared in mind, it’s time to dig deeper on the individual home you want to make the offer on.
Check Neighborhood Comparables
- What are the average sales prices for homes in the area with similar features and characteristics?
- What condition is the home in, and what repairs or improvements are needed?
- Are similar homes available at a more desirable price?
- How long has the home been on the market?
- Has the sales price already been reduced?
- Is the seller considering other offers at this time?
Your real estate agent will be able to provide you with answers to all these questions via a Comparable Market Analysis (CMA).
Lean on their data. Despite the public availability of real estate data, agents still get the best quality with the most frequent updates. Put them to work.
You will generally have to negotiate the offer. Another thing your real estate agent will handle and, assuming you did your homework when choosing them, be darn good at. The seller’s agent will counter your agent’s offer.
We will jump to the part where all parties are in agreeance and you are officially under contract. Escrow is opened and earnest money is deposited.
The CLOCK IS NOW TICKING and you now have a finite amount of time to wrap your mortgage financing, homeowner’s insurance and other details up into a nice little package that gets fully approved by your lender. If you have listened and prepared in advance then you will be just fine.
If not… then I wish you the best of luck. You’ll be starting parts of the process that should have been completed long before the purchase offer was made. You are in for one helluva ride over the next few weeks trying to make up for lost time.
It’s better to be prepared.
Ask any home buyer or seller which part of the process they dislike most, and you can expect just about all of them to respond with “the closing.” In most cases, dislike for the closing process tends to revolve around one common element: delays. But delays are inevitable in home purchases because even though the terms and conditions included in a real estate contract are important, they are not always concrete.
The truth is, a real estate deal involves several different parties and with so many moving parts, delays should be expected. Here are some of the most common reasons why closings get delayed and what you can do to keep your deal moving forward.
#1: Unrealistic Contract Dates
Using an experienced real estate agent is important because one of the biggest mistakes an agent can make is setting unrealistic contract dates for the sale. In most cases, it takes anywhere from 45 to 60 days for a closing to occur after an offer on a home is accepted by the buyer. This provides the buyer with enough time to secure financing, and the seller to take care of any contingencies agreed to in the negotiations. To schedule a closing for any time shorter than that will almost always result in delays.
#2: Problems With the Bank Appraisal
The bank appraisal process is one of the most important parts of the home buying process, but it is also one of the most common causes for closing delays to occur. And, there are several reasons why this can happen. For instance, the bank appraisal may determine that the home was under-appraised at the time the agreement was made between the seller and the buyer. As such, a new agreement would have to be struck, the negotiations of which could delay the closing date.
#3: Problems With the Title
This happens all too frequently. A home sale is agreed upon, and then during the title search, it is discovered that the home has previous liens on it, essentially making the home un-sellable. The only way you can avoid this problem and ensure that the title on the home is clean is to hire a real estate attorney.
#4: Different Closing Figures
Before closing, both the buyer and the seller receive their closing figures. The closing statement, which has been traditionally known as the “HUD-1 Settlement Statement,” is not always considered accurate by one or both parties. The industry is making strides to change the document so as to eliminate this popular cause of closing delays. As of October 2015, the HUD-1 Settlement Statement, as well as the Good Faith Estimate, have been replaced by the closing disclosure and loan estimate document.
#5: Problems With the Land Survey
An instrument survey is the drawing of the land on which the property being sold sits, and it is designed to show the legal borders of the property being purchased. In some cases, the closing can become delayed due to a discrepancy with the land survey.
For instance, the property border shown on the document might be encroaching over a neighbor’s property line. This is another issue where having a real estate attorney on your side could help you avoid a potential problem that could result in a closing delay.
#6: The Lender Needs Additional Documents to Approve Financing
Many buyers misunderstand what it means to be pre-approved for their mortgages. Most think that the pre-approval means that the loan is guaranteed and everything will be ready to go at closing. But the reality is that even with a mortgage pre-approval, the lender will always review the case again right before closing to see if anything significant has changed in the buyer’s credit report or bank statements.
If the lender sees something that worries them, they will ask for additional documents, and this will almost always cause a delay in closing. To avoid this, try to keep everything as it was when you were pre-approved for your mortgage. This means: don’t open up any new lines of credit, don’t change jobs, don’t make any questionable deposits or withdrawals from your bank account, etc.
