Posted on: May 4, 2016
Pricing your home based on data, not emotion, can mean a swift sale.
You don’t need to be Bob Barker to know when the price just isn’t right. Just ask Candace Talmadge. She originally listed her Lancaster, Texas, home for $129,000, but “eventually had to accept the market reality” and chop $4,000 off the price.
The home’s location proved challenging: Buyers were either turned off by the area — a lower-income neighborhood south of Dallas — or unable to afford the home.
“Sellers have to keep in mind the location,” says Talmadge. “Who are going to be the likely buyers?”
Home pricing is more of a science than an art, but many homeowners price with their heartstrings instead of cold, hard data. Here’s why crunching the numbers is always the better route to an accurate home price — as well as what can happen when home sellers overlook those all important data points.
The Pitfalls of Overpricing
Homeowners often think that it’s OK to overprice at first, because — who knows? — maybe you’ll just get what you’re asking for. Although you can certainly lower an inflated price later, you’ll sacrifice a lot in the process. The most obvious damage: A house that remains on the market for months can prevent you from moving into your dream home. Already purchased that next home? You might saddle yourself with two mortgages.
“You lose a lot of time and money if you don’t price it right,” says Norma Newgent, an agent with Area Pro Realty in Tampa, Fla.
And worse: Continually lowering the price could turn off potential buyers who might start wondering just what is wrong with your home.
“Buyers are smart and educated,” says Lisa Hjorten of Marketplace Sotheby’s International Realty in Redmond, Wash. “You’re probably going to lose them.”
The Pricing Traps
It’s easy for homeowners to stumble into two common traps:
1. Conflating actual value with sentimental value — how much they assume their home’s worth because they lived there and loved the time they spent there.
2. Assuming renovations should result in a dollar-for-dollar increase in the selling price — or more.
“Many homeowners think, ‘Of course my home is worth a bazillion dollars,'” says Newgent. If they put in a few thousand dollars worth of new flooring, for example, they might overestimate the upgrade’s impact on the home’s value into the tens of thousands.
Talmadge’s Texas home came with a built-in renovation trap: It was already the nicest home in the area, making it harder to sell. Major additions had inflated the square footage — and the price, according to one appraiser — without accounting for the surrounding neighborhood. That created a disconnect for buyers: Wealthier ones who might be interested in the upgraded home disliked the neighborhood, and less affluent buyers couldn’t afford the asking price.
“Don’t buy the nicest home on the block” is common real estate advice for this reason.
That’s not to say that renovations aren’t worth it. You want to enjoy your home while you’re in it, right? Smart renovations make your home more comfortable and functional but should typically reflect the neighborhood. A REALTOR® can help you understand what certain upgrades can recoup when you sell and which appeal to buyers.
Another culprit for many a mispriced home is online tools, like Zillow’s “Zestimate,” that prescribe an estimated market value based on local data.
The estimate is often wildly inaccurate. A Virginia-area real estate company, McEnearney & Associates, has compared actual sold prices with predicted online estimates for several hundred homes in the area for the past few years and concluded the predictions failed half of the time.
The Right Stats for the Right Price
The best pricing strategy? Consult a real estate agent, who will use something called comps (also known as “comparable sales”) to determine the appropriate listing price. They’re not just looking at your neighbors; they’re seeking out near-identical homes with similar floor plans, square footage, and amenities that sold in the last few months.
Once they’ve assembled a list of similar homes (and the real prices buyers paid), they can make an accurate estimate of what you can expect to receive for your home. If a three-bedroom bungalow with granite countertops and a walk-out basement down the block sold for $359,000, expecting more from your own three-bedroom bungalow with granite countertops and a walk-out basement is a pipe dream.
After crunching the data, they’ll work with you to determine a fair price that’ll entice buyers. The number might be less than you hope and expect, but listing your home correctly — not idealistically — is a sure way to avoid the aches and pains of a long, drawn-out listing that just won’t sell.
Knowing When the Price is Too High
Once your home is on the market, you’ll start accumulating another set of data that will serve as the ultimate price test: how buyers react.
