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  • 5 Common Closing Day Surprises and How to Deal

    I was thrilled when the sellers accepted my offer on a tear-down lot in McLean, VA, the perfect place to build my own “Downton Abbey”–style manor. And the deal went forward without a hitch—that is, until closing day.

    Soon after I arrived at the title company’s office on the big day, my real estate agent sheepishly handed me a set of 40-year-old covenants that restricted what I could build on the site. Looking back, I know that I should have smiled politely at the six people gathered and suggested we reconvene later after I’d studied this giant wrench in my plans. But I didn’t want to inconvenience everyone, so I closed the deal.

     It was an agita-inducing mistake. Even though those covenants didn’t derail my dream home’s construction, they caused me constant anxiety.

    This is not just a concern for those building a home from scratch: For many home buyers, closing day is daunting, and coping with last-minute surprises can be tricky. Some problems are minor and easy to solve; others can wreck a deal. So which are which? Let’s take a look.

    Ugly walk-through revelations

    The dreaded walk-through is the top reason for surprises on closing day, and for good reason: This final inspection of the home happens the day before your settlement—or even the morning of—so there’s little time to prepare for whatever problems might pop up.

    Who knows? A sudden storm could have poured water into the basement, or now that the furniture is all gone, cracks in walls or other flaws may be exposed.

    How bad is it? If the problem is serious, like flooding, you should definitely proceed with caution. To avoid this snafu, make sure to inspect a home as thoroughly as possible before your final walk-through to avoid last-minute surprises.

    Don’t be shy about asking for another look-see after a big storm to vet for dampness or flooding. But a last-minute discovery of a problem is not necessarily a deal breaker. Just ask the seller to cover the cost of those repairs, and put the funds in escrow. Be sure to come with estimates from professionals on how much those fix-its will cost.

    What stays, what goes

    Another common issue that crops up during the walk-through is misunderstandings about which items get transferred with the sale. For instance, maybe you loved the seller’s antique stove, ceiling fan, or other household item and assumed it would stay—but you find out the sellers took it with them.

    How bad is it? Unless you’re really attached to the item, you may want to let this one slide if you want this deal to go through. The easiest way to avoid these misunderstandings is to delineate in a contract what remains in the house or must be moved out, says Ben Niernberg, executive vice president of business development at Northbrook, IL–basedProper Title, LLC.

    “Be very detailed on what’s staying and going,” he says. “Washer, dryer, ceiling fans, fixtures, appliances—be diligent during your initial inspection.” Also, make sure the contract reflects your expectations.

    Credit challenges

    Even though you were probably approved for a mortgage a month or so earlier, even small changes in your financial picture since then can affect your credit score and create problems up to the moment you close on the property. Changing jobs, applying for a credit card, falling behind in paying bills, even sudden infusions of cash can red-flag your deal.

    How bad is it? Pretty bad. If a lender withdraws the offer, you won’t be able to close until you secure another mortgage, which could take weeks. Or, if the lender wants to increase your interest rate, as it usually does in these situations, then you’ll have to decide if you can still afford the purchase.

    To head this issue off at the pass, contact your lender the day before closing to discuss and solve any issues that may have turned up. Also, try to avoid making any sudden financial moves in the weeks leading up to the close, like quitting your job or receiving a $10,000 “gift” from a family member to help out with home buying—that could, ironically, throw a wrench into the process.

    Money transfer misunderstandings

    On closing day, the chief order of business is to transfer funds. Some financial institutions and title companies prefer cashier’s or certified checks; others want funds to be transferred electronically. Show up with the wrong paperwork or account numbers, and you’ll be left scrambling.

    How bad is it? This misunderstanding should be nothing more than a speed bump. To avoid it, ask your agent and lender before closing what form of payment is required. Also bring your checkbook to pay for small items that might crop up, like an unpaid electric bill.

    Title trouble

    A title company—which confirms details about your property such as past ownership, liens, and the aforementioned covenants—could bring up issues on closing day. If that happens to you, don’t be afraid to step back and insist on taking time to digest any details, problems, or stipulations attached to the property.

    How bad is it? It depends on what the search turns up. Some problems, like tax liens or a claim on the property from a relative or co-owner, can postpone a closing. Other things, like the covenants I mentioned above, or unpaid HOA dues, may be surprises but not deal breakers. But any and all title defects must be fixed before you can close on the property. It may be frustrating, but when you leap into homeownership, it’s always better to be safe than sorry.

  • 7 Hidden Costs of Selling a Home

    Ready to put your home on the market? You’re probably already picturing the dollars pouring into your bank account—after all, home prices are rising in many markets across the country, and odds are pretty good that your home has appreciated over the years. So it only makes sense that you’d stand to make a profit, right?.

    But what’s easy to forget is selling a home costs money, too—sometimes a lot of money. This is what’s known as a reality check.

    There are some obvious costs you’ve probably anticipated, like commissions to the listing and buyer’s agents (which typically amount to 5% to 6% of your home’s price). But there is also a variety of smaller expenses to factor in. Here’s where your money might go, how much you should expect to pay, and some real ways to curb these costs.

    Repairs

    If you’ve let your home’s maintenance lapse, you may need to hire a handyman or a general contractor (depending on the nature of the work) to get your property ready to put on the market. This isn’t the time to cut corners.

     “If you cheap out, buyers are going to catch shoddy repairs during the home inspection and you’ll wind up paying more money than if you had used a good handyman the first time,” says Michael Lyons, a real estate broker in Hollywood, FL.

    Walk through your home, and draw up a list of noticeable problem areas such as rotted wood, cracks in the ceiling, or chipped paint. These may seem like minor issues, but they’re worth fixing.

    “If buyers see small issues, they could assume there are bigger problems beneath the surface,” Lyons explains.

    In terms of making major repairs, you’re probably better off lowering the listing price—or giving the buyer a credit at closing—instead of doing the work yourself, says Lyons. Replacing a roof, for example, costs on average $20,142, but offers only a $14,446 resale value—meaning you’ll recoup only 72% of the cost, according to Remodeling magazine’s 2016 Cost vs. Value Report.

    Professional photographs

    Four in 10 home buyers start their search by looking at properties online, according to the National Association of Realtors®’ 2015 Real Estate in a Digital Age Report. And photos are overwhelmingly viewed first, according to a study by Old Dominion University. Therefore, it’s worth paying for a professional photographer. Granted, it would be cheaper to let your agent take pictures; so, if your agent offers this, look at photos from her previous listings to gauge the quality of the work.

    While the cost varies by area and the size of your property, you can expect to pay $500 to $1,000; to find a photographer in your area, go to smartshoot.com/real-estate-photography.

    Landscaping

    Curb appeal is what gets buyers in the door—and improving your landscaping can raise your home’s value by up to 12%, according to research from Virginia Tech. While prices vary, the average cost of a full-on landscaping job—flower beds, plants, trees from scratch—is around $3,239, according to HomeAdvisor. That said, you can save on these costs by doing at least some of the work yourself.

    “Go to your local Home Depot and pick up new mulch and seasonal flowers to give the exterior a pop of color,” Lyons recommends. Take the time to remove weeds, trim hedges, and (of course) mow the lawn.

    Staging

    Buyers need to be able to visualize what it will be like living in the home. Hence, staging—where you hire a professional to arrange furniture and other items in a home to make it more appealing—is a good idea. If you’re selling a vacant home, Lyons says staging is a must.

    Staging services and prices range widely, but a 2015 NAR survey pegged the median cost at $675—and one-third of buyer’s agents said they believe staging a home increases the price that buyers are willing to pay by up to 5%. Don’t have much left in the budget?

    “Just introducing small items, like a bowl of fruit in the kitchen or towels and candles in the bathroom, can entice buyers,” says Lyons.