#7: The Seller Didn’t Complete Agreed-Upon Repairs
Sometimes in order to sell a house at the agreed-upon price, a homeowner might need to agree to repair certain problems in the home. By the time of closing, all of these repairs need to be completed or the buyer may choose to delay the proceedings until all of the agreed-upon repairs are complete or they could back out completely.
If you’re buying a home and the seller has agreed to make repairs, then your real estate agent should be ensuring that the repairs are being made so the closing date remains true.
#8: Problems Discovered During the Final Walk Through
The final walk through is the last chance the buyer is going to have to see the home before the closing date. Therefore, the buyer needs to go over everything with a fine toothed comb. Sometimes, a buyer finds a problem that was missed earlier, like the HVAC isn’t working or one of the appliances is broken. When this happens, the closing process stalls until the appropriate action can be completed.
#9: One or More of the Real Estate Professionals Causes the Delay
As stated earlier, there are a lot of people involved in a real estate sale, and sometimes, one or more of these professionals could cause a closing delay. For instance, the real estate agent might not have returned the signed documents to the lender in time. Or, the bank appraiser doesn’t schedule a re-inspection to confirm that the bank-required repairs were made.
#10: The Mortgage Application Is Denied By the Lender
In the worst case scenario for both the buyer and the seller, the buyer’s mortgage application gets denied by the lender. This forces the seller to try and find another buyer, and the entire process starts all over again.
Next to the kitchen, a bathroom renovation is right up there on just about every homeowner’s wish list. Yes, a total overhaul is pricey, costing an average of $9,315. But if you don’t have that kind of cash lying around, that doesn’t mean you have to settle for a petrifying powder room.
Here’s the deal: A few strategic bathroom makeovers can have big impact for far fewer greenbacks, so if you’re dying for a new look (or to make renovations that will pay off at resale), try these budget-friendly ideas.
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Paint, meet brush
Paint is always your friend in the budget department, says NKBA K+B Insider and Master Builder Karl Champley. Bathrooms tend to be small and dark.
“The solution is lighter colors,” Champley says, “like ultra-bright white for the ceiling.” You’ll create a dazzling space while visually stretching the height of the room.
Meanwhile, be sure to paint the walls and door an interesting color. And “purchase the shade in two different sheens such as flat and semigloss,” says Gordon Boardway, a painting expert with Five Star Painting.
Boardway notes that different paint sheens create cool effects on bathroom walls, as “flat paint absorbs light while semigloss paint reflects light. Use painter’s tape to make straight lines for fun stripes, diamond patterns, chevron stripes, and more.”
Target the tile
Emile L’Eplattenier, a real estate marketing and sales analyst at Fit Small Business, has just one word when it comes to penny-wise bathroom renovation: tile! She suggests pairing earthy, natural materials such as slate with sleek marble or stainless steel. The best part? “Natural slate tile is actually incredibly cheap,” says L’Eplattenier. “You can get 12-by-12-inch tiles for about $2 a square foot.”
If you can’t redo all the tile, an even cheaper route is to regrout—but change the grout color to shake things up. Go ahead, take a chance!
There’s no need to rip out big pieces like a dingy bathtub (which will cost you an average of $2,849 to replace) or a stained countertop, says Ciara Devitt, interior design expert for Cymax Group.
“These can cause damage to drywall or surfaces underneath, which will then need to be replaced,” she says.
Instead, refinish them with products like the Rust-Oleum Tub & Tile Refinishing Kit for $26. You can also try Miracle Method, a bath and kitchen refinishing product. Refinishing a 5-foot bathtub starts at $475, while countertops can often look brand-new for around $200 to $400.
Yanking out a whole sink can be pricey, so consider keeping the original sink and faucet and swapping out just the vanity beneath for a new one that fits your sink, which will run you just $499. Champley also suggests installing a wall-mounted model (also known as a floating vanity) or pedestal vanity to keep the floor clear.
Replacing faucets, door handles, and various other ironmongery can impart “an instant face-lift to the bathroom,” says Devitt. To save even more, make sure the shower and tub faucet has a WaterSense label, which will lower your water bills without sacrificing performance. Devitt’s favorite WaterSense two-handle faucets for under $300 come innickel and bronze.
CoCo Peterson, director of merchandise at DEQOR, says “a killer mirror” can make a bathroom appear larger while also providing more light to the room.
“Mirrors do wonders to open up a space and are inexpensive,” says Peterson. “I’ve installed many full-length mirrors in small bathrooms, which can make you feel like you have doubled the size of the room.”
