In today’s market, with homes selling quickly and prices rising some homeowners might consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons this might not be a good idea for the vast majority of sellers.
Here are five reasons:
1. There Are Too Many People to Negotiate With
Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
The buyer who wants the best deal possible
The buyer’s agent who solely represents the best interest of the buyer
The buyer’s attorney (in some parts of the country)
The home inspection companies, which work for the buyer and will almost always find some problems with the house.
The appraiser if there is a question of value
2. Exposure to Prospective Purchasers
Recent studies have shown that 88% of buyers search online for a home. That is in comparison to only 21% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
3. Results Come from the Internet
Where do buyers find the home they actually purchased?
43% on the internet
9% from a yard sign
1% from newspaper
The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
4. FSBOing has Become More and More Difficult
The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 9% over the last 20+ years.
5. You Net More Money when Using an Agent
Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.
Studies have shown that the typical house sold by the homeowner sells for $208,000 while the typical house sold by an agent sells for $235,000. This doesn’t mean that an agent can get $27,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.
Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.
QUESTION: We had to do a short sale on our home in Nevada last year, but now we have landed on our feet again and want to buy a home in our new location in Oregon. We have enough money saved up for a 20 percent down payment for a house we can afford. Is it possible for us to qualify for a mortgage?
ANSWER: It’s great that you landed on your feet and have been able to save money for a down payment on a new house. Your bigger down payment can be a compensating factor that some lenders will use to qualify you for a loan in spite of a negative credit profile that’s a likely result of the short sale.
Conventional loan guidelines established by Fannie Mae and Freddie Mac say that you must wait two years after the closing date on your short sale to finance another home, if you have 20 percent for a down payment. You would have to wait longer if you had less cash for a down payment (four years with 10 percent and seven years with less than 10 percent). So if you want a conventional loan, you’ll need to wait another year.
FHA-insured loans are available with a down payment of as little as 3.5 percent after a three-year waiting period. Veterans Administration loans, which don’t require a down payment at all, are available after a two-year waiting period.
However, the FHA recently introduced a “Back to Work – Extenuating Circumstances” program to help the many people who lost their homes during the recent housing crisis and recession. You may qualify now for this program if you lost your home due to a job loss or a drop in income or both. This temporary loan program will be available for FHA loans issued between Aug.t 15, 2013, and Sept. 30, 2016.
To qualify, you’ll have to meet standard FHA guidelines for a loan approval and a mortgage lender’s requirements. Typically, this means that your credit score must be 620 or 640 and above and your debt-to-income ratio must be 41 percent to 43 percent or less. You’ll be required to fully document your job history, income and assets.
In addition, the Back to Work program has other specific requirements. You must:
Participate in an FHA-approved housing counseling program.
Provide documentation for the “economic event” that caused the bankruptcy, which must have reduced your income by 20 percent or more for at least six months. In other words, you’ll need a W2 or tax returns or a termination letter.
Prove that you had good credit before the economic event damaged it.
Prove that you’ve fully recovered from the event by having a credit report without any late payments for at least 12 months on installment debt and without any major derogatory comments on revolving credit accounts. Your report cannot show any judgments or collections unless they’re related to medical bills or identity theft.
Consult a mortgage lender to see if you can qualify for this FHA program, but remember that FHA loans require mortgage insurance for at least 11 years, even if you make a down payment of 20 percent. You may want to consider asking a mortgage lender if any exceptions are possible for individuals who want to apply for a conventional loan after a short sale. If not, you should weigh the benefit of waiting one more year to buy a home rather than committing to years of mortgage insurance payments.
Sales volume rebounded for December, increasing 21.5% to 1,313 single family home sales. This is nearly an identical rebound from the 21.4% drop from October to November (1,375 sales down to 1,081 sales). This marks an increase in sales after four months of consecutive decline. Equity sale dominate the market, accounting for 87.5% of all sales (1,145 units). The remainder of sales comprised of 80 Short Sales (6.1%) and REO sales (6.7%). For the month, REO sales increased 26.4%, short sales decreased 1.6% and conventional sales decreased 1.4%.
