The Importance of a Proper List Price

Who makes the decision about list price and sales price? The home's owner.

Who suffers when the list price is too high? Everybody: the seller, their agent, the buyer's agent, the buyers. An improper list price can cause problems at every point of the transaction. Even when (if) buyers and sellers reach an agreement on price, an appraisal for less than the contract price creates headaches for everyone. One of the most difficult and often unpleasant responsibilities for listing agents is having an honest and direct discussion about the market value of the seller's home.

Sellers must understand market value
Market value is often less than the seller's perceived value of their home. Spending thousands of dollars and hundreds of hours on a water feature in the backyard does not necessarily increase the home's value by the amount invested. It can increase the home's appeal, but not always the value. Market value is different than the assessed value for taxes.
The National Tax Payers Union (NTU) reports that about 60 percent of all properties in the United States are assessed at an amount above their current market value.
Market value is determined by homes that have sold recently in the area. How far the home is from things like schools, shopping, medical services, and work centers also factor in. The impact of future construction projects and road development should also be considered. The local economy is perhaps the most influential factor in a home's market value. Despite the recent housing market crash, it is still difficult for many home owners to accept that real estate values do not always go up year-after-year.

Home value estimators
There are several online Home Value Estimators. While technology has improved the lives of Realtors in many ways, these automatic home value estimators often make their jobs more difficult. Without actually naming any of the available online options, some are better than others, but there is a huge error rate with all of them. For individual sellers, the disparities between these computer generated estimates and an informed opinion of value from a knowledgeable agent are often significant.
When agents discuss market value with their clients, they must learn to incorporate the tax assessed value and estimate from online estimators into the discussion. They can encourage the sellers to view these things as a starting point and to use all available information together for making an informed decision about their listing price.

Why listing price is important
A larger pool of potential buyers: Most interest and activity takes place in the first few weeks a home is listed in the MLS. To maximize the exposure to ready, willing, and able buyers, it is crucial that the price is not too high. Even in a seller's market, qualified buyers should be viewed a valuable. A high list price can instantly scare away potential buyers and result in the home remaining on the market longer than it should.
The price directly impacts days on market: There is no need to add wording like "bring all offers" and "highly motivated seller" when the list price of a home is competitive. Buyers often have spent several weeks or months comparing homes and prices in the area. They know how much house they can get for the same price elsewhere. When a home has an unreasonably high list price, contract negotiations typically take longer and are more contentious. This leads to a reluctance by both parties in working together for a successful closing.
Some sellers are not going to get the sales price they hoped to achieve. As a result, they often resent every penny that is deducted from the sales price (namely the real estate agent's commission) and lowers their net proceeds. When they are prepared well in advance of the negotiations and closing, they have time to understand and accept that reality. They make the decision. A tactful and honest Realtor will go over a reasonable estimate of market value prior to listing the home. Otherwise, the seller can feel misled, trapped, and forced into a situation they do not like.

Home Improvement Projects That Add Value To Your Home

Buying a home is exciting and loaded with possibilities. For the seller, it can be a highly emotional and stressful experience. The place that they have called home for many years is heavily scrutinized and picked apart by potential buyers, real estate agents, and inspectors. There are some smart upgrades every seller can make that will not cost a lot of money and can improve their likelihood of getting the sales price they want.

The most important room in the house?
What room do you think of when asked that question? For most people, it is the kitchen. There are entire TV channels devoted to home cooks. More families are opting to prepare meals at home rather than dine out. In addition to saving money, cooking from home is healthier, more rewarding and improves the family dynamics. Many buyers head straight for the kitchen when viewing possible houses. They are looking for the kitchen that "just feels right" and that they will enjoy spending time in.

Industry experts agree that it is well worth an investment of a few hundred dollars to upgrade kitchen faucets and lighting fixtures. Sellers should choose energy-efficient lighting and make sure that it adequately illuminates all areas of the room. There are several options for kitchen cabinets. Some companies specialize in refinishing the cabinet boxes and replacing the doors and drawers. Short of that, homeowners can give cabinets an updated look with a fresh coat of paint or thorough cleaning. The most important thing is that the kitchen is clean and looks reasonably up-to-date. It is expensive to renovate. Sellers can still make a few low-cost improvements. The seller wants the buyers to envision themselves cooking in the kitchen, not thinking about the cost of upgrading the entire room.