    Utilities

    If you’ve already moved into your new home, you’ll want to pay to keep the electricity on while your property is on the market.

    “No buyer wants to walk into a hot or cold house, or a house that’s pitch-black,” Lyons says. Also, if you turn off the air conditioning during the summer, you’re putting your home at risk for mold, says Lyons—and mold remediation costs on average $2,158, according to HomeAdvisor.com.

    Capital gains taxes

    If your home has appreciated a lot, you may have to pay capital gains tax. This tax is based on the difference between your home’s purchase and selling prices, minus the value of documented improvements such as an addition (but not maintenance such as a roof replacement). So, if you’re in a hot market and your profits are substantial, Uncle Sam may take a small chunk when April rolls around.

    The good news is, this rule comes with substantial exemptions. If you’re selling your primary residence as a married couple filing taxes jointly, you can exclude up to $500,000 of profit from the sale of your home; if you’re single, it’s $250,000. Talk to your accountant or a tax preparer for more information.

    Closing costs

    Closing costs will likely be your second-biggest expense behind commission fees. You can expect to spend roughly 2% of your home’s sale price, says Keith Gumbinger, vice president at mortgage information resource HSH.com.

    The buyer typically chooses the closing company, and closing costs tend to be fixed, including transfer taxes, mortgage processing fees, escrow fees, and notary fees. You’ll also pay at closing any outstanding property taxes, a prorated share of the water and sewage bills (depending on when you sell), and the remainder of your mortgage.

    Yet you may have control over a few closing costs, says Gumbinger. If you hire a real estate attorney to oversee your side of the transaction, it’s worth shopping around to compare rates. You might also be able to avoid a $100 to $200 reissue fee for the title search if you can provide a copy of your policy.

  • Tricks to Banish Bad Smells From Your Home—Forever

    Even if your house looks immaculate, there are few things that will exterminate (with extreme prejudice) any kind of positive first impression than an off-putting smell. Whether it’s eau de cat, last night’s attempt at Nepalese cuisine, or just an overall mustiness, bad odors are bad news—especially if you’re trying to sell your home. After all, as Debra Johnson, a home cleaning specialist with Merry Maids, points out, “If you enter a home and immediately encounter a smell, that is generally all people focus on, and all they will remember.”

    Banishing bad odors, however, isn’t as easy as dusting toe kicks. Certain scents are hard to remove—the more so when you’re so used to them, you become “nose blind” and don’t even notice. So for starters, you may have to ask people you trust (or your Realtor®, if you’re selling) to tell you honestly whether they’re picking up a whiff of anything weird. And if the answer is yes, we’ve got some tips and techniques for you.

    Learn how to banish these common smells from your home.

    Pet pee

    The odor of cat urine, in particular, is so obnoxious and persistent that people have actually sued former homeowners for not disclosing it. The odor might be successfully masked during showings, but reemerge once the new owners move in.

     Luckily, there are sprays with enzymes that break down odor molecules to remove the stench. The trick is to soak the spot with the enzyme spray, letting it seep down into carpet pads and floors.

    If that doesn’t work, you may have to pitch the rug or replace a section of flooring, but not necessarily the whole thing. Cats and dogs are creatures of habit when it comes to doing their business, so replacing just that area may do the trick.

    Yesterday’s dinner

    Open windows and set the range hood fan on high while you’re cooking fish or other pungent items, then clean pans and utensils immediately. If odors still linger after dinner, set a shallow bowl filled with white vinegar or coffee grounds on the counter to absorb smells overnight. Another tip: Close bedroom and closet doors before cooking fish so clothes and linens don’t absorb the smell.

    Pungent paint

    A cut onion can neutralize paint smells that can otherwise make your house reek for days. Before painting, peel a large onion and slice it in half. Place each half on a dish and position them in opposite ends of the room. After the onions absorb the paint fumes, wrap and toss. And don’t worry; the smell of the onion won’t linger for more than an hour, tops.

    Lingering garbage

    Even after you’ve pitched out the garbage, those cans hold traces of trash. The best way to banish the smell is to wash out the can. Then, make an odor-eating sachet: Place some coffee grounds, a couple of tablespoons of baking soda, and a few cloves in the center of a coffee filter. Close with a rubber band or twist tie, then place in the bottom of the can, beneath a clean trash bag.

    Whatever’s in the kitchen sink

    Whenever you smell a foul odor near your sink, check your drain and garbage disposal, where rotting meat or produce can become stuck and create a major stink. To deodorize the grinder, place two or three slices of lemon or orange in the disposal, turn on the water, and flick on the switch. More things you can grind to remove disposal odors include ice combined with rock salt, white vinegar, or good ol’ mouthwash.

    Mustiness

    If your home smells musty, you may have a mold problem that only a professional can wipe out safely. To prevent mold, the trick is to control your home’s humidity so that mold spores don’t have a chance to multiply.

    “By keeping a home’s indoor humidity to a range of 30% to 60%, homeowners can discourage mold and mildew,” says Ryan McLaughlin, a project manager at 1-800-WATER-DAMAGE. You can purchase a hygrometer, which reads the moisture level in the air, for about $10. If it reaches a mold-friendly level, try the following techniques to dry indoor air.

    • Turn on bathroom fans during and after showers to remove the moisture. Keep the shower door open to dry out the stall.
    • Open windows, if your bathroom has them, to create cross-ventilation and increase air circulation.
    • Buy a dehumidifier to remove air moisture. If you can stretch a hose from the machine to a drain, you won’t have to empty buckets of water each day.
    • Fix plumbing leaks to prevent standing puddles.

     

  • Millennials Changing Face of America, Heavily Impacting Homeownership, Say Experts

    WASHINGTON (May 13, 2016) — Millennials are bucking trends, changing the landscape of America, and sharply different from previous generations in many different ways. One of the most visible and consequential ways is through millennial homeownership numbers, according to experts on generational trends and homeownership presenting at the 2016 REALTORS® Legislative Meetings & Trade Expo.

    While all generations have their own hardships, opportunities and defining features, millennials are coming of age in a time of deep demographic transformation, experts say. In a session titled "The Minds of Millennials—Motivation, Mobility and Making  Home," moderated by National Association of Realtors® Chief Economist Lawrence Yun, panelists discussed what the shift means for the American way of life.

    "America in the near future will look nothing like the America of the past," said Paul Taylor, executive vice president of the Pew Research Center and author of the book "The Next America: Boomers, Millennials, and the Looming Generational Showdown". "These shifts are creating big generation gaps that will put stress on our families, our politics, our pocketbooks, our entitlements programs and perhaps our social cohesion."

    Millennials, Taylor said, are different from their parents and grandparents in ways that are already impacting all aspects of life. For example, he noted that millennials (those born after 1980) are less religiously affiliated and slow to marry and have kids. They grew up with cell phones and on social networking sites while also obtaining a high level of education, but are still struggling financially because of the economy. Politically, half of the generation identifies as independent, more than ever have before. While seemingly small differences, these characteristics have very real effects on homeownership. After all, he noted, 39 percent of millennials are still living with a parent or relative, citing the record share of young households holding student debt.

    Jessica Lautz, managing director of survey research at NAR, agreed that homeownership among millennials is taking a hit. Student loan debt, flat wages, rising home prices (making it harder to get into the homeownership game) and rising rents (complicating the saving process), are delaying milestones such as marrying and having children - major events in life that often cause young people to buy a home.

    The real estate industry is already feeling the impact of these factors on millennials in regards to home buying.  First-time buyers have in the past accounted for about 40 percent of homebuyers; however, NAR data show that number has trended downward since 2011 and currently sits at 32 percent. And while married couples are the largest group of buyers (currently 67 percent of all buyers), single females make up the second largest group of buyers, and that share has also dropped from 22 percent in 2006 to 15 percent in 2015.