Of the 1,313 sales this month, 202 used cash financing, 661 used conventional (mortgage‐backed) financing, 318 used FHA (Federal Housing Administration), 100 used VA (Veteran’s Affairs) and 32 used Other* types of financing. The average DOM (days on market) for homes sold this month was 41, while the Median DOM was 26. These numbers represent the days between the initial listing of the home as “active” and the day it goes “pending.” Breaking down the Days On Market, there were 709 listings that sold between 1 – 30 days, 287 listings that sold between 31 – 60 days, 160 between 61 – 90 days, 81 between 91 – 120 days and 76 sold after being on the market for over 120 days. See comparison of sales volume for 2013 and 2014 below.
The month‐to‐month median sales price increased 1.1% from $265,000 to $268,000. The current level is 7.2% above the $250,000 median sales price of December 2013. The current figure is up 67.5% from the January 2012 low of $160,000. When compared to the all‐time high ($392,750/Aug. ’08), the current figure is down 31.7%.n
Active Listing Inventory in Sacramento County decreased for the month, down 19.2% to 2,427 (from 3,002 listings). Compared year‐to‐year, the current number is up (32.2%) from the 2,836 units of December 2013. Following this drop, the current months of inventory decreased 35.7 % to 1.8 months.
Sales volume decreased for the third straight month, closing with 1,375 single family home sales. This is down 1.5% from the 1,396 homes sold last month. Month‐to‐month since July, sales have decreased 1,548 – 1,428 – 1,396 – 1,375, respectively. Compared with last year, the current figure is down .8% (1,386 sales). Making up this month’s total are 1,208 Equity Sales (87.9%), 83 Short Sales (6%) and 84 REO sales (6.1%). For the month, REO sales remained the same, short sales increased 17.6% and conventional sales decreased 1.1%.
Of the 1,375 sales this month, 256 used cash financing, 654 used conventional (mortgage‐backed) financing, 312 used FHA (Federal Housing Administration), 89 used VA (Veteran’s Affairs) and 64 used Other* types of financing. The average DOM (days on market) for homes sold this month was 37, while the Median DOM was 23. These numbers represent the days between the initial listing of the home as “active” and the day it goes “pending.” Breaking down the Days On Market, there were 816 listings that sold between 1 – 30 days, 293 listings that sold between 31 – 60 days, 148 between 61 – 90 days, 69 between 91 – 120 days and 49 sold after being on the market for over 120 days. This breakdown, as well as types of financing, is show in the graphic below.
The month‐to‐month median sales price decreased 1.1% from $275,000 to $272,000. The current level is 7.3% above the $253,500 median sales price of October 2013. The current figure is up 70% from the January 2012 low of $160,000. When compared to the all‐time high ($392,750/Aug. ’08), the current figure is down 30.1%.
Active Listing Inventory in Sacramento County decreased 2.7% for the month to 3,434 listings, down from the 3,529 listings of September. Year‐to‐year, the current number is up (29.1%) from the 2,659 units of October 2013. The months of inventory remained the same at 2.5 months.
With severe drought conditions across large swatches of the west and pockets of the rest of the United States, many homeowners are looking for ways to conserve water on landscaping. But there’s no need to rip out your whole yard and replace it with gravel—unless you want to. There are plenty of other ways to create a drought-tolerant landscape while also creating a beautiful and functional space. And drought-tolerant landscaping not only saves water immediately, but will be more resilient against future droughts. Here are some ideas: Take on manageable pieces
Identify your biggest areas of water consumption. Besides lawns, the biggest areas of water use tend to be rose gardens, summer vegetables and cut flower gardens. If you’re not ready to eliminate these areas entirely, figure out how you might want to reduce their size. A rose garden, for example, could be made into a smaller group of favorite bushes. Vegetables and cut flowers can go in containers or raised beds where you will have more control over how much water they get. Mix compost into soil for better moisture retention.
Make your lawn more water-efficient
If you want to keep a lawn, consider downsizing to a smaller swatch, picking a spot where you’ll get the most use, like a play area for kids. Find low water grasses for your area. Raise the blades on your lawn mower—keeping grass longer will reduce evaporation and promote deeper root growth. Leave clippings on the grass after mowing to help retain moisture and return nutrients to the soil–extra clippings can also be tossed on the compost pile. Aerate soil with a soil aerator tool to reduce runoff and help water absorb into the soil.