Appliances
Buying all new appliances is not recommended, but sellers may be able to freshen up the look of existing units by purchasing new doors or face panels. Many dishwashers have panels that are easily reversible or changed out. Home sellers want to go for a cohesive look and minimize any concerns buyers may have for unexpected expenses. If the old appliances are in the final stages of their useful life or there is no way to freshen their look, sellers may want to offer an allowance for new appliances to be part of an accepted contract. The buyers can choose the appliances they want, the seller does not have to pay the allowance until the closing of an acceptable offer. Laws regarding such agreements vary by state and allowances can be easily misunderstood. Real estate agents representing each party should carefully review wording for legal compliance and be sure their client understands the terms. But it can be beneficial to both parties.

Bathrooms
Second to kitchens, bathrooms are important rooms and can be costly to to completely update. A new toilet seat, vanity, or pedestal sink are easy to install and can greatly improve the look of any home's bathroom. Dingy looking tile and grout makes buyers think the house is unclean and needs renovating. If possible, re-grout and replace any chipped or missing tiles. It is much less costly than completely replacing the old tile and makes a big difference.

Painting

If sellers are going to do only one thing, they should paint. Most real estate agents and industry analyst agree that painting provides sellers with the best return on investment. The payback can be as much as 300 percent. Sellers should spend a bit of time discussing which colors are current with their Realtor. They should go with neutral, tasteful colors more so than their own thoughts on what looks good.

Curb appeal
It is an old truism that applies to homes and people: "You only get one chance to make a good first impression." The entry should be fresh and clear of any dirt, cobwebs, or overgrown shrubbery. If time and money for painting is limited, make painting the door and entry area a top priority. Also, worn out door knobs and locks convey that the house is also worn out. An impressive bit of hardware on the front door signals that the home is solid.
Just as buyers should begin planning for their purchase months in advance, sellers who make a written plan and break it down into manageable projects have the best chance of being in control of their transaction from start to finish. With the guidance of a knowledgeable Realtor, selling a home can be a rewarding accomplishment they look back on proudly for many years ahead.

Multigenerational Housing Trends

Living in multi-generational households is common in many cultures. It has long been stigmatized in the United States. When the Great Recession led to significant unemployment numbers for young adults, many reluctantly moved back to their childhood home to live with their parents. Once there, many have warmed to the idea of keeping family under one roof to maintain more control over their finances.

Aging Americans

As the economy began to recover, the percentage of multi-generational households continued to increase. The rising cost of retirement home living and in-home health care providers has led many older Americans to move in with children or spend some portion of the year living with each offspring. With improvements in medical science and statistics showing increased life expectancy, one might think older Americans were the group driving multi-generational housing number. But, since 2012, young adults between 25 and 35 have been the group most likely to live in a multi-generational home.

Numbers increased in all age groups but one

Though the percentage of homes that have more than one generation residing there has increased at a slower rate post-recession, the increase continues across all ethnic, racial groups, and genders. For seniors, the women who outlived their husbands are most likely to be living in a multi-generational home. For young adults, men are way more likely than women to be living under the same roof with their parents. According to the Pew Research Center, the only age group that has had a decrease in the percentage of people living in multi-generational homes is people ages 65 to 84. They had a very small decrease between the years of 2010 and 2012.

Numbers have doubled since 1980

According to an analysis of data from the U.S. Census Bureau, Pew Research Center finds the number of individuals with a multi-generational home increased from 28 million in 1980 to 57 million in 2012. The numbers have increased steadily each decade, going from 35 million in 1990 to 42 million in 2000. For the first decade of the 21st century, the number of people residing in multi-generational houses increased from 42 million to 54 million. The upward trend has slowed, but numbers continue to increase.

Will continue being a significant portion of the housing market

The National Association of Realtors reports that 14 percent of homes purchased in 2014 were for the purpose of accommodating multiple generations of occupants under the same roof. Just under 25 percent of those buyers said it was due to boomerang kids. That is people over the age of 18 who once moved out and then moved back home to their parents. That number is 33 percent for buyers aged 59 to 67. Thirty-eight percent of those multi-generational home buyers between 49 and 58 bought to accommodate their boomerang kids.