    Still, one big thing hasn't changed, according to Lautz. "Even with all these statistics showing how things have changed for millennials and the fact that they are worse off financially than previous generations had been, the median age of first-time buyers has stayed relatively unchanged at 31," Lautz said. "This means that they are ready and willing to buy if they can in fact break into the market. It's getting more difficult to get to that point, but the desire to do so hasn't changed."

    And while the path to homeownership is harder now for millennials carrying student debt, dealing with rising rents, and experiencing stagnant wages, NAR research shows that millennials still see the value in owning and home and once they are ready, they are looking to a real estate agent in higher numbers than ever before.

    "We are seeing that millennials are using agents at much higher rates," Lautz said. "You might assume that they would prefer to take on a purchase or sell on their own, being raised in the digital age, but instead, we have found that these buyers and sellers want someone to help them through the process, not unlike the way their parents have helped them through their young adult life. Not having been through the process before, they rely on real estate agents to get them through the competitive market and to the finish line."

    The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

  • So You Wanna Sell Your Home? Step 9: Move on Out!

    Well, dear home sellers, we’ve come a long way—together! From the first coat of paint you used to freshen up your house’s trim to the stress of wrangling your way to a deal, we’ve been with you every step of the way. Now you’ve made it to the final hurdle of selling a home: moving on out!

    Don’t worry, this is the easy part. But, as with the previous eight steps, you want to do it right—and that’s why we’re here to help. With this final installment of our Home-Selling Guide, we’ll get you through the last leg of your journey without a hitch.

    Get your timeline in order

    Once the paperwork is signed at closing, the buyers will officially own the house … and you won’t. That means that, technically, if you or your stuff is still there after the close, “the buyer could evict you,” says Joshua Jarvis, founder of Jarvis Team Realty in Duluth, GA. So make sure to have your exit strategy in place!

    Still, most buyers will understand if you need a bit more time and have a legitimate reason—like if you can’t move until the weekend due to your work schedule. Just be sure to discuss these issues as soon as possible before the close, so your buyers can plan accordingly.

    Decide what to leave behind

    To make sure you’re leaving behind everything the buyer wanted—and that you agreed to—double-check the closing documents. There should be an itemized list of what comes with the house. And even if the buyers didn’t formally request them, it’s just good form to leave certain types of things behind.

     Such as? “Generally speaking, you should leave anything that’s bolted to the wall,” says Jarvis. “Some homeowners want to take their fans and blinds to the next home, but generally if it’s screwed in, it stays.”

    Also, if you and the buyers agreed to transfer any services—such as alarm monitoring or pest control—be sure to set that up before you go. Leave the buyers a detailed note in the house, or ask your agent to get in touch with theirs to make sure the transfer goes smoothly.

    If you do inadvertently take an item that the buyers had requested, they have the right to ask for it back—and they could potentially sue you in civil court for the cost of a replacement. So, when in doubt, feel free to check with the buyers before you grab and go.

    But don’t leave anything else behind

    Just as important as what you leave behind is what you don’t. Your buyers have a right to move into a home that’s been cleared of furniture and other movable items they didn’t expressly request.

    “Some folks leave all kinds of unwanted clothes, furniture, paint cans, and other items, thinking they are helping the buyers,” Jarvis says. If you truly think your buyers might love to have your old planting pots or kiddie equipment, go ahead and ask—but please don’t assume they’ll welcome your leftovers.

    Even if you’re careful, you might forget something—at which point the buyers may contact their agent to get it back to you, but they also have the legal right to just keep or get rid of it. So double-check areas (e.g., the attic, garage, basement, storage shed, kitchen, and bathroom drawers) where people commonly overlook items.

    Clean up

    It’s common courtesy to leave the place not only clear of your possessions, but also clean. However, that doesn’t mean you have to leave it immaculate. “Generally, you shouldn’t have to pay to have it deep cleaned,” Jarvis says.

    In most cases, a simple broom-clean will do. That means wiping down the countertops, cleaning out drawers, sweeping or vacuuming all the floors, and giving the bathroom and kitchen appliances a once-over so the new owners aren’t grossed out when they arrive.

    Wait! Are you forgetting anything?

    Before you close the door for the last time, run through a quick checklist. Did you eyeball every room for stray items? Have you forwarded your mail and turned off the utilities? Is the water running in the pool? Have you left behind incriminating evidence of a capital crime? (We’re kidding on that last part … we think.)

    We all get in a bit of a rush even in the best planned moves, but you won’t be able to get back in, so it can’t hurt to do a final run-through.

    Once you’re ready, it’s time to leave. You can drop a line to your Realtor® to let her know you’re out, although it’s usually a courtesy more than a necessity. If you’re feeling truly gracious, feel free to leave a note, card, or bottle of bubbly congratulating the people who’ve inherited your former home. Given all the fond memories you’ve built between those walls, wouldn’t it be nice to start the home’s new owners off on the right foot?

    And buy yourself some Champagne, too. Make it the good stuff—you’ve earned it.

  • So You Wanna Sell Your Home? Step 8: Head to Closing

    The good news: You’re almost home free (or free of your home in this case). You’ve accepted the buyer’s offer, the negotiations are finally winding down, and there is only one more little box to check: closing.

    OK, so maybe it isn’t a little thing. And maybe you’re a little worried something is still going to go wrong, but that’s why we’re here! In this eighth installment of our weeklyHome-Selling Guide we will show you how to get through closing without a hitch—or barely a hitch (hey, stuff happens).

    Get the repairs done

    First things first: You’ve got to get those repairs done. We get it—the last thing you want to do now is work on a house you are about to sell. But if you agreed to make repairs or improvements, don’t put them off until the last minute.

    “Some sellers do try to get cute and wait until the day of closing, but they really should do all the repairs at least a week before closing,” says Joshua Jarvis, founder of Jarvis Team Realty in Duluth, GA. Getting things done ahead of time will give you plenty of wiggle room if something should still go wrong, or if the buyer finds a problem during the final walkthrough (more on that to come).

    So check the approved offer, make a note of any repairs you and the buyer agreed on, and get to it—and don’t forget to cover yourself. Save receipts from items purchased and invoices from contractors, and take before and after photos of any work completed. You will have proof that repairs were completed on the off chance that the buyers contest them during the walkthrough or at closing.

    The final walkthrough

    Before your closing date—often 24 hours before—the buyers and the buyers’ agent will do one more walkthrough of the house (for which you should not be present). They will go through every room of the house, inside and outside—a process that typically takes about a half hour. Some buyers will go into detail, testing every light switch. But in most cases, the buyer is just looking to make sure agreed-upon repairs were made and no new issues have crept up before closing.

     “Buyers are basically looking for anything unexpected in the home,” Jarvis says. “Say, for example, there was a rug covering a problem area.” (Not that you would do that, you awesome seller, you.) If the buyers do find an issue, you may have a chance to fix the problem ahead of time.

    “In most cases, the seller would be notified immediately after the walkthrough,” Jarvis says.

    If the problem is big enough, you may have to delay your closing date to give time for the repair. But that only happens occasionally. Often, the buyers will take a trade.

    “Many times, the buyers ask for money instead,” Jarvis says. But once the documents are ready to go, the terms usually can’t be altered to include the new amount, and that is where the trade comes in. “You typically see gift cards or appliance trades [added to the deal],” Jarvis says.

    The closing

    Many closings go smoothly. By this point, the buyers are excited to get into their new house, agreed-on repairs have been made, and the sellers are ready to get out. If things are going smoothly, the closing for you might boil down to a blur of paperwork. “The sellers sign eight documents and will have to sit through an hour and a half of watching the buyer sign,” Jarvis says.