Peterson suggests affordable mirrors for every decorating taste: vintage and shabby chic ($130), functional ($160), bold and eclectic ($398), and minimalist and trendsetting ($170).
One of the biggest bathroom mistakes you can make is to use only one source of light, says Sean Juneja, co-founder of Decor Aid. Adding a sconce ($189) will create different atmospheres throughout the day.
“In the middle of the night or early evening, you can use just the sconces for a soft light while strong overhead lighting can be used for showering and grooming,” Juneja says.
To keep your bathroom from looking “soulless and generic,” Juneja suggests carefully choosing items like the shower curtain, wastebasket, and bath mat to pull the room together.
“Try pieces that are simple and tailored,” he says. “Don’t just run out and get everything in white.”
A gray shower curtain is fun and purse-friendly at $45. Luxe Turkish towels add pattern and texture for a $50 investment, and a Nate Berkus for Target bathmat is just $18.99. Another fun source for bath accessories is pigeon and poodle.
“Vanity accessories will help you organize things like cotton balls and tissues and add interest to your sanctuary,” Juneja adds.
Yes, artwork in the bathroom is “a thing,” says Juneja. It’s a great way to not only add visual impact but also to express your personality, “which people often forget to do when decorating their bathrooms.” He recommends looking for affordable art on sites such as ArtStar, Society6, and Minted. You can also check out these other ways to find great artwork for your home.
Most savvy home sellers know that curb appeal is important to make a great first impression on potential home buyers as they pull up and park at, well, your curb. But if the prospect of painting your whole house or landscaping your yard seems too pricey, never fear: There are plenty of ways to create high-impact curb appeal on the cheap.
Check out these ideas that require little investment time but pay off big-time down the road.
Paint the ugly bits
Not up for painting the whole house? Then one budget-friendly alternative is to repaint just the trim, mailbox, and other small areas. You can also put your brush to better use by covering up unsightly things like the electrical box on the side of the house and any pipes and parts that are connected to it. Match the color to that of your house for a clean, streamlined look.
Update your garage door
Improving this utilitarian spot is one of the easiest ways to give the exterior of your home a face-lift, advises Dan Grandon, president of Closet Factory Franchise Corp.
“First you should consider the purpose of the space. If you use the garage for work, go with a door that features large window inserts as this helps bring more natural light into the space,” he notes.
However, if your garage is mostly used as a dumping ground, you might want to focus on a more energy-efficient design, like an insulated door. And it goes without saying, the garage should be pristine (many buyers will enter the house through this space).
Create a sitting area
Carol Marcotte, a designer with Form & Function in Raleigh, NC, likes to set up an outdoor spot on the front porch to amplify the first-look attractiveness.
“Stage a place to sit that includes a pair of chairs with a couple of cute outdoor pillows,” she suggests. This idea helps your home look friendly and lets potential buyers envision themselves on your front porch, sitting and waving to the neighbors. Save your pennies by putting out weather-safe indoor furniture you already own.
“If your outdoor porch doesn’t have enough room to accommodate a lot of furniture, just a small bench can make a big difference,” adds Anna Shiwlall, a designer with 27 Diamonds in Los Angeles.
Trim the hedges
Of course you’ll make sure your lawn is cut regularly, but don’t forget about the bushes that surround the property. There’s not much worse than blocking the view of the house with overgrown boxwood. Plus, there’s the safety factor, says Marcotte.
“Burglars could hide in those bushes,” she warns. Simple trimming and weeding can help beautify your yard and won’t cost you a dime.
Add small accessories
Small details can raise the wow factor without breaking the bank. For example, hang a colorful birdhouse or two in the prominent trees of your front yard. Or place a couple of cute garden statues or sculptures (a frog, turtle, or other animal) among the flower beds. An arbor or trellis from a garden store makes a nice focal point, especially when placed near the entrance to the backyard or patio.
Hide the clutter
We’re talking garbage cans, recycling containers, air conditioners, compost bins, and garden tools. A jumbled pile of hose needs corralling, so coil it and store it inside a large pot or basket. Prefab lattice can be joined together to create a smart-looking fence to hide cans, bins, and that big ol’ AC unit. Not handy enough to make a box? Arrange a few strategically placed potted plants in front or plant a bush to help conceal these items.
Make it sparkle
In addition to picking up the yard, you’ll want to make sure the sidewalk and driveway look their very best, too. But rather than repaving, rent a power washer instead.