What it means to the housing market

The traditional 3 bed, 2 bath house is less desirable to more buyers. More buyers want two master bedrooms on the main floor. The ideal design is a split floor plan with bedrooms on the main floor and added privacy for the living area of family members. More buyers seek large dining rooms than large kitchens. The dining room was almost considered obsolete a few years back. It now provides and additional room for the extra occupants to create their own little home within the home. It frequently serves as a second living room, where the family member(s) can have their own TV, computer, etc.
Regional and national builders are already mindful of the impact multi-generational home buyers will have on the real estate market. They change house designs to match the current economic conditions and trends. Home sellers and real estate agents should also consider how they can make room for this growing segment of home buyers.

The Importance of Home Inspections

People often have strong opinions about home inspections. There are some builders who hate home inspections and don't care much for the people who do them. Many sellers think it is just a ploy to further whittle away at their asking price. A comprehensive and thorough examination of the condition of a house by a professional inspector is sure to reveal some defects. It takes time and can be unsettling to both the buyer and seller. Both parties might be fearful that something uncovered will derail the transaction. Sellers do not respond well to the notion that they allowed some defect to remain untreated. Buyers, who have found their dream home, do not want to walk away from the purchase of a home that meets all of their criteria in ever other way. But home inspections are important and should not be skipped.

Why sellers should have home inspections

A pre-listing home inspection will establish a more stable negotiating platform for the seller as they consider and respond to all offers. Historically, home inspections take place after an agreement on price and terms has been reached. When issues are found, it results in re-negotiations and often repairs that are the seller's responsibility. Sometimes, when the seller is already at their lowest price, the transaction will fall apart if the repairs are needed for financing. The buyers may not be willing or able to cover the cost of repairs themselves. When the seller is planning their next home purchase based on the sale of their current home, unexpected defects that are only discovered after contracts are written can be disastrous.

When people live in a residence for a long time, they become accustomed to the property's condition and they do not always notice the minor issues that can add up and lower the overall value of the home. A defective light switch or faulty outlet that the family never used anyway will become an issue to potential buyers. The old HVAC system has probably been working just fine for the past 15 years. But it is really at the end of its useful life and will cost the next owner thousands of dollars to replace.

Having an objective evaluation of the house by a licensed professional before putting it on the market helps sellers know what issues will come up during negotiations. It will help them remain in control of the transaction and keep it moving in the direction suitable for the seller.

Why buyers should have home inspections

Sellers are legally bound to disclose any known defects with the home they are selling. New construction is covered by at least a one-year warranty. But sellers do not always know about damage caused by termites or carpenter ants. They may have a growing mold problem in the crawl space, a small leak that is damaging insulation and sheathing in the attic, or a minor problem with the HVAC system that will soon cost big bucks to repair. Many builders have numerous houses under construction at the same time. When they get one under contract, they will shift focus to other projects or rush the completion. This can result in shoddy workmanship and latent problems that will only become an issue years down the road.

It is better to uncover potential problems prior to closing the transaction. A builder is much easier to reach before you take ownership of a property than they are after you have moved in. Being legally entitled to getting something repaired does not eliminate all of the aggrevation and inconvenience involved in forcing a builder to make something right. Moisture problems and many other issues may not be noticed by homeowners until after the first year. This can further complicate matters.

A home inspection provides an added layer of security for all parties involved in the real estate contract. For buyers, it helps them have more confidence in the condition of the house, whether it be from a private seller, builder, or a bank foreclosure. For sellers, a home inspection empowers them with a full understanding of how their home measures up to the competition. It will help both buyers and sellers prepare for their future and feel good about the transaction for many years to come.

Using Green Home Features to Help Sell Homes

While the right location remains the top priority for home buyers, energy efficiency and low maintenance are rapidly moving up the list of things all buyers look for when searching houses. It is not just about leaving a small carbon footprint and better planet for future generations. Homes with green features save the owners a lot of money on utilities, make sustainable living easier, and are now getting their own unique kind of appraisals that put real value on the features. With all the focus and interest on reducing energy consumption, there is growing evidence that highly efficient homes sell faster and at a higher price than the competing houses. With that being said, here are a few of the top value green features.