    Unless problems creep up—or the buyer wants to negotiate further—you only have two jobs: waiting and reading documents. Some are worth perusing more than others. For example, make sure you pay close attention to the settlement statement. “There are other documents you’ll need to sign like a warranty deed or ‘Don’t sue the attorney’ documents, but the settlement is the most important,” Jarvis says. It includes the money you’re making on the sale, plus tax implications. Make sure to check that these numbers jibe with what you’ve been told and were expecting—and if not, pull your real estate agent or attorney aside and point them out.

    Last-minute drama

    So what if things aren’t going smoothly? What if the buyers want to negotiate again? The buyer has the right to hash out concerns up until the time they sign the final document and take possession of your house. It makes sense to at least hear them out. After all, you’ve come this far.

    If the buyer is negotiating for something you can solve without amending the terms (say, for example, you can offer up the washer and dryer in the house), you’ll probably be able to hammer those details out at closing.

    But if you and the buyer have negotiated a lower price at the last minute, you may have to delay closing.

    “Big changes just mess the whole thing up,” Jarvis says. “For example, a seller could say, ‘I’ll drop the price by $2,000.’  There’s an amendment that needs to be done and the the loan would have to be rerun,” Jarvis says. That could take anywhere from one day to a week, depending on the bank’s turnaround times.

    Once the negotiations are handled and the papers are signed, the buyers’ funds are transferred to your attorney, who will handle the payments to cover your loan and pay your real estate team. Thankfully, this part is handled by someone else.

    And then comes the best part: You’ll get a check for the remainder, usually the same day in most states.

    In our next (and final) installment, we’ll cover the last step: Officially moving out and moving on!

  • So You Wanna Sell Your Home? Step 7: Get Ready to Close

    Hooray! You’ve found a buyer for your home. You’re done, right? Right?

    Not quite. All you have to do now is get yourself—and your house—ready to close, and we’re here to help, with this week’s installment of our weekly step-by-step Home-Selling Guide. Let’s dive in!

    Earnest money

    When the buyer makes an offer on your house and you accept, the buyer will write you a check for a deposit known as earnest money. Everyone at some point gets a bit puzzled by earnest money. It comes down to a simple idea: This is money you put forward that proves that you are earnest about your intentions to move forward on the deal. These funds are held by a third party until you close the deal; on average, buyers pay about 1% to 2% of the offer amount.

     If the deal goes through, the earnest money becomes part of the buyer’s down payment (or full cash payment). If the deal falls through because you’re unable to meet the buyer’s contingencies (for example with the inspection or appraisal), that money gets returned to the buyer. Usually. However, if buyers back out just because they randomly change their mind, you get to keep that money for all the hassle—consider it a hefty consolation prize for having to put your home back on the market.

    The seller’s disclosure

    As soon as you accept an offer, you will need to supply the buyer with a seller’s disclosure—basically an itemized list of any problems with the house or surrounding area. But how much do you have to disclose?

    It all depends on your state laws. The legal site Nolo.com has a list of disclosure laws for various states, and your agent can also provide you with the requirements for your area. Generally, expect to dish the dirt on:

    • Basic information about the house, like the age or utility costs
    • Structural problems, like the condition and age of the roof
    • Environmental issues, like if the property is located in a flood plain
    • Known issues, like flooding in the basement

    Even if your state doesn’t have strict requirement rules, you can also disclose more than the minimum, and it may make sense to do so. “I always advise sellers to include as much information as possible,” says Cathy Baumbusch, a Realtor® with Re/Max Executives in Alexandria, VA. It sounds counterproductive—after all, you don’t want to scare the buyer away—but withholding information could come back to haunt you. Like poltergeist-level haunting.

    After all, the seller will find out sooner or later, so it’s best to be up front.

    The inspection

    Unless you’ve sold the home “as is” (and sometimes even if you have), the buyer will want an inspection on the home. The inspector’s job is to look for problems  like:

    • Roof damage
    • Structural problems
    • Plumbing problems
    • Fire hazards like bad wiring or improperly working chimneys
    • Major appliance and HVAC issues

    Since the buyers hire the inspector, the report will go to them. If they spot anything amiss, trust us, you will hear about it, as it may become a negotiation point you’ll have to work out before you close.

    Basically, the buyer may want some repairs done after reviewing the seller’s disclosure and conducting the inspection. The repairs have to be legit problems (the buyer can’t just walk because the stove is outdated). “You may be asked to get it repaired, or give the buyers a credit so they can pay for repairs themselves,” says Baumbusch. While fixing it yourself may seem cheaper, it’s faster to offer a credit, so be sure to consider what a delay would cost you.

    The appraisal

    If your buyers are getting a mortgage, they will also have to hire an appraiser. An appraiser is similar to an inspector, in that he comes to your house and checks it out, top to bottom. Only the purpose is different: Rather than looking for problems and repairs, an appraiser is trying to estimate what your home is worth, so that the lender knows the investment is sound. To do that, the appraiser will not only size up your home in person but check out the sale prices of comparable houses in your neighborhood (much as a Realtor would do for you). If the appraiser’s price matches the one your buyers are paying (or even if it’s higher), all is good.

    But if the appraisal comes back lower than the asking price, it may become a problem. Typically, lenders won’t loan buyers anything above the appraisal amount. The buyers have two choices: Pay cash for the difference, or negotiate a lower sale price with you. If they choose the latter, you’ve got two choices, too: Accept the lower home price, or walk. To decide, ask yourself: How easy would it be to find a new buyer? If you were deluged with offers, it may be in your interests to move on, but keep in mind that you might run into the same problem with subsequent appraisals. So unless you’re confident your home is worth more and you’re willing to head back to square one, you may want to take a hit just to keep moving forward.

    Next up? The close. Hallelujah! We’ll tell you what you need to know about that next week.

  • So You Wanna Sell Your Home? Step 6: Strike the Right Deal

    Once your home is finally on the market and listed, it’s showtime. Will you be deluged with offers, or will your home be pervaded by the lulling but ever-so-unnerving sound of crickets?

    And if you do get just one or two offers, and they’re not as high as you’d hoped, what do you do? What do you do?

    Never fear, dear sellers—that’s why we’re here! In this sixth installment of our weekly 2016 Home-Selling Guide, we’ll show you how to navigate the negotiation process and come to a deal that will make you happy. More than happy, even.

    Getting those offers in

    If you’re not in a rush to sell your house, it may make sense to see what offers roll in over a few months. But if you need to sell quickly (or just don’t want to wait), your agent might be able to push things along by setting a deadline—usually within a week or two of listing.

    “When you expect multiple offers because your price is competitive or your home is in a popular neighborhood, you should always set a deadline,” says Cathy Baumbusch, a Realtor® with Re/Max Executives in Arlington, VA. But you’ll need to be confident that your home is priced right, relative to its appeal. If all goes well, you can sell for over asking.

    Reviewing your first offer

    Once you have an offer in hand, you’re probably scanning for one thing: the price.

    “In our area, houses rarely sell for less than 90% to 95% of the asking price,” Baumbusch says. The offers on your home should fall in that range, but don’t rely on price alone. According to Baumbusch, every offer has five important components:

    • Price
    • Closing assistance
    • Closing date
    • Buyer financing
    • Contingencies

     

    Some offers may seem great on the surface, but significantly less so once you dig in. For instance: Is the buyer asking for closing assistance? Often first-time buyers don’t have enough money to cover the down payment and the closing costs, so they’ll ask the seller to foot some of the bill—about 2% to 3% of the total closing costs is a common request. If you agree, any assistance you give will lower your bottom line, so factor this amount into the asking price.