Agent Hjorten says there’s an easy way to tell if you’ve priced too high: “If we have no showings, it’s way too high. Lots of showings and no offer means you’ve marketed well — but it’s overpriced once people get inside.”
Talmadge didn’t struggle with showings. She says a number of people were interested in the home, but not enough at the price. In the end, Talmadge sold her home for $125,000, with a $5,000 seller’s assist, a discount on the cost of the home applied directly to closing costs.
“It all boils down to location, location, location. In [another] neighborhood, our house might well have sold for well over $130,000,” Talmadge says.
When it comes to finding a buyer, pricing your home according to data — and the right data, at that — is crucial to making the sale.
Posted on: April 27, 2016
Living through a renovation with kids at home can be done. Here’s how — from families that have survived it.
Your 3-year-old hasn’t slept through the night in two weeks. And you’ve just gotten a second note from your daughter’s first-grade teacher about disruptive behavior and missed homework.
You’re so frazzled you forgot to brush your teeth this morning. That’s when you ask yourself, “Is this remodel worth it?”
Given the alternative (waiting a decade or two when the kids are grown), parents with children at home can hardly be blamed for biting the psychological bullet and diving into a project that can take weeks — even months. The good news is that you really can have that amazing new kitchen without losing your mind (or custody of your kids). It just requires a fair amount of finesse — and these expert tips:
1. Don’t Skip Self-Care
Keeping your kids sane through a remodel starts with keeping yourself sane. Children pick up on your emotions. If you’re stressed, exhausted, and anxious, they’ll reflect those feelings right back at you.
“When you’re in an airplane, they say put the oxygen mask on yourself first, then you can help the person next to you,” says Dr. Eugene Beresin, executive director of The Clay Center for Young Healthy Minds at Massachusetts General Hospital, and a father of four who survived his own renovation with newborn twins in tow.
“You can’t take care of your kids, set routines, or think about how the kids are reacting to change if you’re stressed,” Beresin says.
“Check in with yourself and make sure you, as the parent and caregiver, have a self-care plan in place for your own construction sanity,” says Lisa Bahar, a California-based marriage and family therapist. That plan could be as simple as regular date nights with your spouse or sticking to your workouts.
2. Disrupt the House, Not Your Routines
Your home might be in shambles (literally!), but you’ll still need to maintain a sense of normalcy.
“Children rely on familiarity, routine, and structure,” says Beresin. “Knowing your children and how they react to change, you can actually prevent stress by using preventative measures as opposed to just reacting to their reaction.”
An example might include eating breakfast at the same time every day — even if it happens in the living room.
Keep in mind your children’s developmental levels, strengths, and weaknesses. For school-aged kids, knowing where they can sit down and do homework every evening goes a long way. Teenagers need a private space to relax, no adults or siblings allowed. And toddlers, who don’t understand why their home is in disarray, might need more cuddling and play.
3. Put the Kids In Charge (of Something Small)
No, you don’t have to hand over the decorating reins to your teenager (unless you were already planning on turning your foyer into a One Direction shrine, in which case, shine on). But allowing them to pick small things, like their bedroom paint color and duvet, or their own stool for the new kitchen island, helps them feel more connected to the renovation.
“If they’re invested, they’ll feel more a part of the whole process,” Beresin says. “The last thing you want is for your kids to feel like hostages.”
4. Model Good Behavior
“It’s inevitable arguments will occur, so you and your spouse or significant other should learn ways to take the discussion away from the children,” says Bahar.
This might mean taking a few deep breaths and escaping to the garage for a meltdown after the contractor tells you he needs two more weeks, or that there’s a structural problem that’s going to cost extra to fix.
5. Explain the Unexpected
For young kids, explaining precisely what a renovation entails can be a struggle. After all, six months feels like an eternity to them.
“Young children work out difficulties through play,” says Beresin. He recommends using Lego sets or building blocks to walk through the renovation process with your kids. Try building a house and knock part of it down, making something new or different with the fallen pieces. “It may not seem like a direct correlation, but it is for a first-grader.”
When Beresin renovated his historic home in Acton, Mass., he was juggling a teenager, toddler, and infant twins.
