How to Price Your House to Sell

Pricing your house to sellWhen trying to sell a home, correct pricing of that home is crucial, and the psychology that goes into determining a price can leave your stomach doing backflips.

Should you start out high and see if you can get top dollar? Should you start low knowing the competition out there is tough? If you just drop your price later, how many buyers did you miss out on at the start?

The decision to price your home is extremely important. Pricing your home not only dictates how much money you will make, it also dictates how many people will see your home. Here are a few things to consider before you set the price of your home.

Change Your Mindset

Emotional attachment to a home can end up costing a home seller thousands of dollars. Sellers tend to price their homes too high because they are stuck in the mindset of: My home is worth more because it’s mine.

This is called the “endowment effect” and is a psychological human emotion. We tend to think, even with something of little value, since we own it, the item is worth more than it really is.

Buyer’s don’t really care how much you paid for your home when you bought it. They care about what comparable homes are selling for today. This is a large step for home sellers to overcome.

You can’t price your home to sell for what you owe if the market says it’s worth less. Once you understand this and overcome the emotions of pricing your home, you’re on your way to a successful sale.

Identify your homes true value and price it just below.

For example; if your market analysis comes in at $250k, pricing your home at $245k will give you a lot more activity.

Even though you’re priced slightly below market value, with the amount of activity that price will bring, you may end up getting multiple offers which will drive the price back up. If you don’t get multiple offers, you will at least get an offer close to asking price.

How fast do you need to sell?

What’s more important to your situation: Time or money? If you need to sell within 30 days, price your home lower than if you could hold out for 60-90 days. You may get less with the 30 day sale, but you will get rid of the home faster. If you price for 90 days, you may get more money, but you’ll lose out on time.

If you sell within the first 90 days, you’ll be okay. If you’re home sits longer, you could end up losing a lot more money and time than anticipated with your original list price. Pricing your home too high will end up netting you less money in the long run during a declining market. You will end up chasing lower prices, and you should try to avoid that situation if at all possible.

If your home sits too long, don’t be afraid to get aggressive.

The longer your home sits on the market the more stale it becomes to buyers in that price range. Obviously, after sitting for an extended amount of time, your home isn’t worth what your asking.

To get out of that “stale” market, take decisive action and drop your price a substantial amount. By doing this, you will attract new buyers in new price ranges. If you drop the price in small increments, it’s like dying a slow death by torture.

Buyers can see all your price reductions, and it shows you’re getting more desperate the more you cut the price. A quick, substantial cut in price is going to give buyers a real incentive to take another look at your property.

If, after all of this, you still can’t get your home sold, it may be time to take it off the market or consider a short sale.

If you can’t afford to price a home at a price that will allow it to sell, talk to your agent about the possibilities of a short sale if you feel you need to go that route.

For Sale By Owner – Learn The Basics Before You List Your Own Home

For Sale By Owner - Learn the Basics Before You List Your Own HomeEvery day hundreds of homeowners are selling a home without an agent. Although utilizing the services of a professional real estate agent is the easiest way to sell a home, there are systems available to those homeowners who feel they can manage the transaction on their own.

The process of selling “for sale by owner” (FSBO) requires the homeowner to be educated in how to market their home, who to market it to, and understand how to manage the paperwork involved in a real estate transaction.

There are companies who specialize in providing FSBOs with the tools necessary for selling a home. These companies either charge a percentage of the sale, or a flat fee for services. Such services may include signage, contracts, flyers, flyer boxes, and a link to the home on the company’s website. These services usually do not include information on how to market the home for sale to attract as many buyers as possible.

Whether using FSBO services from a company or not, there are several steps that must be taken in order to sell a home and meet all legal, and taxable, requirements. Here is a short list of what you need to obtain and understand before handling the sale of your own home:

  • Legal and binding contract forms
  • Federally mandated disclosures forms
  • Proper disclosure of defects
  • Tax ramifications, including but not limited to IRS capital gains requirements
  • Real estate tax information, distribution, and responsibility
  • Deed restrictions and liens

Some states will have standardized forms available for homeowners who attempt to sell on their own, and there are packets of forms available at many office supply stores. If using the latter, it is a good idea to contact an attorney to review the forms to ensure they are legally binding, protect the seller, and meet all local, state and federal guidelines. In addition, there are some federally mandated forms such as the Lead Based Paint Disclosure form that, if not included in a real estate transaction, can result in penalties for the seller.