“You can do this fairly cheaply,” says Marcotte. “You want to be sure the outside of your home is super clean, because it says ‘well-maintained’ to a potential buyer.”
The roof shingles are cracked. There’s mold in the basement. There are holes in the walls, and your porch might crumble and kill the mailman at any moment.
Your home is falling apart, and you’re almost positive you can’t afford to repair it.
So now it’s time to get rid of this crumbling abode—but who’s gonna want your (charming) piece of junk? Here’s what you need to know about getting the most out of your fixer-upper when you sell.
Check whether you can afford to fix it up
We’re mostly going to tell you about your options when it comes to selling your home. But first, you’ll want to make sure you can’t afford to fix it up.
If you’re short on cash, check out both the FHA 203(k) loan and the streamlined (or limited) FHA 203(k). These are refinancing programs (that’s right—a whole new loan) that also provide funds for approved renovations. FHA loans come with their drawbacks (lots of mortgage insurance) and benefits (like low down payments), so you’ll want to weigh their pros and cons.
Another option is a home equity loan, or HELOC. Check out the differences, and see if they’re a viable option. But if you really need to sell your house, read on.
Estimate the home’s value
Finding out your home’s value isn’t as simple as subtracting the cost of repairs from your home. You also need to factor in “aggravation costs,” says Bruce Ailion, a broker and Realtor® in Atlanta. In other words, turnkey homes often sell at a premium to traditional buyers because they don’t have to do any work. If your home needs some sprucing up, you’re likely going to have to incentivize buyers to dig in and get their hands dirty.
Another aspect that complicates the value assessment: “Buyers often overestimate the cost of repairs,” explains Ailion. And if a buyer thinks there’s more work than necessary, you’re going to get less.
Be prepared to sell to an investor
Some sellers are particular about who’s going to own their home next. Some don’t want to sell to investment businesses at all. But depending on the condition of your home, you might not have a choice. The more repairs you need, the pool of traditional buyers gets smaller—while the pool of investment buyers gets bigger.
A good rule of thumb: If your home needs kitchen or bath remodels, a new roof, or foundation repairs, there’s an 80%-plus chance your buyer is going to be an investor, Ailion says.
Plus, if there are serious structural or heating and cooling issues, that could disqualify your home from a number of mortgage programs. That’ll significantly shrink your pool of buyers, but it will make it enticing to all-cash investors.
Use a Realtor to get more money
Since you’re already taking a price hit on your house, you might be tempted to sell directly to one of those companies that trumpet, “We Buy Houses” for fast cash. By doing this, you’re cutting out an agent and theoretically saving that commission.
But beware: Aside from the scam potential, you could end up getting less money. That’s because those types of companies are generally looking to buy at 20% below your sales price, Ailion says.
He gives the following hypothetical example: Fixed up, your home would be worth $150,000. But in its current state, it would fetch only $100,000. If you went to one of those companies, it “would offer $75,000 to $80,000,” he says.
Get a fast and fair price on the market
The fastest way to sell your house may be to an all-cash investor, but that doesn’t mean you’ll get a fair price—or that the sale will be quick. That’s right: You’re going to have to do a bit of legwork. You want to generate interest—which basically means underpricing the home to get multiple offers, Ailion says.
So what do you do when the offers start rolling in? Play hard to get.
“Do not respond for five to seven days. Perhaps you will have 20 to 30 offers, maybe more. Do a call for best and final due in five to seven days,” Ailion says. “Over that two-week period, you may get 40-plus offers. In two weeks you will have a cash buyer very close to (your desired price), maybe more.”
So before you panic, hire a real estate agent, asses your home, and get your home ready for the market. Just because the house is falling apart doesn’t mean you have to take an enormous hit on the return. Put your best foot forward to get the best price possible.
You love the house sooo much. The problem is, lots of other people probably do, too. How can you stand out in a competitive environment? Try writing an offer letter that knocks the seller’s socks off.
“Making the highest offer is typically the best way to win a bid, but when a seller is faced with two very similar offers, a letter can oftentimes tip the scales toward yours,” says Realtor® Mindy Jensen of Longmont, CO.
So how do you use writing to woo a seller to your side? Check out these snippets from winning offer letters, then learn how you can follow in the footsteps of these real-life buyers.