“One event scared the hell out of my 3-year-old,” he said. “We were in the kitchen and a guy literally fell through the ceiling. We hear this crash and see two legs sticking out.”
That’s some scary stuff for a kid. Beresin recommends reassuring your children that “these events aren’t going to be the way the world is.” Something scary happened, but you still have some control over your home. They’re still safe inside.
After explaining exactly what had happened and that no one was seriously hurt, his 3-year-old still harbored some residual fear whenever she entered the kitchen, but it didn’t take long before the event became a running joke.
“There will always be unforeseen events, whether you have twins or a guy falls through the ceiling,” says Beresin. “It takes a fair amount of resilience to cope with the unpredictable, but your kids need preparation and discussion, and need to know it’s only temporary.”
Posted on: April 20, 2016
Do you know what documents to keep and why? You risk wasting money and time if you don’t back up your income tax records.
Millions of Americans will remember to do their taxes juuust in time to sprint to the April 15 finish, fists stuffed with W2s and receipts. But if you’re a homeowner, wrangling income tax paperwork — or other home records — is a marathon, not a sprint. Even more than repainting your house’s facade or mowing your lawn, keeping important docs organized year round is a crucial part of home maintenance — it can save you $ and protect you from the Tax Man.
Here’s what could happen if you don’t keep accurate records and back them up:
1. You’ll Pay More Taxes Than You Should
Homeowners get access to various deductions and credits based on payments for owning, financing, and maintaining a home. If you don’t maintain your records, you may miss out on some of these major tax benefits:
- Real Estate Tax and Mortgage Interest Deductions. “A homeowner’s biggest tax break generally comes from his or their monthly mortgage payments since, for most folks, the bulk of that check goes toward interest, and all that interest is fully deductible on Schedule A,” says Kay Bell, tax analyst at Bankrate.com. Property taxes are also deductible.
What You Need: Your annual statement from your mortgage company, which usually includes property taxes. If you pay your real estate taxes directly, the bill from your local unit of government.
- Home Improvement Deductions: Improvements made for purpose of accommodating disabled residents can be included in medical expense deductions. Energy costs for certain medical-related improvements may also be partially deductible. What You Need:Receipts and a letter from a doctor.
- Tax Credits for Energy-Efficient Upgrades: Installing new energy-efficient systems (that meet Energy Star guidelines) like insulation, a roof, windows, water heater, or furnace can earn you a credit to offset your tax liability. What You Need: Receipts and certification from product manufacturers.
- Home Office Deductions: If you can deduct the costs of a home office , you will need to prove you paid those expenses. For example, if your home office takes up 10% of your home’s square footage, you can deduct 10% of your home insurance and utility costs. But you need proof you paid those bills. What You Need: Bank statements, bill receipts, insurance receipts, your mortgage documents, and any other documents of related expenses. If you’re self-employed, you’ll be taking this deduction on Schedule C.
2. You May Have Trouble Selling Your Home
It’s not just the IRS that requires paperwork. Ryan Fitzgerald, a REALTOR® in Raleigh, N.C., and owner of Raleigh Realty, recently ran into proof of ownership issues when a seller hadn’t backed up his paperwork, nearly causing a delay in the sale of his property.
“The original deed was filed with the wrong county in North Carolina. The original bank was sold to another bank, and there were several refinances in between that caused confusion as well. The original paperwork could not be located by the purchasing bank, and since the original bank was no longer in business, the seller was freaking out about the sale not being able to go through,” recalls Fitzgerald.
“The buyer’s attorney needed to prove that my seller did indeed own the property outright, and could not do so without the original deed,” he says. “This all could have been avoided if there were duplicate documents backed up.”
What You Need: Your home’s deed, or deed of trust if you have a mortgage that needs to be paid off.
3. You’ll Miss Some Tax Savings When You Sell
In addition to all the tax benefits and credits homeowners can claim when they maintain proper paper trails, Eric Nisall, tax pro and AccountLancer founder, reminds homeowners, “It’s important to keep receipts and detailed records” even on home improvements and repairs that are not tax deductible. Those non-deductible expenses could offset potential taxes on the sale of your home.