    The buyer’s time frame to close may not seem like a big deal on the surface, but it can actually matter a lot, especially if you give the buyer a long leash. If the deal falls through, you’ll have to put the house back on the market and wait for more offers. On the other hand, if the buyer wants to move in right away, you might be left scrambling (and, quite possibly, temporarily homeless). Make sure the timing works for you.

    Good so far? Now make sure the buyer has financing. Hopefully, the buyer’s agent included a note verifying the buyer’s financing and how much the buyer will put toward the down payment and earnest money. The last thing you want is to accept an offer, only to find out afterward that the buyer can’t come up with the necessary cash.

    Finally, look over contingencies, which give the buyer the option to back out of the deal if something goes wrong. The buyer may say the final sale is contingent on an inspection, or he may want to move in early. Both requests are fairly standard and acceptable. But keep an eye out for buyers asking for too much. For example, “it would be over the line for a buyer to ask a seller to wait more than 30 to 60 days for the property to go under contract,” Baumbusch says.

    When to counter

    You always have the option to return the buyer’s offer with a counteroffer of your own.

    “You should always counter if the price is not what you are looking for, or if you can’t support the amount of closing cost help they are looking for,” Baumbusch says. But if you do, keep it reasonable. If the buyer was 15% below asking, he probably won’t go up to full asking amount. Consider being flexible with your price; you can always make it up in other ways. For example, submitting a counter with a slightly higher price and contingencies that may help you—like having the buyer waive an inspection to speed things along—might pay off in the end.

     If you don’t agree with the buyer’s contingencies, consider your position first.

    “If your home is in a popular area, [you] have an advantage,” Baumbusch says. Keep in mind, the buyer may not accept your counter outright. You can play Let’s Make a Deal, but always consider your bottom line. Is it worth it to keep countering for a small amount of money or single contingency? Don’t get trapped in a loop; consider the buyer’s side of things. These prospective buyers may be maxed out. To help you decide, ask your agent to call the buyer’s agent and hash it out it with them. Get some insight into the buyer’s state of mind, and whether he can budge.

    Once you’ve accepted an offer, it’s time to close. Scary, we know! But we’ve got you covered in the next installment.

  • So You Wanna Sell Your Home? Step 5: Create an Eye-Catching Ad

    Long before home buyers set foot in your place, declare with a flourish “This is the one,” watch the clouds part and the rainbows form, and make you a terrific offer, they have to know you’re selling it first. And it’s up to you and your Realtor® to spread the word. Only how?

    Look no further than this fifth installment of our weekly Home-Selling Guide, which will show you how to put together an attractive online ad that will win you plenty of admirers—and plenty of honest-to-God prospective buyers!

    Take great pics

    Online house shopping is a lot like online dating. Everyone will tell you they loved your bio, but really, they’re  just looking at the photos. To show your home in the best light, consider hiring a pro.

     “The photos the pros take just stand out over amateur snapshots,” says Darbi McGlone, a Realtor with Jim Talbot Real Estate in Baton Rouge, LA. A pro will be able to find the best angle, make your small half-bath look relatively palatial, and even touch up some of the photos to make them truly pop online. Ask your Realtor for suggestions, or look through the Real Estate Photographers of America and International.


    But if you (or your Realtor) want to take a crack at snapping some winning images yourself, we learned these tips from a professional photographer:


    Store away everything you can before you start shooting. Movable art, throw pillows, brightly colored small appliances, and other knickknacks might make your home look cozy and inviting to buyers in person, but those small items don’t translate well in photos. For your photos to look the best, you want to draw the eye to the key elements of the room—such as the fireplace or the huge bay window. Too much going on in each shot? Those eyes won’t know where to focus.

    Don’t use your smartphone. Let’s repeat this one: Don’t use your smartphone. This is your house you’re selling, remember? For the best shots, the camera and the lens matter. Aim for using a digital camera with HDR (high-dynamic-range mode) capabilities, and take photos with a wide-angle lens that can capture the whole room without making the space feel squished. “I’ve tried all the tricks, but unless you have a wide lens, you are wasting your time,” McGlone says. So invest, OK?

    Try shooting from every viewpoint imaginable—and then add a few more that you might not have originally imagined. Take plenty of shots of each room from every angle. To make rooms appear more spacious, crouch down and snap at knee level. Experiment.

    Edit and retouch your photos using software such as Photoshop—but remember, less is more. “I will brighten a photo if it looks too dark but never touch up so much that it is not realistic,” McGlone says. Stick to the basics and add just enough to enhance the photos, otherwise buyers may think you have something to hide. And most likely, you do.

    Write a winning description


    After the photos, buyers will read your listing details. At the top of your listing should be the basics: number of bedrooms and bathrooms and the square footage. Next come the stand-out features. “That includes things like interior exposed brick, a fireplace, an outdoor kitchen, or any upgrades,” says McGlone.


    While your Realtor will usually write your listing, you can (and should) have final approval. And it turns out certain words reel in buyers better than others. Here are five words correlated with a higher sales price, according to research featured in Freakonomics:


    Granite

    State-of-the-art

    Corian

    Maple

    Gourmet

     The reason these work: They’re specific. Granite countertops give you a good idea what that kitchen is like, as do maple floors. Terms that are vague or appear to be trying too hard will backfire. Below are five terms correlated to a lower sales price:

    Fantastic

    Spacious

    Charming

    Great neighborhood

     So keep an eye out for eye-roll-inducing adjectives that might very well turn off buyers.

    Build buzz on social media

    To get the word out, your Realtor will post your listing in the local multiple listing service, worldwide sites such as realtor.com®, and their own brokerage business website. To add to the potential buyer pool yourself, get to sharing. Social media isn’t only for pictures of cats and political opinions; you can find a buyer for your house, too.


    “These days you really have no choice but to smartly use social media to promote your listings,” McGlone says. After all, your friends and acquaintances will take a special interest in helping you out—make doing so just a click away. Even if they aren’t looking to buy, someone in their own network could be, so encourage your friends to share the post and pass it along. While Facebook is a tried-and-true favorite for posting listings, you can also use Twitter or photo-driven Instagram to great effect.

    Make sure to market offline, too

    Even in today’s Internet-obsessed world, you and your Realtor need to do some offline marketing as well. Remember those yard signs from seemingly bygone days? They may not be the reigning house marketing tactics anymore, but it’s still a good idea to let your Realtor pop one in the yard. A study by the National Association of Realtors® found that 48% of buyers still relied on yard signs to help their search.

    Bottom line: You never know which avenue will reach the right home buyer who will lay eyes on your home and fall in love. And all you need is love—however you find it.


  • So You Wanna Sell Your Home? Step 4: Pretty It Up

    Once you’ve made repairschosen a Realtor®, and decided on an asking price, your home is almost ready for market—but first, how about a little primping and polishing? Or maybe a lot of primping and polishing.

    After all, you want your home to make a great first impression on buyers—and that’s where this fourth installment of our weekly, step-by-step 2016 Home-Selling Guide can help. To show your home in the best possible light, heed these savvy seller tips.

    When you’re just living in your home, a bit of clutter is business as usual. You know the drill: video game cartridges in the bathroom, toolbox in the kitchen, tuxedo shirt inexplicably in the garage. But when you’re trying to sell, all this disorder can be deadly. That’s because clutter can make even spacious homes look cramped and dirty, distracting from substantial assets, says Darbi McGlone, a Realtor® with Jim Talbot Real Estate in Baton Rouge, LA.

     One way to help pare down your belongings is to go room by room, boxing up anything you haven’t used or worn in at least six months. What’s that you say? There’s nothing you’re not using? Try anyway. You’ll probably be surprised by the stuff you won’t miss. (Bonus: You’ll have less to move later.)