Green features that make a home more appealing to buyers

• Natural light- Any feature that utilizes natural daylight inside the home. This can be as simple as a tubular lighting and passive skylights to the new sun-tracking skylights and floor-to-ceiling windows. When retrofitting an existing home, improving the natural light utilization is one of the least costly and most noticeable things a seller can do.
• High-value windows- Though top quality windows can be quite pricey, they are one of the features potential buyers appreciate most. Anyone who has owned a home previously appreciates the difference good insulated windows will make in utility bills. Most of the heat wasted in American homes goes right out cheap windows.
• Solar panels- The current generation of solar panels will pay for themselves in about 12 years. The payback is better with federal, state, or local incentives. Once the investment is recouped, these money savers require very little upkeep and continue to add value to the home.
• Energy ratings- Savy buyers are familiar with the significance of Home Energy Rating System (HERS) scores, EnergyStar and Leadership in Energy & Environmental Design (LEED) certifications. These ratings are rapidly becoming as important to home buyers as MPGs are to automobile buyers.

How to sell a home with green features

The term green has a negative connotation to some people. They associate it with low-quality products made of recycled material and government mandated changes. While younger buyers are more inclined toward environmental conscientiousness, older buyers are more interested in saving money. Rather than stick rigidly to terms like eco-friendly or green, find opportunities to use "high-performance" and "energy-efficient" when applicable.

Buyers are most interested in the opportunities for sustainable living in their own home and backyard than they are in saving the rainforest. While most people do care about the environment, there are daily essentials like food, warmth, and lighting that take president.

Federal Trade Commission's Green Guides

Not surprisingly, with buyers being motivated by green features, there are a number of unscrupulous people who are willing to use deceptive marketing to attract people. The FTC has recently updated their Guides for the Use of Environmental Marketing Claims. Any agent should be familiar with the guidelines and review all of their marketing for compliance. Basically, the FTC wants all environmental claims to be specific, measurable, and verifiable.

Most green features are more easily incorporated into new constructions. But you can still highlight features like energy-efficient windows, a high-performance HVAC system, and EnergyStar appliances. Make a point to mention walls painted with no-VOC paint. A non-toxic or low-toxic home is desirable to any family. Use placards throughout the house to draw attention to various features. It is easy for agents to get sidetracked when speaking and a lot of potential buyers will remember what they read more than what they hear. You can visit the NAHB Research Center for more information on having a home Green Certified.

Benefits of Buying Over Renting

The responsibilities of home ownership are a bit daunting to many people. Some folks spend their lives avoiding what they consider a financial burden; never experiencing the comfort, security, and thrill of owning their own property. There is a common misconception that people who rent are able to save more money than home owners. In reality, if someone is planning to live in the same location for at least seven years, itemize their tax deductions, and has good credit, buying a house is significantly less costly than renting.

Why those three factors matter

Buying is a much better option than renting in practically any major metro market of the United States. For many cities, the savings are calculated to be more than 50 percent, as high as 70 percent in some areas. Savings are this high largely due to the low interest rates. People in a 25 percent federal tax bracket also benefit from buying. Here is why the home buyer's situation, credit score, and tax filing matter:

• If they itemize their tax deductions, they are able to subtract the interest paid on the mortgage and their property tax payments from their pre-tax income. This is going to lower their total tax burden. The higher their tax bracket, the more they benefit. To not itemize will increase the cost of owning a home. How much it raises the cost of home ownership depends on the amount of interest and property taxes paid and the filer's tax bracket.
• Low interest rates make home ownership possible for people of all income levels. People with a good credit score qualify for better loan terms and lower interest rates than people with less than stellar credit. One percentage point on a mortgage interest rate results in at least a 10 percent higher monthly house payment.
• Each time a person buys or sells a house they encounter some transaction cost. These cost are spread out significantly for individuals living in a home for seven or more years. Therefore, their average monthly cost of owning the home is much lower than a person who owns the same house for less than seven years.

It is possible to get bogged down over-analyzing numbers and overlook the many other benefits buying a home has over renting. In addition to tax savings and having more space for the same monthly payment, there are some indirect benefits. Some are financial; some make for a better overall quality of life.

More security

Renters have a more tenuous relationship with the roof over their head than home owners do with theirs. There have been situations where the landlord had a mortgage on the property being rented and allowed it to fall into foreclosure. The tenants were forced to move through no fault of their own. Landlords can also terminate a lease for a wide variety of reasons.

Less stress

On the subject of landlords: Some are good. However, most property managers and landlords are stretched thin trying to cater to the needs of a lot of tenants. This can result in long delays before needed repairs are made. Renters are often stuck living with ongoing plumbing and HVAC problems. Home owners have more control over their situation. If they are not handy at repairs themselves, they have several contractors willing to compete for their business, and they report directly to the homeowner.