Or go lawn-free
Consider replacing your lawn with an alternate ground cover. Try ornamental grasses for interesting textures, low-growing flowering plants for seasonal color or edibles like low-growing herbs or strawberries. Some cities offer financial incentives for switching to a drought-tolerant landscape or for using gray water (reused water from baths, sinks, washing machines, and other kitchen appliances.) Check your area for opportunities.
Add more areas of low-water use
Replace a section of lawn with an outdoor seating area, a sandbox for kids or a raised bed with herbs. Create intrigue by laying down paths of flagstone, pavers, gravel, mulch or other porous material. Add new focal points like a porch swing, fire pit, or a patio. Instead of water-thirsty blooms, think of other ways to incorporate color with colorful perennials, planters, chairs or bright native grasses.
Optimize your sprinkler system
Inspect your sprinkler system for leaks, broken heads or misdirected heads that water driveways, sidewalks, or the street. Make sure the system runs early in the morning or late in the day. Consider a “smart” system that will monitor the soil and automatically adjust watering as necessary. Try watering less frequently or for shorter periods. When reducing your irrigation, make changes gradually, so plants and trees have time to adjust.
If you have plants with high water needs, plant them together. Use a drip irrigation system or soaker hose to minimize run off and evaporation. Watering deeply and infrequently encourages deeper roots and more resilient plants. Take advantage of natural sources of water by putting in plants next to paths, driveways and other spots where water run off naturally occurs. Direct eave spouts into raised beds or other planted areas and consider using rainbarrels to collect rain water.
Native plants are a great choice for drought-tolerant landscaping because they won’t need much (if any) watering once established. Over time native plants have developed a natural resistance to pests and won’t require added chemicals and special care. For ideas on good native plants for your area, ask at a local nursery, look on the EPA’s listing of native and regionally appropriate plants, or contact your local extension office.
Shrubs, perennials, bulbs and trees use less water than most annuals and lawns and well-established plants use less water than newly-planted ones. Evergreens and other trees are also a good choice—they’re drought-resistant and offer shade that helps retain moisture in the rest of the yard. Cover steep areas with deep-rooted native ground covers and/or shrubs to discourage water run-off and erosion. Mulching is essential—it helps soil retain moisture and keeps weeds at bay. Use organic mulch like bark, cocoa husks, or pine needles that decompose and nourish the soil. Layer mulch about three inches deep and replace as necessary.
And don’t worry too much about the pool
New research indicates that pools use only about as much water as a lawn of the same size. And covering a pool will cut water use by 50-70 percent, making a covered pool about equal in water use to drought-tolerant landscaping.
There are a few tricky cleaning jobs universally dreaded for being time-consuming, hard, or just plain confusing. How are you supposed to clean off a ceiling fan without getting dust all over the house and your head? How do you clean a fireplace without creating an indoor dust cloud? The tips below won’t make any of these jobs fun, exactly, but they will make them quicker, easier, and maybe even tolerable.
Ceiling Fans Put a drop cloth or old sheet on the floor and furniture over an area about twice the radius of the fan blades. If you want to keep your hair dust-free, pop on a hat as well. Use an old pillowcase to dust blades, sliding the case around the blade so the dust falls into the case. Make a second pass over each blade with a new pillowcase, this time spraying each blade first with a cleanser (a spray bottle of water and two tablespoons of white vinegar works too.) Hop on a sturdy chair or ladder and wipe around the rest of the fixture with a dust cloth or use a long handled micro-fiber duster.
Refrigerator–Interior To clean the interior, first take everything out the fridge. Remove shelves, bins, and drawers and wash in warm soapy water (don’t plunge cold glass shelves directly into hot water because they might shatter). Wipe down interior with a mixture of two tablespoons baking soda and a quart of hot water. For extra cleaning power, let mixture sit for a few minutes before wiping off. Use a plastic–not steel wool–scouring pad for stuck-on food and spills. Clean seals with a baking soda paste or undiluted hydrogen peroxide, getting into crevices with cotton swabs. While interior parts are drying, wipe down jars and containers, removing drips and spills. Check expiration dates and toss any out-of-date items. Follow the same procedures for the freezer, adding a plastic scraper to remove frozen-on ice or food.