    One area where you’ll want to be merciless is your kitchen counter: Remove everything but your coffee maker, so people will think, “Wow, such a huge kitchen!” And to allow home buyers to really envision themselves living there, you’ll also want to pack up personal items such as the framed photos, report cards on the fridge, or your kid’s collection of “Star Wars” snow globes.

    But don’t just stuff those things in the closet.

    “Closets often end up being the dumping ground to store all the clutter that was visible,” says McGlone. “Which is never good, because closet space is an important buying consideration. You want potential owners to be able to see the true amount of space in each closet.” Instead, stack boxes neatly in the attic, basement, or, best of all, a storage facility—the perceived extra space you add to your home could be worth the rental cost and then some.

    Stage to sell

    These days, home staging is all the rage: On average, staged homes sell 88% faster and for a whopping 20% more than ones where home sellers just kept their furnishings in place. And while you can hire a professional stager, you can also cop a few of their tricks for free.

    For instance, hanging curtain rods higher can give the illusion of taller ceilings. Well-placed mirrors can make rooms appear bigger and brighter. Want to go the extra step? Paint your walls white, layer in neutrals, then add pops of color with pillows or a cashmere throw on the couch for a cozy glow.

    “I always think to move the furniture toward the walls to make it feel like there is more space,” McGlone says. Push furniture out and away from each other to open up floor space, but be careful to keep window space clear. Conceal flaws whenever possible; if the view out a window isn’t great, put up sheer curtains so the light comes in but the scenery stays hidden. And as with all your possessions, think “less is more,” although stagers do sometimes strategically add furniture (such as a cozy reading chair in a bedroom corner) to give the illusion of more space. Go figure!

    Boost your curb appeal

    Finally, it is time to take a hard look at the outside of your house. After all, that’s the first thing buyers will see when they pull up, so you’ve got to work that curb appeal hard.

    For starters, take a good hard look at the paint. If it’s looking dull or dingy, try power washing first. You can rent a power washer from most home improvement stores; a good wash can take off layers of dirt that make your home look shabby. Most professional paint jobs come with a 25-year warranty, and if you’re long past that, it may be time for a new coat. At the very least, slapping a coat of paint on your front doorwill give you the most bang for your buck—because that’s what buyers will see up close before they even knock.

    Paint aside, your yard also needs to be in order. Overgrown trees can make a home seem dark and creepy. If your trees are touching any part of your house, you should scale them back. If your front lawn is lacking in shrubs and flowers, add some. Even in winter, you can find hardy plants such as evergreen boxwoods and holly bushes. Also make sure your lawn is mowed, and if you have a pool that’s open, keep it sparkling.

    “A dirty pool will remind people how much upkeep there is, even if they asked for a pool,” McGlone says.

    Once you’ve gotten your home looking fantastic both inside and out, it’s time to break out your camera and spread the news that it’s up for grabs. Stay tuned next week to learn the ropes!

  • So You Wanna Sell Your Home? Step 3: List It at the Right Price

    Putting a price tag on a home you’re trying to sell is a tricky thing. For one, it’s your home, crammed full of memories, hopes, and dreams—and all that stuff can cloud your thinking and lead you toward the wrong price. There are consequences: Shoot too high, and your home could languish on the market for months and maybe not sell at all. Price it too low and you could bilk yourself out of a whole lot of dough.

    That’s why we’re here to guide you through this tough but critical decision (and all the others you’ll have to make) with our step-by-step weekly Home-Selling Guide. Read on to pinpoint a price that’s just right.

    Repeat after us: What you paid doesn’t matter

    You may have a dollar figure in mind—perhaps based on what you paid originally, plus a little extra. Because homes appreciate, right? Maybe yes, maybe no. While a hefty increase in value is nice in theory—and in general, it’s expected to be a seller’s market this year—“ultimately, it’s up to the market,” says Chandler Crouch, broker of Chandler Crouch Realtors in Fort Worth, TX.

    Think of it this way: Would you buy a banana for $1 if those same bananas were on sale down the block for 69 cents? Of course not! And, of course, a home ain’t no banana.

    No matter what you paid for your home, market values fluctuate—both up and down. This can work for you or against you. But all that matters on the open market is what buyers are willing to pay now.

    Use all your tools: Comps, AVMs, and your Realtor®

    The best way to get a handle on your home’s sales price are the prices of similarly sized homes in your neighborhood—otherwise known as “comparables,” or “comps.” For example, if a house near yours with the same square footage and numbers of bedrooms and bathrooms, and in similar condition, sold for $230,000 within the past three months, you can bet your own price will be in that ballpark.

     For a quick snapshot, several websites (including this one) offer automated valuation models, or AVMs, where you type in your address and then get a price based on an algorithm that factors in comps in your area. But AVMs are just a starting point.

    “No one has actually put eyes on your house, so an AVM can’t really give you an accurate price,” Crouch says. That’s why you need your Realtor to visit your home, so she can factor in your home’s unique strengths and weaknesses along with comps to come to a better estimate.

    When your Realtor tells you a price, check it. Ask her how she came up with the amount, and look into the comps in your area yourself. Once you’re able to pore over the info, Crouch says, “you’ll be able to see a price range for yourself, so you won’t feel like you’re just having to blindly trust your Realtor.”

    Factor in upgrades with a grain (or two) of salt

    Yep, you poured $10,000 into your brand-new chef’s kitchen, or $15,000 to install an in-ground swimming pool. Sweet! So it stands to reason that you’d make that money back when you sell, right? Well, not quite. Surveys by the National Association of Realtors® show that your return on investment for home improvements depends on what kind of renovation you’ve pulled off—and how much prospective buyers want it in your area. Refinishing hardwood floors, for instance, will reap a 100% return, paying for itself. Convert a basement to a living area, and you’ll recoup only 69% of those costs. The harsh truth: Not everyone is going to fall head over heels with your five-seat built-in hot tub.So do your research and find out what those upgrades will really get you.

    Leave some wiggle room

    Most buyers love to negotiate when you’re trying to sell your house. So it helps to “let them win one,” Crouch says. Instead of starting out with the absolute lowest price you can afford to go, add a bit of a cushion. How much? Crouch says you should round off your asking price in $5,000 increments. “It’s just how people think,” he says. So if you know you want $347,000 for your house, you can play it safe and round up to $350,000.

    Also keep in mind that many first-time buyers may have a hard time coming up with cash for closing in addition to their down payment, even if their finances are good and they’re qualified for a loan. Offering to cover closing costs—while sticking to a higher asking price—might help seal the deal.

    Price with Internet browsing in mind

    Once you find yourself a ballpark price you’re happy with, it’s time to fine-tune it. Keep shoppers’ online search parameters firmly in mind—small differences in your price can spell a big difference in your exposure.

    “Home buyers typically fill out a Web form that has a minimum price and maximum price,” says Crouch. “If you’re a dollar outside of that range it is going to be like your house didn’t exist—they’ll never see it.” In other words: Price your home at $300,000, and you could miss out on a whole lot of people who are searching in the $250,000–$299,999 price range. So if you’re on the cusp, consider rounding down to capture more eyeballs. Remember what we said about padding? It cuts both ways.

    Test the waters with a soft rollout

    While choosing a price can be scary, consider this one small loophole: Some brokerages offer a “soft” rollout plan in which they highlight the house as “coming soon” online, without officially listing the house in a multiple listing service. That buys you time to test the market, see if people will click at that price—then adjust accordingly without having to officially lower or raise your price on the record.

  • So You Wanna Sell Your Home? Step 2: Find the Right Realtor

    It’s the first month of 2016—a perfect time for blowing off your New Year’s resolutions, letting your brand-new gym membership gather dust, and, on a more positive note, preparing your home for sale!