Consistent monthly payments

A fixed-rate mortgage can't go up, regardless of what happens with the economy or inflation. Renters can be easily edged out of their residence with increases in rent. People who lock in their monthly mortgage payments at an affordable amount are better protected from inflation than renters.

Renters often have to rent storage units for personal items. If they move frequently (renters often do), they may have to buy furniture with each move to fit small spaces. They often end up giving away many belongings or selling them for a fraction of their true value. Home owners typically have more space and buy less furniture. Perhaps home ownership isn't for everyone. But owning a home is an accomplishment. It brings with it a unique since of pride and emotional satisfaction like nothing else.

What Home Buyers Need To Know About Closing Costs

Closing cost are notoriously confusing to home buyers. Misunderstandings about these fees can lead to animosity toward real estate agents by their buyer clients. Those hard feelings result in the loss of valuable referrals from past clients, and perhaps, powerfully negative reviews shared by word-of-mouth and online. Your clients have a right to know how much they are paying for each service that is their responsibility. The Consumer Financial Protection Bureau (CFPB) is working to simplify forms and ensure home buyers clearly understand all aspects of the buying and mortgage process. Agents who explain closing cost to their clients in an authoritative, easily understood manner will set themselves apart from the typical real estate agent, and benefit from having their past clients enthusiastically recommend their services to others.

Closing cost are fees the buyer must pay in addition to their down payment. The following are typical closing cost charges that appear on the final HUD-1 settlement statement. For the buyer they should appear in section J of the settlement statement. Some charges may be paid out-of-pocket by the purchaser prior to the day of closing or will be paid with the loan. Those should appear in the 200s lines. The total the buyer needs to bring to the closing table is at the bottom. It is the total amount found on line 120 minus the the total amount of line 220.

Loan origination Fee

This fee is typically tax deductible. The loan originators are often paid based on the loan origination fee. It is negotiable and they may lower the fee just to get the business.

Loan discount

The loan origination fee buys down the interest rate by providing the lender with some money upfront. Each point is one percent of the mortgage amount. How much one point lowers the interest rate varies.

Document preparation fee

Also negotiable; some lenders do not charge for compiling the necessary documents.

Administrative fee

This fee typically covers the underwriting and document preparation fee. It is also negotiable and the amount varies by lender.

Funding fee or Wiring fee

This charge was unheard of years ago. Many consumer advocates say it is the lender's responsibility to get the money to you. Buyers should request they waive the cost of wiring the loan money to the closing agent.

Credit report

The lender or broker pay an outside company to complete your credit report. Some will try to make money themselves on the report by padding the actual cost. You can ask for a receipt to know the exact amount.

Appraisal fee

A professional appraisal is needed for purchase loans and for most refinance loans. It is another fee that is paid to a third party and the lender should not be inflating the cost to make money. Buyers can again ask for receipts and refuse to pay any upcharges.

Flood certification and hazard insurance

The flood certification fee is a survey done by an outside company to see if the home is located in a flood zone. Hazard insurance is required to protect the collateral of the loan. Buyers are not required to pay for an entire year upfront. Most lenders are satisfied with two to four months of coverage at the time of closing.

Recording fees

The county clerk charges this fee to officially record the purchaser as the new owner of the property. If the buyer refinances with a different lender, the fee will be necessary to change the lender's name on the record.

Tax stamps or recordation tax

When a property changes hands, it gives government an opportunity to charge a tax based on the purchase price. The amount is sometimes less for first-time buyers. Whether or not it is charged on refinances varies by county. Some charge based on the difference between the new and old loan.

Release of lien fee

The is charged by the closing attorney to have the county records changed to show that ownership of the property has transferred, and the previous owners and previous lender have no claims to the property.

Document prep and notary fees

Some documents must be notarized. Most attorneys have in-house notaries and still charge you for each page they notarize. Settlement agents, like the mortgage company, charge a fee for the legal documents they prepare.

Title search

This fee is charged for researching the history of the purchase property to ensure there is a clear title for ownership.

Closing fee

The charge for overseeing the closing and signing of all legal documents. The closing is typically held at the closing attorney's office.

The government does not regulate many of the fees charged by professionals in real estate transactions. It is important that buyers understand they have the right to shop around and choose the one offering the best rate.