For the exterior of the fridge, wipe down the outside surfaces with soft cloth and a gentle cleaner. Use a toothbrush or plastic scouring pad for grime on handles. Unplug the fridge to clean the condenser and coils. Remove the trim panel from below the door (you may need to unscrew it.) Vacuum or dust the panel, or if it’s plastic, soak it in warm soapy water to loosen dirt. Using the brush or crevice attachment, gently vacuum dust from coils and condenser. You might need to move the unit away from a wall to get at the back. When you put it back, make sure to leave enough space between coils and wall so the unit can run efficiently.
Make a first pass over the boards with a dust mop, vacuum or a dusting cloth. If there’s leftover grime, wipe down with damp cloth and mild detergent. Use wood cleaner for wooden baseboards. Try a cotton swab to get at intricate designs and corners. Touch up scuffs and scrapes with a bit of matching paint. Finish off by wiping down clean, dry baseboards with dryer sheets to repel future dust.
Prepare for the job by donning old clothes and a pair of gloves. Cover the area around the fireplace with old sheets or newspaper. Remove grate and andirons and put outside on a tarp. Put a handful or two of used coffee grounds into the ashes to minimize flyaways, then shovel out the old ashes and put in a double-bagged trash can. Use the fireplace brush to sweep up remaining ashes. You can scrub the inside further by scraping with a wire grill brush and a fireplace cleaner, if desired. Clean the andirons and grate with the wire brush and a hearth cleaner or a paste of baking soda and warm water. Let everything dry thoroughly before putting back in.
Grout can be a challenge to clean because it’s porous and often light-colored. To clean, you will need a cleaning agent and a scrubbing tool, like a scrub brush or toothbrush. Use a baking soda and hydrogen dioxide paste, a half and half solution of white vinegar and water or a mix of oxygen bleach and warm water. Spray or apply the solution to the grout and let sit for about 20 minutes. Scrub the grout, reapplying the solution for tougher stains. For mold that won’t come off, you can use a chlorine bleach spray, but the bleach will weaken the grout over time. To maintain your grout and delay another deep cleaning, spray weekly with vinegar and wipe clean.
Gentle vacuuming with a brush attachment works for all types of blinds, including cloth, wooden, and metal/vinyl blinds. Close the blinds so they’re fully extended and brush each slat individually, working downward. Swivel the slats to do the other side, again moving downward. You can also dust with a micro-fiber cloth or a duster. Again, you have to go over each slat, front and back. For dingy vinyl and metal blinds, make a mixture of one part vinegar and one part water and go over each slat with a dampened cloth or, for more flexibility, an old sock turned inside out and worn on your hand. Cloth blinds can be spot treated with a damp cloth and a bit of dishwashing liquid. You can cut down on scrubbing time by removing metal and vinyl blinds and taking them to the bathtub or outside to hose them down, then scrubbing with warm soapy water, but you run a greater risk of bending or breaking the blinds. Make sure the blinds are fully dry before rehanging.
You have done the hard part in the home-buying process and chosen a lender and a real estate agent to work with. You have also gone out and found the home of your dreams! Best of all, your team has done a great job of negotiating the best deal for you.
Now, as a buyer, all you have to do is sit back and wait for your loan to close … right? Wrong!!
Getting a home loan these days is a very interactive process. I am always amazed by how many clients I work with who come to me unaware of all the pitfalls they face during the loan process. To help avoid any surprises while waiting for final approval, I provide my clients with a short list of “do’s and don’ts” to follow.
Let’s start with the “do’s” …
Do keep the process moving by responding to your loan officers’ requests for documentation as soon as possible.
Do make decisions as soon as is reasonably possible.
Do convey questions or concerns you
Do continue to make all of your rent or mortgage payments on time.
Do stay current on all other existing accounts.
Do continue to work your normal work schedule with no unplanned time off.
Do continue to use your credit as normal.
Do be prepared to explain any large deposits in your bank accounts.
Do enjoy purchasing your home but remain objective throughout the process to help make decisions that are best for you.
After you have been preapproved for your mortgage you will want to refrain from the following…
Do not make any major purchases (car, boat, jewelry, furniture, appliances, etc.).
Do not apply for any new credit (even if it says you are preapproved or “xxx days same as cash”).
Do not pay off charges or collections (unless directed by your loan officer to do so).
Do not make any changes to your credit profile.
Do not change bank accounts.