One of the risks for FSBOs is litigation brought forth by angry buyers after the close of the transaction due to failure to properly disclose any known, and unknown, defects in the property. That is why it’s imperative to have a home inspection on the property prior to putting it on the market. Although most buyers will have their own home inspection conducted, some will not, further opening up potential law suits in the future after the close of sale.

FSBOs should always investigate the tax consequences of selling their home, whether on your own or with a real estate agent. Consult a tax professional for advice on capital gains laws that may end up resulting in additional taxes due at the end of the year, on any unpaid local taxes, and the responsibility for the current year’s real estate taxes.

Attempting to sell a home “for sale by owner” is possible, but many critical issues must be researched in order to guarantee a successful, legal sale.  By contacting the right professionals, understanding the law, and being proactive about taxable consequences, selling a home without an agent can be achieved with success. However, understanding all the risks and liabilities of selling a home as a FSBO, makes even more sense to consider hiring a professional to do the job they are trained to do.

Overall, the commission you’ll pay a real estate agent is a small price to pay for the peace of mind you’ll have by not having to worry with all of the aforementioned risks and liabilities.

Sell Your Home with an Agent or Sell It Yourself?

Should you use a real estate agent to sell your home or try selling it yourself? Kiplinger has the answer…

Questions or comments? Just click the comment link below to contact us. We’ll be happy to answer your questions.

Real Estate News – December 2011

Real Estate News - December 2011

In this Issue:*

Step by Step Closing for Buyers and Sellers

Time For a Year-End Tax Review

Don’t Wait For Interest Rates to Bottom Out

(Your comments are welcome at the bottom of our newsletter)

Step by Step Closing for Buyers and Sellers

Step by Step Closing for Buyers and SellersWhen you have found the home of your dreams, or sold your home, you as the buyer or seller will have to appear at a meeting in which all of the final legal details will be handled, this is known as the closing.

Others in attendance are the real estate agent(s), lender and a closing agent. The meeting usually occurs either at an agent’s office, escrow agent’s office, attorney’s office, or at a lending institution such as a bank or mortgage company.

The main emphasis is to review all of the paper work, and to sign the different forms for financing, and to transfer title to the new owner. For the buyer and seller, knowing what to expect can ease concerns on the process of closing.

Typically the buyer will have more of a role to play in the process of closing on a house. However, the seller will have an important role as well. Usually a review of the settlement statement is presented first for both to agree upon and sign. You will need to be sure about the terms and agreements before you sign.

Next the buyer will be required to show proofs of required mortgage related or homeowner insurance, and that all necessary inspections have been completed according to the guidelines of the contract. All parties must be in complete agreement over terms and sign the documents.

Once this phase is completed both parties will present a certified check for the entire amount of the closing costs. The lender will present the funds paid to the closing or escrow agent, also if there are any funds due they will be submitted at that time to the lending agent.

Depending on the requirements you agreed to as a buyer, your bank or mortgage company may have stipulated that you will need to set up an escrow account to pay your property taxes, or may be your designated home insurance provider out of this account, this will be handled at the closing for your new home.

Other issues such as the recording of the deed will be discussed. Don’t be surprised if you are informed that you don’t have legal claim to the property until it is officially recorded at your local courthouse. It is to be understood that you may not move in until you have legal ownership of a clear title, and this process can take from a few days to over a week. This is why disbursement of funds to anyone involved in the transaction will not be paid until the deed recording is completed.

If you’re the buyer you will need to know what forms you will be required to sign. Take a few moments and write down a check list, and bring along copies of any paper work you have been required to sign or review. An important document known as the Truth in Lending statement will contain vast amounts of financial information for the buyer. This statement will contain information such as your interest rate for the mortgage, amount of cash financed, and your monthly payment schedules along with the total amount paid based on the length of your loan.

Detailed information will be found in other paper work for the buyer too. The mortgage note and other assigned specifications will spell out in specifics terms such as how and where the note is to be paid, and the institutions right to reclaim their rights to the property. This legal documentation will also explain that you’re to meet other specific requirements, such as paying any necessary insurances and taxes yearly, that is of course if you are allowed to pay this independently, and is not part of an escrow account.