Any gain on the sale of a primary residence over $250,000, or $500,000 for married couples filing jointly, is taxable. “When it comes time to sell your home, those expenses can be used to increase the basis in the home,” says Nisall. “Adding the costs of improvements to the original purchase price increases the basis, which in turn can reduce the taxable gain on the eventual sale,” he adds.
What You Need: All receipts from major home improvements.
4. You Could Be Fined By the IRS
By now you’ve probably got this figured out: keep the damn paperwork! But it’s not just about missing out on tax deductions — it also protects you if the IRS comes knocking. Because if they do, and you don’t have the paperwork to back up your deductions, you could be fined penalties and interest! The IRS expects to see proof of payment for all expenses.
What You Need: All tax and expense records stored and securely backed up. Put all your paperwork with a copy of your tax return. Make at least one hard copy. A digital backup on a drive or in a secure server in the cloud is a good idea, too. Digital copies are often fine with the IRS, but they have the right to demand a hard copy. So be sure to put one physical copy in a safety deposit box or some other secure place that will protect against fire, flood, theft, etc.
Posted on: April 14, 2016
1. If You’re Early Into Your Mortgage
It may not be as instantly gratifying as a treehouse vacation in Costa Rica, but spending your tax refund to pay down your mortgage principal could save you enough funds to take a splurge-loaded vacation a bit later.
Let’s assume you have a 30-year-loan at the average loan amount of $292,000, a 4.5% interest rate, and you’re getting that average refund of about $3,000. If you apply that “found” money to your principal each year, CPA Micah Fraim of Roanoke, Va., says you can shave years off your mortgage — in this case, nearly four. That’s about 95 mortgage payments you won’t need to make! Even better is the more than $70,000 that you’ll save in interest payments over the life of the loan.
If you don’t want to make an annual commitment, think about this: Make that payment just once and you’ll cut seven months off your payments and save more than $8,000 in interest. And when you decide to sell, you’ll have more equity.
2. If You’re Planning to Sell
Invest it in staging, and you may be surprised by how quickly your home gets plucked from the market.
“Staging lets prospective buyers see the space as their own, instead of as belonging to the people who currently live there,” said Ashley Lewkowicz, owner of Ashley Kay Design in Bucks County, Pa.
“A home that’s not staged can sit on the market for six months or more,” she added. “A home I recently staged sold in less than two.”
Not only is a faster sale better for your bank account in terms of saved mortgage payments and utility bills, but a drawn-out listing can cause a home’s price to wilt. That makes those throw pillows, decorative bath salts, and rented furniture way worth the investment.
For a large, suburban home in a major metro area, staging can cost about $2,000 upfront, and then about $500 per month for furniture and accessory rentals, according to Lewkowicz. But a faster sale at a higher price can definitely more than double your money over the course of the sales process.
And most staging can be accomplished with simple little touches.
3. If You’re a Home Improvement DIYer
Who knew your home could be your own personal ATM? For many DIYers, putting that $3,000 tax return into small home improvements can result in getting far more than their investment out of the house later.
- A new steel front door costs about $250, but can add about $1,500 when you sell.
- New wood flooring costs about $1,770, but is worth $5,000 when you sell.
- Even new insulation, which costs about $700, can recoup about $2,000 at sale.
If you’re willing to scope materials yourself and put in a little elbow grease, your tax return can fund a renovation for you to enjoy now and reap the financial benefits later.
Posted on: April 5, 2016
Understand which mortgage loan is best for you so your budget isn’t stretched too thin.
It’s easier to settle happily into your new home if you’re confident you can afford it. Here’s what you need to know about your mortgage financing options, including how to choose the loan that matches your income and tolerance for risk.
Mortgage Financing Basics
The most important features of your mortgage loan are:
1. Term (how long the loan lasts)
Mortgages typically come in 15-, 20-, 30- or 40-year lengths. The longer the term, the lower your monthly payment. The interest rate on a 15-year mortgage might be 1% lower than the rate on a 30-year mortgage.