Do not make unusual deposits into your bank accounts or move money around from one account to another.
Follow these simple rules and you will help to make your loan closing as smooth and hassle-free as possible! Good luck!
Considering a short sale as a Bank of America mortgage holder? Well make sure you hire an experienced, proven short-sale agent and that they are current on that lender’s process.
Below describes some new changes to B of A’s shot sale process imperative tot he successful completion of your short sale.
(Re-Printed from B of A email correspondence 07/31/2014)
The new Initiation Package assists a homeowner through the Short Sale process. Starting mid-July, homeowners will receive a short sale Initiation Package upon initiating a short sale and not being reviewed for a home retention option. Included in the package is the Borrower Election Form that will now be required before proceeding with a short sale.The short sale transaction will no longer continue and no other homeowner documentation or offers will be reviewed until the signed Borrower Election Form is received and verified by the Short Sale Specialist. As a reminder, for your agent, a valid Third-Party Authorization Form is also required and must be verified in order to proceed with the transaction.
As a homeowner, thoroughly read this package including the Homeowner Checklist. This package contains a list of financial documents that may be required to complete a short sale. B of A’s ability to evaluate the homeowner for a short sale, as well as postpone collection and foreclosure efforts, depends on their receipt of all necessary documents. Upon initiation, a Short Sale Specialist will continue to contact your agent, to discuss the next steps in the short sale process.
Initiation Package Includes:
Information on Loan Assistance Programs
Frequently Asked Questions
Important Notice to Help You Avoid Foreclosure Scams
Borrower Election Form – now required upon initiation
Request for Mortgage Assistance (RMA) form
IRS Form 4506-T
Please note: initiating directly into a short sale, through Equator, is not an option for Federal Housing Administration (FHA) investor properties. Homeowners must always discuss their situation with their Customer Relationship Manager (CRM), who can help them identify if they qualify for an exception to proceed with a short sale without doing a full home retention review.
With the positive momentum in the market, more home owners are ready to put their homes on the market and make a sale. But beware—when prices are up and inventory is down, more sellers become overconfident and careless with their sale.
Here are eight of the top ways sellers sabotage their own home sale, and tips to save the day.
1. Refusing to Make Obvious Repairs Prior to Sale.
Agents tell sellers this everyday, all day: “You will lose money if you don’t take care of repairs before the house goes on the market.” Showing a house when there are leaking faucets, cracks in the walls, water stains on the ceiling, and a busted hot water heater are all ways to turn off potential buyers.
What Sellers Need to Hear: “Shelling out the money may seem like an extravagant expense—especially if you don’t think that the repair will add much to the value of your home. Trust me—time and time buyers over estimate the cost of a repair, so they are going to try to get what they think the repair will cost, and that’s going to cost you more in big credits or discounts!”
2. Ignoring the Backyard
Everybody knows that fantastic front curb appeal sells homes, but many sellers forget what’s out back. In the summer and fall months, everyone’s attention turns to the outside spaces, where they dream of warm summer nights and outdoor entertaining.
What Sellers Need to Hear: “If you don’t maximize and capitalize on your backyard, you are missing a huge component of your warm weather living spaces. That back yard patio is not just for storage of old bikes and broken patio furniture that should have been thrown out years ago. In a buyer’s eyes, it can be the most important ‘room’ in the house. You need to stage your backyard and outdoor entertaining areas as beautifully as you would the interior of your home. Green grass, flowers and trimmed trees should be the same standard as your curb-appealed front.”
3. Hiding Problem Issues From the Buyers
Far too many agents have watched too many home sellers pay out big bucks because they didn’t “reveal it all.”
What Sellers Need to Hear: “Disclose! Disclose! Disclose! Once you have an accepted offer, sellers are required to fill out disclosure statements. If you did renovations to the house without a permit over the years, disclose. If there was a roof leak that damaged the attic two years ago, disclose. If the electrical blows every time you run the dishwasher and the microwave at the same time, disclose. You know the history of the home better than anyone, and we need to work together so that we know how to address any potential issues. The buyers will find out eventually. And if you knowingly have kept things from them, it sets the tone for an ugly and difficult closing. Not to mention that you are setting yourself up for the liability.”