A winning game plan
The words that wooed: After seeing a number of properties that have not “spoken” to us in a significant way, we were delighted to discover your home, with its mixture of charm and warmth. We envision family gatherings within its open living area and drinking coffee while watching our children play in the pool. As basketball is in the family blood (Steve is a former employee of the National Basketball Association), I’m sure there will be plenty of pick-up games for everyone.
Why it worked: “My clients were up against a better offer from a builder, but the seller couldn’t bear the idea of their house being torn down,” explains Anne West, a Realtor with Coldwell Banker Residential Brokerage in Winnetka, IL. “They wanted to sell their home to someone who would raise their family there and who would love it as much as they had, and my clients were able to articulate that they were just that family.”
How to do it yourself: Find out some backstory about the owners or other bidders if you can. The tidbit about the builder, for example, was crucial knowledge. But for any property, most sellers who have taken good care of their homes want to make sure they will be loved by the next owner, too, so let your enthusiasm shine to gain the edge over pricier offers.
Must love dogs
The words that wooed: My husband and I have been searching for our first home, and we believe your house will be the perfect place to raise our growing family. Our son is due in September, and I know he will be so happy playing in the fabulous backyard with our two dogs.
Why it worked: “The seller appreciated her praising specific things that were obviously installed by the homeowners,” says Mindy Jensen, a Realtor in Longmont, CO. “But the tipping point was when she included a picture of her dog with the letter. The seller specifically allowed her to match the highest offer, based solely on her dog.”
How to do it yourself: Make yourself relatable. Take a cue from the lovingly tended roses or, in this case, a dog, and try to glean what the seller values. It could be kids, a dog, or even a love of gardening. If you share those same interests, offer them up. You never know what phrases may spur the seller to choose your offer over another.
This way to Easy Street
The words that wooed: We are not looking for a bargain, just a fair price for something nice. This would be a cash sale, and we could close quickly or at a convenient time for you.
Why it worked: “This was a no-brainer for the seller, because you can tell these folks are clued in, and money talks,” says Bruce Ailion, a real estate agent with Re/Max Atlanta. “This letter makes it clear that this is going to be an easy transaction: cash sale, market price, close quickly or on your timetable.”
How to do it yourself: Get your ducks in a row before you make an offer. Even if you’re not doing an all-cash offer, have a pre-approval in hand. Especially in a seller’s market, make it clear that you are going to be easy to work with and that the seller can call the shots.
The words that wooed: We grew up in the city and our parents live very close by; one of them is living very close to your home. It’s important to find a home close to our family, so that when we start our family, our children will be close to their grandparents.”
Why it worked: “If the seller has raised their own family there, they have an emotional connection to the house,” says David Feldberg, broker/owner of Coastal Real Estate Group in Newport Beach, CA. “Talking about several generations plucks those heart strings.”
How to do it yourself: Include details about your family and connection to the area. And always include a photo. When the seller is considering multiple offers, the photo makes your offer stand out from the pack.
Flattery can get you everywhere
The words that wooed: From the moment I walked in, I knew this place felt like home. (Well if I am being honest, I fell in love with the wallpaper in the bathroom first!! ha-ha.) I also really appreciate the attention to detail in the upgrades you made: the stain on the floors, the wall colors and the charming lights, and I absolutely love your furniture selection.
Why it worked: “My client clearly admired the seller’s decor decisions,” says John Michael Grafft with Berkshire Hathaway Koenig Rubloff in Chicago. “It turned out she was an interior designer. Everyone appreciates a sincere compliment.”
How to do it yourself: Find details that you love about the home and mention them so it’s clear you’re not sending a generic letter to every potential property seller. The seller chose those design elements, so find something you love that you can mention sincerely. Even if you are planning to change everything about a place you consider a fixer-upper, compliment the fact that the seller took great care of the home.
Short and sweet
The words that wooed: Semper fi.
Why it worked: “The rest of the letter was great, but in all honesty, that phrase at the end of his letter sealed the deal. He and the seller were both Marines,” says Mindy Jensen, a Realtor in Longmont, CO.
How to do it yourself: Common interests can make all the difference, but don’t lie. That goes for military service, of course, but also other details. Don’t tell the seller that you want to raise your children there, if you don’t have any. Instead, if you hope to eventually have a family, you can say, “I hope to someday be able to raise my children in this beautiful home.”
Even though you don’t have a sprawling backyard, that doesn’t mean you can’t enjoy entertaining outdoors. Make the most of your petite patio and turn it into a pocket-sized paradise. Here are our tips for how to decorate small spaces for outdoor entertaining.