    Last week, we introduced our 2016 Home-Selling Guide, a step-by-step weekly insider’s guide to the new rules of selling your home today. In this second installment, we’ll teach you how to find an essential partner in pulling off this most important of all transactions: a great Realtor®. Because not all agents are created equal. (They’re not even all Realtors.)

    Here’s how to find a Realtor who’s right for you.

     

    Gather referrals, but take them with a grain of salt

    There are a lot of agents out there. So how do you choose? Go ahead and ask your pals for referrals, but don’t fall into the trap of picking an agent purely because of rave reviews. The old mantra of location, location, location applies to real estate agents as much as homes.

    “You want a Realtor who is very familiar with your area—and not just what he can pull up online,” says Wendy Flynn, a Realtor in College Station, TX. The reason is simple: If they’ve spent time in the area, they’ll know how to market your house there.

    So a better question to ask your friends than “Know any real estate agents?” is, “Know a real estate agent who’s sold any properties in my area in the past few years?”

    Test their communication skills

    Once you have some potentials, email them or call their office, then sit back and wait. This is your first test of a key component: how responsive will your agent be? Ideally, she should get back to you that same day.

    “If it takes longer than four business hours without a decent explanation, I would be cautious,” says Chandler Crouch, broker for Chandler Crouch Realtors in Fort Worth, TX. Imagine if you’ve got competing offers on the table, or if some problem comes up with the home inspection. You don’t want to wonder where your agent is and whether you’ll hear back from her!

     

    Probe their experience

    Your initial conversation with a prospective listing agent should be like any job interview: Don’t be afraid to ask the tough questions right off the bat. A good agent should know his stats, and any dancing around these numbers could mean he’s hiding something. According to Crouch, you should ask the following:

    • How long have you been in business? Aim for Realtors with at least two years of experience, enough time to learn the ropes and finesse their marketing and selling plans. Time (on the job) is  money (in your pocket).
    • How many houses did you sell last year? Look for agents with double-digit sales. “I wouldn’t consider an agent unless they had 20 or more sells a year,” Crouch says.
    • What percentage of your listings do you sell? Ideally you want an agent who has sold an average of 60% to 80%.
    • What is the average list price to actual sell price ratio for your listings? This can fluctuate by market, but you should still look for high numbers. “I would set a low bar of 95% to be acceptable for even the worst market conditions,” Crouch says.

     

    Assess their marketing skills

    Everyone knows that to sell a house quickly (and get the big bucks) you need to reach as many eyeballs as you can. And the way to suss out an agent’s ability to do that is to ask these questions:

    • How will you market my home? A Realtor should use at least a good brokerage website to showcase your listing, national listing portals such as realtor.com®, and an email subscription list.
    • How will you use social media? They should use at least Facebook and Twitter to market listings; they get bonus points if they post photos on Instagram.
    • What offline materials do you use? While most marketing is done online now, your Realtor should still make use of tried-and-true methods such as fliers, yard signs, and brochures, especially at an open house.
    • How much do you spend on advertising? “Don’t stop asking until you get a solid dollar figure,” Crouch says. Advertising costs vary widely by area, but Realtors should consistently spend a portion of their business expenses on advertising. By asking for a set amount, you’ll know if they’re doing that or not.

     

    Don’t shoot for cheap

    Finally, don’t assume the most inexpensive agent is the one for you. While agents work at different price points and some may take a lower commission, they should be confident enough in their abilities to stand by their prices, according to Crouch. So when you’re talking terms, he recommends asking agents if they’ll work on a discount. If they jump at the chance early on in the conversation, that might be a red flag.

    “Think about this: If the agent can’t even negotiate to protect their own money, how likely do you think it will be for them to go to bat to protect your money?” Crouch says. “It’ll be a test of confidence in their own services at least.”

  • So You Wanna Sell Your Home? Step 1: Whip It Into Shape

    If you’re looking to sell your home during prime house-shopping season this spring, you’d better get cracking now. After all, it’s not as easy as slapping an ad on Craigslist; if you want your humble abode to stand out from the competition, that could take months to do right.

    That’s why we’re kicking off our 2016 Home-Selling Guide—a series of articles in which, each week, we’ll show you the next step to prep your house for sale and ace the deal. (In case you’re also on the hunt for a new home, we kicked off our Home-Buying Guideyesterday.)

    Step 1 to selling a home is a New Year’s classic: Whip your place into shape by fixing any problems and upgrading the eyesores. Because like it or not, your home has sustained some wear and tear over the years. Here’s how to assess the damage and find out which renovations will pay off down the road.

    1. Tally the age of various items

    No matter how great your home looks at first glance, any savvy buyer will point to various parts and pop the question: How old? And since guesstimates won’t cut it, it’s time to gather some paperwork. If you’ve purchased your home in the past few years, check your home records or seller’s disclosure for the age or last repair of big items (namely your roof, HVAC system, water heater, and gutters), or dig up copies of your own maintenance records or receipts.

    How long items last depends on a lot of factors such as the model and how well it’s been maintained, but you can get a general idea of average life span from the National Association of Home Builders. For example:

    • Wood shingle and shake roof: 15 to 30 years
    • Central air-conditioning unit: 15 years
    • Electric water heater: 14 years
    • Gutters: 30 years

     

    2. Do your own walk-through

    Channel Sherlock Holmes and go through your home, room by room. Look for signs of damage that might drag down its value. Chandler Crouch, broker for Chandler Crouch Realtors in Forth Worth, TX, suggests looking for these common problem spots:

    • Wood rot around outside door frames, window ledges, and garage doors. Condensation and rain can cause these areas to weaken and rot.
    • Water stains on the ceiling or near doors and windows. This can indicate a leaky roof or rain seeping in from outside.
    • Leaks under sinks or around toilets.
    • Bulges under carpet or discoloration on hardwood floors, which can indicate flooding problems or an uneven foundation.

     

    Next, test what’s called the “functionality” in every room. For example, “Cracks visible in the walls and floor, doors that don’t shut right, broken handles on cabinetry, basically anything that doesn’t work perfectly should be repaired,” Crouch says. And don’t forget to inspect the outside.

    “A lot of sellers skip the outside, but it is so important. That is where buyers will make their first impression,” says Darbi McGlone, a Realtor® with Jim Talbot Real Estate in Baton Rouge, LA.

    3. Bring in the pros

    Once you’ve done your own walk-through, you may want to have a pro take a second look. These people can spot flaws you overlooked, because either you’re used to them or you didn’t realize they could cause trouble. You can enlist a Realtor or hire a home inspector to do an inspection (or pre-inspection) to pinpoint problems from bad wiring to outdated plumbing.

    While the cost varies, people pay an average of $473 for a home inspection, according toAngie’s List. Go to the National Association of Home Inspectors to find an inspector in your area. It may cost a bit, but it will buy you the peace of mind of knowing you’re not in for any surprises down the road. In fact, having a home inspection report handy to show buyers can inspire confidence that they (and you by association) aren’t in for any nasty surprises as you move toward a deal.

    4. Decide what needs renovating

    Once you know what in your house could stand for repairs or upgrades, it’s time to decide where to infuse some cash. Don’t worry, not everything needs to be done before your home’s on the market. And while you’re probably not jumping at the idea of renovating a property you’re going to sell, certain fixes will give you an edge over the competition, which means more/better offers. Remember, real estate is an investment!

     But don’t just obsess over the obvious—e.g., your kitchen could stand for new cabinets. After all, many buyers will want to tweak cosmetic details to their own tastes, so you could be throwing money down the drain. Instead, focus on fix-its that are less susceptible to personal preferences that buyers like to know are in good shape.

    For example, a recent study by the National Association of Realtors® found that upgrading hardwood floors reaps an estimated 100% return on investment, essentially paying for itself. Upgrading your insulation can net you a 95% ROI, a new roof a whopping 105%! Because what buyers don’t like to know they’ve got a solid roof over their heads?