4. Getting Egotistical When Negotiating
Every agent has had that seller who just simply cannot fathom that a buyer would even think to make such a low offer, but the truth is that most of the time, the buyer doesn’t mean to offend the seller. Heck, the buyer may even know that the home is outside of their price range, but they may just love it so much that they couldn’t resist making an offer. Too many sellers take negotiations personally and lose out on creating a win-win deal.
What Sellers Need to Hear: “Real estate transactions are business deals. Plain and simple. There is no room for ego here. If an offer comes in low, the mistake is to be insulted and not counter back. Always counter back and keep deals in play. Keep your ego out of the equation and put your head back into it. Remember your end goal: getting your house sold and having a smooth and successful closing.”
5. Using Lousy Photos (and Not Helping their Agent Get Great Ones)
Ninety percent of all home shoppers start their home search online, and nothing can tank a home sale like terrible listing photos. But sometimes sellers don’t understand the importance of fantastic listing pictures—and that can mean that agents need to resort to grabbing a few fast photos on a cell phone or on a rainy day. After all, the only thing worst than terrible listing photos are listings with no photos at all.
What Sellers Need to Hear: “Think back to when you were originally looking for a home. Even if you were house hunting when online wasn’t a huge thing, you probably remember that seeing a home told you more about it than any text ever could. Even in a sellers market, great photos can help draw in the best buyers—the ones who will be willing to make a big offer on this property.”
6. Holding On to Clutter and Junk
For as long as buying and selling a home has been a “thing” (so a very long time) there have been sellers that say, “Oh the house looks fine. Buyer’s will see right past all my boxes and collections of plaster cookie jars and shelves overflowing with nick-knacks.” Big mistake. Huge.
What Sellers Need to Hear: “It may sound like a good idea, but it’s not a smart approach. Believe me, I have seen homes come on the market that could have sold much faster, had the home owners spent just one weekend depersonalizing and removing all the extra things inside the home. Clutter makes your home seem smaller, ultimately eating equity and killing deals. Take inventory of all your possessions and think to yourself: should I save it, store it, sell it, or chuck it? It may seem like a solid amount of work, but one weekend of work could mean thousands of dollars come closing.”
7. Selling A House Via “For Sale by Owner” (FSBO)
When the market is hot, many people think that selling their home on their own is easily doable. “Who wouldn’t want to save on commission?” think many sellers. Despite the lure of not having to pay an agent a commission, sellers need the expertise and know-how of a professional, who can help navigate the stacks of paperwork, provide priceless neighborhood knowledge—and negotiate on the seller’s behalf.
What Sellers Need to Hear: “The numbers don’t lie: the typical FSBO home sold for $174,900, compared to $215,000 for agent-assisted home sales. There may be more to a home sale than you realize. Let me walk you through what type of service I can provide you with.”
8. Overpricing the Home
For agents, this is the one major seller mistake that we see the most frequently. It is a misstep that seems to rear its head whenever the market seems like it’s heating up.
What Sellers Need to Hear: “Yes, the market is hot. But not hot enough that you can push the envelope and price it for way more that the comps will support. Overpricing your home is dangerous —and you can end up burned in this ‘hot market.’ You run the risk that your home will sit on the market for weeks and months and become the stale listing that every home seller wants to avoid. Know the competition and set the right price—never overprice too high in hopes that someone will unknowingly overpay. Let me walk you through the data.”
There they are — the biggest selling mistakes of the season.
[Article courtesy of REALTOR MAG, JANUARY 2014 | BY BARBARA BALLINGER]
Here are seven strategies to help you decide whether to list your home or make renovations that will help make your current house meet your needs.
A New Year ushers in new resolutions, which often includes changes on the home front, but deciding what to do with it can be tough for home owners, financially and emotionally.
As the real estate market rebounds and buyers increase in number, make a well-informed decision on the direction you should take with your home. You no longer need to be torn between selling in order to upgrade and remodeling your current space to add value and meet your needs.
Here are seven key steps to help you arrive at the best solution:
1. What bothers you most about your home, such as the traffic pattern, lack of a certain room, or absence of light?
Analyze how you use your house and determine what features are missing that you want. Changes can often be made within an existing footprint, even without adding square footage. Walls can be taken down, doors removed or changed, and windows enlarged. Home owners who have been in their house for years are often only using certain rooms because of a pattern they established early on.