● Arrange furniture the right way: The best way to maximize space is to arrange your furniture around the perimeter of the deck or patio. Think twice before placing a table in the center, and instead give your guests plenty of room to stand or move around.
● Add extra seating with large pillows: Get a few extra spots for guests to sit without taking up too much space by throwing in some large floor pillows. They add an extra element of coziness, plus they’re easy to add or subtract.
● Use color wisely: Color can make all the difference when decorating, especially in such a small space. Keep things fresh and airy by sticking to a monochromatic palette in whites or grays. Or add a bit of fun by using colorful accents in eye-catching patterns.
● Be strategic when choosing furniture: Save space by investing in two-for-one pieces of furniture, such as nesting tables, storage ottomans and benches (which can also be used for seating), and folding tables and chairs.
● Bring on the plants: There may be plenty of foliage outside already, but use it strategically in your entertaining area. Plants are a simple way to liven things up and make your modest space feel like an exotic retreat.
● Hang up lights: Strings of bistro lights can instantly open up a small space. Plus, that warm glow will give things a cozier vibe.
Get ready for a summer full of outdoor entertaining!
Is the time for a fresh start. It brings a feeling of starting over, and an opportunity to improve all areas of your life. In the New Year, take some time to complete projects you’ve been putting off for months. You can create an even better home for you and your family by decluttering and organizing your home.
Follow these tips for easy and quick ways to de-clutter your home.
1. Keep things at arms reach: Keep items you use daily somewhere where they can be easily reached, whether that’s in a basket, on a shelf, or in a cabinet. Store everything that is used sparingly on a higher shelf or in the garage or attic. It will be easier to find what you need when you need it.
2. Add shelves: If your home is cluttered adding more furniture won’t help. Instead of adding a bookshelf or desk, add wall shelving. You’ll have room for books, picture frames, paperwork, and even a television without cluttering your home with more furniture.
3. 12-12-12 Challenge: This challenge comes from BecomingMinimalist.com, and is a simple project to add to your routine. Clean and organize by choosing 12 items to throw away, 12 items to donate, and 12 to return to a proper place in your home. This helps you organize, declutter, and give to a good cause all at the same time!
4. Garage storage: Make your garage your main storage area. Use old dressers and other furniture to store seasonal items and items you don’t use daily. Paint the furniture the same color to create a unified look.
5. Get rid of broken items: There’s no point in keeping items that are broken or unused, they’re just taking up precious space in your home. If you haven’t used it or gotten it fixed in the past six months, you probably never will. Throw it out or donate it to make room for something new.
6. Use things up: It’s a habit to save special items for special occasions, whether it’s fancy bath soap or an expensive spice. Stop saving these things for the right time, use them and enjoy them now. Use what you have before you buy something new to help keep clutter at bay.
7. Deal with one room at a time: Take it step by step. Organize and declutter one room at a time, makes it easier to focus on the task at hand. If you try to juggle too many rooms at once, it may never get done.
Go through these tasks every few months to help maintain an organized home. A decluttered home can give you and your family peace of mind – and room for something new.
Who doesn’t want a faster home sale? Make a good impression on buyers to increase your chances of a speedy sale. Not sure how to do that? We’ve got tips for every step of the home sale process.