The trade-off for a lower payment on the 30-year mortgage is that you make more payments. Since you borrow the money for longer, you pay more interest to the lender.
2. Interest Rate (how much you pay to borrow money)
Mortgage interest rates generally come in two flavors: fixed and adjustable.
A fixed rate gives you the same interest rate and payment until the end of your mortgage. That’s attractive when you’re risk-averse, if your future income won’t rise, or when interest rates are low.
The interest rate you pay on an adjustable-rate mortgage (ARM) changes at some point in the future based on where interest rates are at that time. ARMs are named for how long the rates last. For example, with a 5/1 ARM, your rate changes after the first five years and again every year after that.
ARM Risks and Rewards
An adjustable-rate mortgage rate goes up or down based on a particular financial market index, such as treasury bills. Typically, ARMs include a limit on how much the interest rate can change, such as 3% each time the rate changes, or 5% over the life of the loan.
Rewards for the uncertainty:
- ARMs can be a good choice if you expect your income to grow significantly in the coming years.
- The interest rate may drop if the financial market index that it tracks dips.
- An ARM usually starts at a lower rate than a fixed-rate mortgage of the same length and that can mean big savings.
Risks: If rates go up, your ARM payment will jump dramatically. So before you choose an ARM, be comfortable with your answers to these questions:
- How much can my monthly payments go up at each adjustment?
- How soon and how often can my monthly payment go up?
- Can I afford the maximum monthly payment?
- Do I expect my income to increase or decrease by the time the mortgage payment adjusts?
- Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?
- Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?
- What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?
More Mortgage Options: Government-Backed Loans
If you’ve saved less than the ideal downpayment of 20%, or your credit score isn’t high enough for you to qualify for a fixed-rate or ARM with a conventional lender, consider a government-backed loan from FHA or the Department of Veterans Affairs.
FHA offers adjustable- and fixed-rate loans at reduced interest rates and with as little as 3.5% down; VA offers no-money-down loans. FHA and VA also let you use cash gifts from family members.
Before you decide on any mortgage, remember that slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. To determine how much your monthly payment will be with various terms and loan amounts, tryrealtor.com’s mortgage calculator.
G.M. Filisko is an attorney and award-winning writer who has opted for both fixed and adjustable-rate mortgages. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Posted on: March 23, 2016
Preparing your lawn for spring is easy with these five no-sweat steps.
In recent winter months, snowmen were the only detectable “life” in your yard. But now that Frosty has succumbed to puddlehood, it’s time to get ready for spring! Jumpstart your lawn resuscitation as soon as the ground defrosts, and you’ll avoid a muddy disaster zone come April — not to mention ignite your neighbors’ envy. Here’s what to do:
1. Assess the Mess
“As soon as you can stand being outdoors for an extended period of time, see what hand you’ve been dealt by Mother Nature,” says Missy Henriksen, vice president of public affairs for the National Association of Landscape Professionals.
Case your property for thrown branches, dead leaves, and other debris. Clear it away so you’re able to do a general inspection of your soil, lawn, trees, shrubs, and garden structures. See what grass is coming back — or not. Get rid of broken tree limbs; call an arborist if they look dangerous. Now’s the time to take stock and make a plan.
2. Rake and Wake
Just as you like to hunker down on those dark winter days, so, too, do your grass and trees. “As soon as the snow fades, vigorously rake that grass to wake it up and begin to get it to grow,” says Walt Nelson, horticulture program leader for the Cornell Cooperative Extension in Monroe County, N.Y.
Rake out areas of thatch — dried, dead grass that can be thick and deep. If you don’t, thatch will keep oxygen and sunlight from other plants and grass. Check for fungus and mold growth. Don’t worry if you run across “snow mold” — a pinkish or gray web over matted blades of grass, or possibly just a slimy brown mess. Despite its name, it’s rarely serious. Gently rake it out and it will dry. “You’d need 100 consecutive days of snow for snow mold to kill the grass,” says Tony Koski, extension turf specialist at Colorado State University in Ft. Collins.
The grass may be a bit brown, but that doesn’t mean it’s dead. There are two types of grasses. “Cool season grasses green up in early spring. Warm season grasses green up really slowly in spring,” Koski says.
