Home Selling Tips

As the real estate market continues to heal and prices rise, more Americans are considering a home sale this spring. Before you jump in, there are a number of factors to consider. Beyond the obvious question of where you will live next, it is important to weigh the tax implications of a sale -- you may be on the hook for capital gains taxes on primary home sale profits that exceed $500,000 for couples and $250,000 for individuals. Check out IRS Publication 523, Selling Your Home, for rules and worksheets. Also note that if you are hoping to downsize, you should carefully research your options. Many retirees have found that the purchase price for a smaller, but newer house or condo with desirable amenities, costs more than the sale proceeds received from the sale of their larger homes. If you are ready to take the plunge and to list your home, the most important thing to know is that setting the right price is essential. The first three weeks of a home’s entrance on the market are the most critical for creating interest and attracting buyers. Realtors note that buyers often dismiss a listing that is “old and stale”, which means that the longer the home stays on the market, chances are the selling price will be lower, both in absolute dollars and as a percentage of list price. The corollary to overpricing is not recognizing when you need to reduce the price. Generally speaking, if there hasn’t been a bite for three to four weeks, it’s probably time for a price cut.

In both instances of setting the price and knowing when to reduce it, you hopefully will lean on your realtor. That’s why engaging a good one is so important. In addition to asking friends and family for referrals, make sure that you invite three agents to create a comparative marketing analysis. Be sure to find a realtor who has experience with your neighborhood and price range. During the realtor interview process, you will see which of these professionals has leapt into the digital age, with a variety of ways to reach potential buyers. You may want to ask for the marketing plan in writing, so that the agent is on the hook.

Your realtor will also help you prepare the house for sale. First impressions matter, so identify the important home improvements that must occur before the open house. If you haven’t done so in a while, you will probably have to paint the house, replace the broken windows, clean or replace old carpets, cut the lawn, plant the flowers and tend to the garden. Even the small stuff counts, so make sure all light bulbs in the house are working, remove all clutter from closets and surface areas, fix leaky faucets, re-caulk the showers and tubs. If all of this prep sounds like too much work, you can hire someone to “stage” your home, which takes the process to a more professional level. Some sellers, especially those with older homes are choosing to schedule a pre-inspection for their own benefit. While this increases the costs associated with the sale, it may identify a potential problem earlier in the process.

As potential customers show interest, don’t thwart their progress by making it hard for them to see your house. Avoid putting too many restrictions on showing times that may encourage potential buyers to move on to the next home in their price range. If you are fortunate enough to get a bid, your realtor to skillfully and calmly handle the negotiations. Your reactive or emotional responses can impede the process or worse, kill a deal.

Housing Set for Summer Sizzler

“The housing market is coming back and it looks like it will be with a vengeance,” according to economist Joel Naroff. He offered this commentary after a report showed that building permits, an indicator of future activity, soared to the highest pace in nearly eight years. Surging permit requests along with a jump in builder confidence, an increase in activity and a drop in mortgaged residential properties with negative equity could make the summer a strong one for the real estate market. That’s great news for patient homeowners, who have been waiting a long time for the tide to turn. As of March, the S&P/Case-Shiller U.S. National Home Price Index is up 24.7 percent from the post-bubble low set in December 2011, but still remains 7.6 percent below the peak. (In many parts of the country, like the Bay area and portions of New York, prices are above the previous peak.)

But economists are hopeful that activity and prices will continue to perk up, due to a number of factors. The most important catalyst for housing is the improving economy and employment landscape. As Americans feel more confident about the economy and more secure in their jobs, they will be more willing to take the big step of home ownership.

Additionally, mortgage rates remain low and banks are finally loosening credit conditions, both of which has drawn more buyers into the market, including a group called “Boomerang Buyers.” These are homeowners who lost their homes during the housing recession and are ready to jump back into the market.

According to real estate information company RealtyTrac, from 2007 to 2014 some 7.3 million Americans lost their homes to foreclosures or to short sales. Because both of these events can remain on your credit report for up to seven years, this year will see the first wave of return buyers to the market. RealtyTrac projects 250,000-500,000 Boomerang Buyers will come back into the market this year, and then more than a million in the subsequent few years. Presuming that there are no other major credit issues lingering, these people have a good opportunity to come out of the financial doghouse and qualify for a mortgage.

Those markets likely to see the largest influx of Boomerang Buyers materialize are those where there were a high percentage of housing units lost to foreclosure and where current home prices are still affordable for median income earners, like Phoenix, AZ, Merced and Stockton, CA and Cape Coral/Ft Myers, FL.