Optimize Your Listing: A picture is worth a thousand words. Take professional quality images of your home. There is an abundance of online listings — do what you can to make yours stand out (for all the right reasons). Work with a CENTURY 21® Affiliated Sales Associate to write your listing and create a seller marketing plan. Recommended Reading: Picture Perfect: How to Take Great Photos of Your Home, Creating a Marketing Plan
Upgrade Your Curb Appeal: The outside of your home is the first area a potential buyer will see. Spruce up your yard and exterior. Add a fresh coat of paint, new landscaping, a new mailbox, and more! Recommended Reading: 7 Essential Curb Appeal Tips for Sellers
Clear Clutter: Getting rid of clutter may make your home appear larger and more appealing to buyers. Donate usable items, and get rid of items that are unusable. Once you’ve paired down, get organized so everything looks neat and tidy.Recommended Reading: 7 Easy Ways to Organize Your Home
Make Your Home Feel Larger: Little tricks like using light paint colors, incorporating mirrors, adding extra lighting, and sticking to a monochromatic color scheme may make your room appear larger. Make some home decor and home improvement changes before your open house. Recommended Reading: 10 Secrets for Making Your Bedroom Feel Larger
Accomplish Home Improvement Projects: Pick up a hammer and nails, and complete some home upgrades. Before you get started, make sure you’re notimproving something too much. It’s not an oxymoron, we promise. Recommended Reading: Cents and Sensibility: 5 Mistakes That Could Decrease Your Home’s Value,Top 5 Best Home Improvements for Sellers in 2015
Avoid Common Seller Slip-Ups: Learn from someone else’s mistakes. CENTURY 21® Affiliated Sales Associate, Ann Weaver, shared some of the most common mistakes she’s seen sellers make. Hint: Home condition, marketing, and open house times all made the list. Recommended Reading: The 5 Biggest Seller Mistakes
Ace Your Open Houses: An open house is a key component of the home sale process. You want your open houses to run as smoothly as possible. Avoid these common errors. Recommended Reading: Open House Oops: Don’t Make These Mistakes, Do This, Not That: Tips for Staging Your Home
Set the Price: Setting a price can be tricky. You don’t want to price too high or too low. It’s helpful to research, listen, and compromise. Recommended Reading:Setting the Price, The Sale
What are you waiting for? Start today. You may find that you have a smoother (and speedier) home sale process as a result.
You probably have a laundry list of projects you’ve been meaning to complete around your home. Luckily, there are tips to help you complete some of these tasks in ten minutes or less. Your home can feel more organized (almost) instantly.
Organize your kitchen pantry: Start by sorting out expired items. Now organize your shelves by function. Separate snacks, baking necessities, spices, and more. Take inspiration from your favorite grocery stores. This ten minute task can save you time when you’re cooking your favorite recipes or making a quick midnight snack. As an added bonus, it reduces the chance of adding salt instead of sugar or vice versa.
Make natural cleaning products: Skip the store. Make your own cleaning products using things you probably already have on hand. You can save money, have a clean home, and be more environmentally friendly. Get started by making these natural cleaning solutions.
Organize your closet: Set a timer and organize your closet for ten minutes. We recommend organizing by color, type, or function. For example, hang all shirts, jackets, sweaters, skirts, pants, and dresses with each other. You will probably end up saving time in the long run, because it will be easier to find what you’re looking for.
Peeling wallpaper: Put a drop of wallpaper paste on a sheet of paper, rub the paper on the underside of the exposed wall, then press the peeling wallpaper against the glue. Smooth any bubbles out with a clean cloth and the wall can look as good as new!
Sliding glass doors or windows: If your glass fixtures are not sliding as smoothly as they should, spray a cloth with silicone lubricant and wipe it along the tracks. It’ll make it easier to get some fresh air.
Get off your computer, turn off the TV, and get started!
What would you do if you had an extra room in your house? Get creative because the possibilities are limitless.
- Home Gym: Do you love to start your mornings with a good workout, but hate dragging yourself to a crowded gym? If you have some workout machines at home, transform your spare room into a gym. Even if you just buy some weights, a yoga mat, and other inexpensive equipment, you can turn your unused room into something useful.
- Playroom: If you’re tired of tripping over your kids’ toys in your nice, fancy living room, turn that extra room into their own space. Paint the walls with chalkboard paint so they can write on the walls, store all of their toys in the room, and allow them to play. They’ll love a space of their own, and you’ll love not having a mess all over the house.
- Contemplation Room: Ever just need some time alone with your thoughts? If you find yourself wanting to escape the craziness of the day and not knowing where to go, consider creating a contemplation room. Decorate it in all white with comfortable furniture, throw pillows, and blankets. This creates a serene space where you can go to clear your head, meditate, and relax.
- Library: If you’re a bookworm, you’ve probably always dreamed of having your very own library. Now is your chance! Install bookshelves from wall to ceiling, add comfortable, sophisticated couches, and throw in cozy area rugs to make a comfy and inviting space. Just imagine relaxing after a long day in your library with your favorite book, a cup of tea, and candles.
- Entertainment Center: If you don’t have a den or finished basement, and only a formal living room, you may want to consider turning the spare room into an entertainment center. Use dark woods and deep colors, reclining chairs and a sectional couch, and top it off with a flat screen television for the perfect movie theater feel. It can be a great place to have a movie marathon on a rainy day!
Having a spare room in the home leaves you with countless opportunities to be unique and create a special room that’s all your own!