3. Weed Out Weeds
Finding a lot of crabgrass out there? It’s decision time. Will you avenge the scourge? If your crabgrass is out of control or you’re just hell-bent on getting rid of it, here’s what you need to know: Preventing crabgrass is all about timing. You want to nix the nasties before they start germinating. You need to use a preemergent crabgrass control before the soil temperature hits about 55 degrees and the crabgrass begins growing.
“But most people aren’t walking around with thermometers to measure their soil’s temperature,” Koski says. “Blooming forsythia is a good indicator you should put out your crabgrass preventer. That will be a different time in Michigan than in Virginia.”
You can choose a toxic or an organic preemergent such as corn gluten meal, but understand that with the organic, Nelson says, it will take two to three years of applications to be effective.
Oh, and if you’re eager to get seeding, note that you can’t put out grass seed until at least eight weeks have passed since you applied crabgrass control.
4. Trim the Trees (and Shrubs!)
Move on to trees and shrubs as the world defrosts, but the garden is not yet growing. “Trim out the dead, and it’s off to the races on another growing season,” Nelson says. “You can do the shrubs on your own, but if you’re concerned about trees, hire a professional.”
The important thing about trimming is to “be careful about trimming growth,” Henriksen says. “You want new growth to get healthy enough to sustain itself in case of a second cold snap.” For flowering shrubs, wait until flowers bloom so you don’t cut off limbs that will be producing flowers or fruit.
5. Go Beyond the Grass
Winter is hard on other garden elements. Henriksen recommends making sure your irrigation system works properly, and checking to see if there’s damage to any garden lighting. Fix broken or damaged patio furniture and any wooden structures. Even clean off and refresh your deck once it’s warm enough that power-washing won’t create a deck ice rink.
Don’t forget to tune up the lawn mower and string trimmer. Clean, sharpen, and oil your pruning shears so they’ll be ready when the temperatures start to rise.
Prepping the yard won’t be just a single weekend event, but if you get the heavy lifting out of the way early, it won’t be long before you’re leaving your socks and boots behind, and feeling the warm, soft grass between your toes.
Posted on: March 17, 2016
Your small home has more storage space than you think. For relatively little money but a lot of common sense and ingenuity, there’s space to be found.
Finding storage space in a small home doesn’t require remodeling or room additions. Start by getting rid of accumulated stuff. Take a hard look at room space, and buy furniture and storage items that can do double duty.
Here are six tips to maximize storage that won’t empty your savings account:
1. Declutter. It’s the first thing architect Sarah Susanka of “Not So Big House” tells clients who talk of expanding their homes. Haven’t used something for a couple of years? Pitch it, she says. You’ll be amazed at how much space opens up when you do.
2. Platform and bunk beds. Add space and eliminate a dresser in a small bedroom with a three-drawer or six-drawer platform bed. Find one at a furniture or big department store, and online.
Cost: $225 to $600 and up, queen size
Bunk beds won’t have drawers, but you’ll save space by stacking beds. And kids love ‘em. They come in a variety of styles and configurations. Some will convert to two twin beds.
Cost: $180 to $400 and up
3. Shoe organizers. They’re for so much more than just shoes. Hang one in a kitchen closet or pantry, and use it as your small home catch-all for remotes, keys, notepads, cell phones, and chargers, and other household essentials. It’ll free up a kitchen drawer or two for other uses.
Cost: Less than $20
4. Toe-kick storage. The space under your kitchen cabinets is a treasure trove of storage possibilities. Put placemats, napkins, cookie sheets, and how-to manuals there. Hire a cabinet-maker to install them, or request them as a custom feature in a new-cabinet order.
Cost: About $300 per drawer
5. Floor-to-ceiling storage. Furniture-style 6-foot-tall bookcases don’t use all available wall space. But extend shelving that extra two feet to the ceiling, and you’ve got room for a lot more books, knickknacks, or art objects. Home improvement stores have brackets and shelves in a variety of colors and sizes to match your décor.
Cost: Under $200, depending on the space size