    Once you’ve got the ball rolling on getting your place in shape, you’ll be ready for the next step—stay tuned next week for more details on what to do!

  • After Throwing Us a Curveball, Where Will Mortgage Rates Go?

    So far, 2016 has held an endless series of shockers for observers of the presidential election (Jeb out! Donald on top! Bernie whomps Hillary in Michigan! Trump Steaks are delicious even though they’ve been long discontinued by The Sharper Image!) … and mortgage rates. Most economists, myself included, had expected mortgage rates to be higher than they are today. Instead, rates are near three-year lows for a 30-year conforming fixed-rate loan.

    In 2015, 86% of buyers financed their home purchase with a mortgage. So mortgage rates—where they are now and where they’re going—have a vast impact on what buyers will do and the stress they will experience throughout the buying process. The extension of low rates has been positive for most buyers, who benefit from increased buying power.

    But what happens next?

    Rate roller coaster

    This year hasn’t just seen rates go down. Yes, in six of the first nine weeks of the year, rates declined. But the most recent two weeks have seen rates go up. The daily volatility is even more extreme: 23 down days, 17 up days, and five flat days. This is head-spinning stuff. The average daily change in the average 30-year fixed-rate mortgage so far this year is 3 basis points. (Remember, one basis point is 0.01 percentage points. For example, if a rate falls from 3.5% to 3.47%,  it’s declined three basis points, or 0.03 percentage points.)

     As we enter the peak spring buying season, it’ll be even more critical to follow the movements of mortgage rates. Buyers who think those rates aren’t moving might have a rude awakening when they realize the recent trend upward. Since Feb. 11, the average 30-year fixed rate has increased almost 20 basis points. That translates into a reduction of buying power by over 2%.

    For potential buyers, these rate movements can be nerve-wracking. A 10 basis–point difference in a rate on a mortgage, with all other factors remaining the same, will produce a 1.2% difference on the monthly payment. Of course that affects not just your monthly budget, but also your debt-to-income ratio, which is a critical factor in qualifying for a mortgage.

    If you are keeping score, that means the mortgage market gave buyers about 6% more buying power as rates fell, but since then the market has taken back nearly 2% in buying power. Buyers are still up, but there is a lot of time left on the clock for this year’s buying season.

    Tapping the best predictions for rates

    OK, so let’s get it out of the way right now: There’s no clear consensus on where mortgage rates will go from here.

    I’ve surveyed a range of recent forecasts from the Mortgage Bankers Association, Freddie Mac, Fannie Mae, and the National Association of Realtors®, as well as from highly respected macro economists, and I found quite a bit of divergence on expectations for rates for the rest of 2016 and into 2017.

    Three scenarios emerge:

    The first path sees the economy as hobbled by global economic weakness and the decline in the price of oil. As oil declined in January and early February, the stock market followed, and global money sought refuge in the dollar and U.S. Treasury bonds. As demand for bonds goes up, so does their price, and mortgage rates move in the opposite direction.

    This more negative view of the economy sets a low expectation for mortgage rates, especially for this year. In this scenario, the global economy doesn’t improve but also doesn’t get worse, so mortgage rates remain about where they are now (around 3.8%) for the rest of the year. However, as the first nine weeks of the year show, rates are likely to see quite a bit of daily and weekly movement based on economic data releases and Federal Reserve meetings.

    According to the second scenario, rates and financial markets have overreacted to the global economic concerns, but the global weakness will limit the growth we can see in 2016. This moderate view of growth would see the average 30-year fixed rate get back above 4% by the third quarter and reach 4.2% by year-end.

    The final scenario also assumes that the financial markets overreacted to negative news at the beginning of the year. But this storyline also sees inflation heating up faster than expected, causing the Fed to act more aggressively on short-term rates. This view would see rates reach at least 4.5% by the end of 2016 and potentially even 5.5% in 2017.

    These aren’t the only possible scenarios, but at this point I think they represent the most probable outcomes. Economists—including myself—have been consistently wrong about mortgage rates for several years, as they are influenced by many economic forces that are hard to measure and model. But by looking across these different perspectives, you can see a logical range that very likely includes what rates will do.

    Sobering implications of rate forecasts

    If you want a single forecast, take the average of these scenarios. This view would see the 30-year fixed conforming rate reaching 4.22% by the end of this year. That would be almost 50 basis points above where we are today, giving credence to moving fast and exploring options like rate locks along the way.

    If we do reach 4.22%, the mortgage market will have taken back all of the buying power handed out at the beginning of the year and would remove an additional 1.5% of buying power.

    Then taking an early look at 2017 using the average of these scenarios, the 30-year fixed conforming rate would likely reach 4.89%.

    Adding the impact of home price appreciation to these expected mortgage rate increases leaves the sobering perspective that it will cost 20% more by the end of 2017 to buy a typical home in the U.S. with a mortgage, compared with the incredible bargains today.

    And yes, I knew that as soon as I wrote this, it’s now bound to be wrong. But I promise to keep abreast of what actual rates are doing and what the experts predict for the road ahead, so you can plan accordingly.

  • Rules of attraction: 11 ways to create curb appeal

    Oprah once said, "Your home should be the thing that rises up to meet you." That's serious curb appeal. "We live in a crazy world," says Laura Morton, certified landscape professional and owner of Laura Morton Design in West Hollywood. "We have busy days ... when you come back home you should feel that you've arrived somewhere that is already putting you in a good mood." If this scenario doesn't ring a bell, read on. Curb appeal can be cultivated, and it may be easier than you think.

    Consider a new approach

    "The walkway is often broken, cracked or too narrow," says Morton. "If it's too straight, it's more like a runway — something that gets you from the curb to the door as fast as possible ... a slash of concrete." Repair the path or create a new one. "Cut narrow bands out of the walkway," Morton suggests, "or remove a 2- or 3-foot strip along one side and make it wider."


    Lightbulb moment

    Change the light fixtures. Consider sconces, or replace existing fixtures with something more complementary. Another bright idea: Use lightbulbs that cast a warm glow.

    Work with your house, not against it

    Mike McIver, a Long Beach-based landscape designer, says choose elements that match the home's style. "If it's a Spanish home, Mediterranean plants make sense. Use flagstone and terra cotta pots to mimic the roof." Pick materials, shapes and colors used in the design of the home.

    Don't cram

    Allow breathing space. Plant hedges, trees and shrubs with an eye to how large they grow. "Don't stick them right up against your walls," says Morton. "Give them room to open up and be soft, rather than this look we see of everything being trimmed within an inch of its life."

    Create a palette

    "Just like the inside of your home, use a cohesive color palette and style to create continuity," McIver says. Consider a new color for the door or trim. A big overhaul isn't always necessary.

    Detail oriented

    "Sometimes it's just the addition of an ornamental piece," says Morton. "A new pot or a doormat can make a difference." New address numbers, an updated doorbell, knocker, mailbox, porch bench or rocker create a sense of style.


    Maintenance

    "Sometimes people have too much going on in the front, and it feels uncared for," says Morton. "It could just need a fresh coat of paint on the fence or a power wash." Clean windows, a power-washed driveway, repaired gates and an uncluttered porch make an impact.

    Avoid straight lines

    "I think the most common disasters I see are homeowners who line their walkway with annuals or Malibu lights every 2 feet, like regimented soldiers, to frame the walkway." You are not landing a plane. Instead, use a variety of plants, and place them away from the path.

    Grow character

    "Low branching, multi-trunk trees, like olive trees, tend to have much more character and excitement than a single trunk," says McIver. Consider novelty foliage such as a flowering tree or special palm.

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