The value and importance of a good real estate agent or broker is quickly appreciated at the closing. Many of the processes involved are explained by a caring and competent professional before the closing ever takes place. Make sure though that you do your part by taking the time to ask any questions you have with your real estate broker, and studying, if necessary, your part of the process, whether you’re the buyer or seller.

Home buying and selling can be a pleasant experience for all involved without a lot of hassle and grief. Just make sure you approach it with the right attitude and guidance.




Time For a Year-End Tax Review

Time for a Year-End Tax ReviewMany of us experience events throughout the year that might require us to go back and review our current financial plans. Life changing events such as marriage, divorce, new additions to the family, job loss, retirement and death are all perfect examples of situations that will likely require revision, or even radical revamping, of your current plan. When it comes to financial, insurance, estate and tax issues, many of us are procrastinators. However, if you make it a goal to complete a simple year-end checklist now, you could save yourself money and time, and gain the piece of mind that comes from knowing your family is well taken care of.

If you’ve just been tossing your receipts into a shoe box all year long, now would be a good time to sort through them and organize them according to categories such as job-related expenses, education or job-hunting expenses and charitable contributions, just to name a few. If you’re self-employed or own a small business, now might be the time to invest more money into your work by purchasing a new computer system, office furniture or a work vehicle. All of these items can be granted quite an attractive deduction come tax time.

If you’re one of the lucky ones and the stock market was good to you this year and you have some capital gains from your investments that are going to be exposed to taxes, a prudent year-end plan should include taking the time to sort through your accounts, and using a strategy known as tax-loss harvesting. This technique involves selling the losers in your portfolio to offset any realized gains. If you wait 30 days and obey the requirements of the wash-sale rule, you can then buy back the securities, if you wish.

Don’t be afraid to generate large capital losses, because there is no limit to the amount that can be offset against capital gains. You can claim an additional $3,000 loss on your federal taxes, and then carry forward the remaining loss into future tax years.

Giving to Others

If you have children or grandchildren, you may (depending on the state in which you live) also receive a state tax deduction for your contributions to a 529 college savings plan. And, let’s not forget that your charitable contributions are usually, partially, tax deductible. When you give to a charity, make sure you get a receipt you can use come tax time.

If you’re computer savvy, consider buying a tax software program such as TurboTax or TaxCut to play around with just so you can see the various deductions allowed and the potential savings available.

Getting Your Estate In Order

A key part of estate planning that many of us overlook is the matter of beneficiary designations. From time to time it is a good idea to verify that these designations are still as you would like them to be. At a minimum, your estate-planning checklist should include reviewing the beneficiary designations for your IRA accounts and life insurance policies and checking the validity of your will.

You may also want to look into adding a “transfer-on-death” (TOD) feature to taxable accounts in order to have them avoid probate in the event of your death. While you have these documents out it would be a good idea to check that your current life insurance coverage is adequate for your present circumstances. Are you underinsured? Are you over-insured? If you are attempting to reduce the value of your estate for estate-tax planning purposes, consider using your annual $13,000 tax-free gift per person in 2011.

Other Overlooked Areas

As the year goes by it’s not uncommon to forget to make your retirement plan contributions, or fail to set aside enough money to maximize the contribution. Since the maximum contribution limits have changed over the past couple of years, and will continue to change in the upcoming years, you’ll want to check with your financial planner to make sure you are contributing the correct amounts. If you recently turned 50, you should be eligible for a larger contribution amount, known as a “catch-up” contribution. Also, if you are age 70.5 or older, you need to make sure you’ve taken your required minimum distributions (RMD) from your tax-deferred retirement plans, such as IRAs and 401(k)s.

Finally, depending on your credit history, you might want to check your credit rating and credit report by going to a reputable online site such as myFICO, which offers you your FICO score plus credit reports from all three credit bureaus for a fee.

In Summary

Along with making a year-end financial ‘to-do list,’ to help you stay on top of the matters we’ve covered here, you should also take some time to prepare your new household budget for the year ahead. Once you have a system in place, the process will become easier every year. You may find it hard to get motivated to tackle some of these tasks, especially during the holiday season, but the potential tax savings and other benefits covered here could be history once December 31st has come and gone. So roll up your sleeves and get to work – you’ll be glad you did come April next year.




Don’t Wait For Interest Rates to Bottom Out

Don't try to time the market when getting a new mortgage loanWhether you’re considering buying your first home, or thinking about refinancing a home you already own, the only pressure you should find yourself under now is to find the right interest rate and to close on that rate as soon as you possibly can to take advantage of the record low rates we are seeing right now.