One last group that could help boost the market is Millennials (those aged 18 to 34). Sure, many of them are spooked by home ownership, because they watched their parents navigate the Great Recession and they are graduating college with a hefty chunk of student loans. But they may find that a fixed rate mortgage is the perfect antidote to rising rents. When they do come to that realization, the nation’s homeownership rate, which at 63.8 percent in the first quarter of 2015 is the lowest level since 1989, will reverse course.

If you are entering the market as a buyer, run the numbers and be crystal clear about what you can afford. If you are planning to get a mortgage, go to AnnualCreditReport.com and correct any errors on the report before you start the process, which will make it easier to get pre-approved.

If you are a seller, price your house reasonably. According to realtors, the first three weeks of a home’s entrance on the market are the most critical for creating interest and attracting buyers. If your initial price is too high, it may sit idly on the market. The corollary to overpricing the house is a reluctance to reduce the price. If there’s no action for three to four weeks, it’s time for a price cut.

9 Home Selling Mistakes to Avoid

After the severe winter, it’s finally time for the spring real estate season. According to this week’s release of the S&P/Case-Shiller home price indexes, nationally, prices are up 23 percent from the bottom, but still remain about 20 percent below peak levels seen at the top of the housing bubble in 2006. But those price increases, combined with efforts to put a dent into mortgage levels, means that many homeowners are finally have enough equity in their homes to list and hopefully, sell them. That means it’s time for a refresher on the 9 Home Selling Mistakes to Avoid.

1.Overpricing the House: According to realtors, the top of the list is setting too high a price. Denise Rothberg, Licensed Real Estate Salesperson at Julia B Fee Sotheby's International Realty in Westchester, New York, “The first three weeks of a home’s entrance on the market are the most critical for creating interest and attracting buyers. Buyers often dismiss a listing that is ‘old and stale’, which means that the longer the home stays on the market, the likelihood is that the selling price will be lower, both in absolute dollars and as a percentage of list price.” Or as my late father once said to a friend who was listing his home above the market, “Nobody cares what YOU think the house is worth. The market will tell you what it’s worth.” The corollary to overpricing the house, is not knowing when to reduce the price. Generally speaking, if there’s been nary a bite for three to four weeks, it’s probably time for a price cut.

2. Choosing the wrong realtor: Your mother’s friend, who lives four towns away from you, may not be the best choice for a realtor. It’s fine to ask friends and family for a referral, but make sure that you invite three agents to create a comparative marketing analysis. During the process, you will see which of these professionals has leapt into the digital age, with a variety of ways to reach potential buyers. You may want to ask for the marketing plan in writing, so that the agent is on the hook.

3. Delaying or not performing necessary improvements and repairs: You know the drill here: first impressions matter, so paint the house, replace the broken windows, clean or replace old carpets, cut the lawn, plant the flowers and tend to the garden. Even the small stuff counts, says Rothberg. “Make sure all light bulbs in the house are working, remove all clutter from closets and surface areas, fix the leaky faucets, re-caulk the showers and tubs.” If all of this sounds like too much, you can hire a professional to “stage” your home, which essentially preps the home for sale.

4. Not disclosing problems: Most states require that you disclose defects in your home. If you try to hide them, the engineer’s inspection will likely find them, which provides the buyer with an opportunity to renegotiate, and could end up costing you more than the repair would have. Rothberg cautions that “the discovery phase can kill the deal and you will end up doing the repairs anyway to avoid repeat scenario with other prospective buyers.”

5. Making it hard for buyers to see your house: Rothberg notes that some sellers put so many restrictions on showing times, (“home can only be shown on Tuesdays 1-3pm, when the baby is napping or dog is being walked”), that potential buyers simply move on to the next home in their price range.

6. Distracting the buyer: Stay out of your house while it’s being shown. Your physical presence is not only distracting, but it may prevent the buyers from imagining the home as their own. Additionally, those family photos are beautiful, but they also distract the buyers and make it difficult for them to see themselves in the home.

7. Allowing emotions to take over: You hired an agent for many reasons, perhaps the most important of which is to protect you from yourself. Allow your broker to skillfully and calmly handle the negotiations. Rothberg cautions that “Reactive or emotional responses can impede the process or worse, kill a deal.”

8. Rushing to buy a new property before your sale is completed: You would have thought the housing boom and bust would cure people of this one, but I am often asked about dipping into retirement funds to “float” the down payment on the new home before the existing home is sold. Unless you have enough cash to cover the expenses of both properties for six to 12 months, it’s probably best to be patient. Or as my father, the stock and options trader said to my mother after they had sold one house and not purchased another one, “I’d rather be short one house than be long two.”

9. Not reading documents thoroughly or hiring a lawyer to do so on your behalf: These are legal documents, so you or a real estate lawyer should read all documents connected to this major transa