“Many fail to use 30 to 40 percent of their space,” says contractor Randy Tapper of RHT Design and Construction in Deerfield, Ill. He tries to guide clients toward changing your layout, so you use all spaces, before he suggests adding. Architect Duo Dickinson, author of Staying Put: Remodel Your House to Get the Home You Want (Taunton Press, 2011) concurs, and says removing walls and adding openings rather than increasing the home’s footprint can tackle a great percentage of challenges.
2. Study how your house is sited.
Analyze the land your house sits on — both the topography and condition — as well as how it’s oriented toward views. If the site always leaks ground water, has absolutely no trees (or terrible ones), or includes hideous views, then remodeling likely won’t fix your issues, Dickinson says, and selling becomes a more viable option.
3. What are your thoughts about your neighborhood?
If you’re very attached to your neighborhood, including the area’s retail, schools, and, perhaps, proximity to major thoroughfares, it may be worthwhile for you to “build your way out of your home or site’s challenges — and stay put,” says Dickinson.
Sometimes, pleasant memories, such as where you raised your children or watched a daughter marry in the backyard, may outweigh the option of moving.
4. Factor in your time frame and family needs.
If you plan to be in your house a long time — at least five to 10 years — making significant changes, such as adding rooms, building a sunroom, or finishing a basement, may provide a worthwhile payback and incentive. If, however, you’re empty nesters and ready to downsize, then remodeling may not be the most prudent financial decision. Here’s where a good financial planner can help you assess your home’s value in relationship to the rest of your assets and needs; a mortgage lender also should be tapped to discuss the costs of a new mortgage, if you need one.
But, exceptions abound, even for empty nesters. Some may decide to stay put. If your children and grandchildren visit regularly, you may decide that remodeling, or even adding on, will be the magic bullet for them to enjoy your home for years into the future.
5. Consult contractors, designers, architects, or structural engineers, and get multiple bids, for a realistic estimate of what changes might cost.
It’s worth paying professionals for an hour of your time; some will even provide it gratis, says Dickinson. These professionals can look at a home owners’ current house, listen to what you want, appraise its condition –—including what an untrained eye may not see — and estimate costs of new work.
In addition, if the house was built more than 30 years ago and hasn’t been updated, it may require new wiring or plumbing, a new HVAC system or roof, and better insulation. A new survey may also be worthwhile depending on what changes might take place, especially if it’s dated.
6. Compare the appraisal and remodeling costs with other neighborhood homes for future resale.
Even though home owners should base decisions in large measure on enjoyment and not wholly on resale value, it’s smart to have an idea of how changes will affect the house compared with others nearby, says real estate attorney and Brooklyn Law School Professor David Reiss.
It’s never smart to overbuild for an area. The type of improvement can also affect the value. Remodeling changes may add to the house’s worth without changing real estate taxes, while an addition will probably cause an uptick in taxes.
Recent comps for homes of a similar size and quality and in a similar area will help you make that assessment, says Dickinson.
7. Seeing is believing: Besides comps, go and see what’s available in your price range in neighborhoods you like.
A new house may offer a better layout, the right number of bedrooms and bathrooms, an updated kitchen, or a nice yard. But remember that even the home you buy may need some remodeling tweaks, like new paint, carpet, or an overhaul of an outdated master bathroom. Factor in the cost and time of these changes as you weigh your final decision.
Here, too, it might prove worthwhile to bring in a contractor or architect to estimate costs of any big changes such as new insulation, removing some walls, or finishing the basement.
Dara Shlifka and her husband Aric went through these paces when they decided they needed additional space for a home office in their 1968, Colonial-style, 2,400-square-foot suburban Chicago home. Initially, they were convinced they’d move, since remodeling and bids for additions came in sky-high — $250,000 and above. They house-hunted in a broad price range, from $400,000 up to $800,000, Dara says. But before we found a house, we asked one more contractor for ideas. He suggested converting our living room to an office and building a 600-square-foot addition with a bigger kitchen and a new family room, powder room, and laundry and mud rooms, and his bid came in at only $120,000, which convinced them to stay. “We’re almost done, but already I feel I’m living in a different house,” she says.
Bottom line: Make this big decision carefully based on all of the facts. In the end, you’ll be happier.