If you’re thinking of refinancing, with rates as they are now, you might be able to lower your interest rate by one full percentage point or more. If that’s the case, and the costs to refinance are low, you can immediately take advantage of that lower rate. Then, if rates go down further, you can always consider refinancing again.

If you’re shopping for a home and will need a new mortgage, there has never been a better time to buy than now. Inventory is plentiful, and mortgage rates have never been so low. As a general rule, you should never try to time the market — that’s how you miss getting a great rate.

To find a great mortgage, you should talk to at least one national mortgage lender, one local lender, a credit union and a mortgage broker. Ask your friends which bankers and brokers they have used; if they had a good experience with that person or company, give them a call as well.

The Seller And Real Estate Agent Relationship – What The Homeowner Should Expect

The Seller and Real Estate Agent RelationshipWe all want the sale of our house to go smoothly. We know that somewhere between sticking that sign in the front yard and packing up the moving van, there are a lot of details that need to be handled. With these details comes stress, all bundled up in emotion. Selling a home means more than just signing on the bottom line. That’s where hiring the right real estate professional can be invaluable.

Listing with a trustworthy real estate agent that you feel comfortable with can save a lot of money and time, but also a great many headaches and heartbreaks. A knowledgeable, experienced agent understands the nuances of the real estate transaction as well as the emotions of the sale of one’s home. It takes a special understanding of what happens between the seller, or sellers, and potential buyers to keep everyone on track during potentially difficult times.

Contacting a real estate agent early in the process will help alleviate many of the problems that could arise in those first discussions about selling a house.  Once the right agent has been chosen by the seller, it’s time to get to work finding out how to build a good relationship with their client. This starts with learning about their clients and what motivates them.

A homeowner may be highly motivated to sell their home quickly. For this type of imminent sale,  the time-frame may be tight. Perhaps a job transfer is coming soon, or a new school year starts, or any number of reasons; some pleasant and some unpleasant. A good agent wants to know the motivation in order to better serve you. Be open and honest with the agent you choose. There is no need to beat around the bush, your agent will soon know more about your personal life and finances than you would believe. That is why choosing an agent with experience and integrity is so important.

Sometimes, a move is not imminent. A homeowner may want to test the market for future decisions. Instead of guessing, homeowners should use a real estate agent’s expertise to find out the true value of their home. It prepares them better for making decisions for the future. In other words, guessing what your home is worth is no way to prepare for a future sale of your home, or purchase of another. Your agent will want to know if this is the case so he or she can do some projecting into the future markets for you. There is no reason to ‘fool’ an agent into thinking you’re ready to list your home when you’re not. A good agent wants to help you determine the value of your home whether or not you’re ready to list.

Whether the sale of your home is planned soon or in the future, it is best to contact a qualified agent early in the process. An experienced agent will help by getting the information straight right from the beginning in order to avoid mistakes early on. The right agent will assist the seller in defining what is important during the process, provide a sounding board for ideas, and then help customize a plan of action.

Once you have interviewed several agents, asked all your questions, and finally chosen the one that’s right for you, it’s time for the agent to turn the tables and ask you a few questions. Any good agent will be sure to ask a potential client these simple questions:

  • Do you need to sell your home soon?
  • What is the reason you’re selling your home now?
  • Will you be open to negotiation with a buyer?
  • Are you prepared financially to repair items that show up on the home inspection?
  • Are you listing your home now in order to sell at a future date?
  • Are you pricing your house as a way to test the market for a future sale?
  • Have you tried to sell your house by yourself? If so, what have you tried?
  • Are there back taxes owed?
  • Are there liens on the property other than a mortgage?
  • Are there any reasons that would prevent you from accepting an offer, other than price?

Of course some of this information will be discovered as the paperwork is prepared, but hearing it from the seller first matters. If these questions seem intrusive, they are only designed to avoid an embarrassing, or worse, situation down the road. Be prepared to share your story; this is only a short list of the questions you will expect a good real estate agent to ask a client.

There is much more to selling a house than getting the paperwork done. An agent needs to learn first about the homeowner’s reason for selling, how desperately they want to sell, and how much they are willing to sacrifice in order to sell. All these questions may feel very personal, but a good agent will help their client understand that this confidential information is necessary in order to get their home sold as smoothly as possible.