In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.
Here are the top five reasons:
Recent studies have shown that 95% of buyers search online for a home. That is in comparison to only 17% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
Where did buyers find the home they actually purchased?
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.
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 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 8% over the last 20+ years.
The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.
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.
A study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases, may be costing themselves more, by not listing with an agent. One of the main reasons for the price difference at the time of sale is:
“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”
If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6% this year.
Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more?
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.
Remodeling? Recoup Your Investment When You Sell
Before you pour your savings into a new kitchen and a rainforest shower for the master, think about whether or not you'll be able to recoup your investment when it comes time to sell.
If you have equity in your home, you can make improvements, but don't go over the limit of what other buyers can spend for a home similar to yours in your neighborhood.
While it's tempting to make your home more beautiful, you have to consider the rest of your neighborhood. If most residences in your neighborhood are three-bedroom single-story homes, buyers are unlikely to shop in your area for two-story four-bedroom homes.
Buyers want to shop for a home where there is the most selection of homes that fit their criteria. If they want a swimming pool, they're going to look in neighborhoods where many homes have pools. They won't be aware of your home if you have the only pool in your subdivision.
That's why over-improving for the neighborhood is a bad idea. Not only will you not get your money back for some updates, your home my be harder to sell because of them.
Another reason buyers don't tend to pay as much for updates as you might think is broad differences in taste. Your updates may include choices your buyer wouldn't have made because of several reasons:
You only improved one or two rooms, leaving the rest of the home looking unfinished.
Your updates were too radical, such as cold minimalism in a traditional setting.
Your updates masked a problem but didn't solve it, such as a kitchen that's too small. If the kitchen is still too small after you've put in granite counters, don't expect buyers to care.
You failed to do necessary repairs and updates that were less visible than the new décor but buyers noticed anyway.
Your updates are beautiful but require a lot of cost and upkeep.
Buyers want to make a home their own, and don't want to be distracted or confused by design statements that they don't agree with. Enjoy your home while you can, but make sure your new look can be easily depersonalized when it comes time to sell.
Don't expect to set a listing price based on what you've put into your home no matter how long you own it. Your home will be worth market value no matter when you sell, whatever the value is for that point in time.
All the improvements in the world won't change that basic fact. Your home and the improvements you make are only worth what willing buyers say they will pay.
Before you begin renovations, talk to your Realtor and your lender. They will help you develop a reasonable plan for updates that will add value to your home.
Here are two articles and excerpts that make this point:
“It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”
“Interest rates are so low now that a family can buy the median-priced U.S. home on income of less than $45,000 a year -- about $11,000 less than the median household income. And half of America's houses are cheaper than that.”
“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.” (emphasis added)
Thanksgiving has passed, the weather has turned out cold and everyone has their mind on the holiday season as the year comes to an end. For the residential real estate industry, that means sales go quiet.
The seasonal real estate cycle typically sees a decrease in buyer demand during the last couple months of each year, as people turn their attention to family gatherings and holidays and wrapping up projects at work before the new year.
Where you’ll see the biggest change in sales over the ebb and flow of the seasons is the number of days a property is on the market. Realtor.com reports the U.S. housing market hit its lowest median days on market in June 2016 with 65 days, climbing to 89 days in December 2016 and hitting its peak in January 2017, with a median of 96 days on market. The trend appears to be repeating itself. The housing market hit its low for this year again in June, at 60 days, and is now climbing up, with the most recently reported number being 73 days for October.
But fewer active buyers and more days on market doesn’t mean you can’t sell your house during the winter months. Especially if you’re pressed for time and need to sell quickly, particularly hot markets see many eager buyers looking to snatch up available properties while the competition is still recovering from Thanksgiving dinner.
If you are not listed you surely will not sell. Less homes on the market in the winter does give a seller an upper hand.
Long Island HOMES & Horse Properties
This is one of the best times to get a fixed-rate mortgage. A fixed rate simply means that the mortgage lender charges you a fixed rate of interest that doesn't ever change over the life of the loan.
If you get a fixed rate of 4.00 percent, you will be paying four percent in interest until you sell the home. At such a low rate, it's unlikely you'd refinance.
You can see how much you pay in interest in an amortization schedule. The longer you pay on a fixed rate, the more interest you pay down because your interest payment is front-loaded into the beginning years of your loan schedule.
The longer you own your home and pay on your mortgage, you'll see that a greater percentage of your monthly payment goes to reduce principal, helping you to build equity or ownership in the home.
An adjustable rate mortgage is initially lower than a fixed rate, but the loan will adjust periodically according to market rates after one year, three years, five years, or whatever you and the lender have agreed to.
The danger is that the new adjusted rate could become too expensive for you, especially if it adjusts higher every year. Part of your terms can include ceilings that limit the number of times and the amount your loan can increase. Adjustments can add as much as two percentage points more to your interest rate, or as much as several hundred dollars more to your monthly payment.
Rates first hit historical lows in 2011, and have retouched those lows several times since. Any time the national average for fixed rate mortgages is below four percent, that's a gift to homebuyers. Adjustable rates are certain to be higher down the road, making fixed rates a lower risk.
Even with a fixed rate mortgage, your monthly payment can change in other ways. You may decide to roll the costs of your mortgage into your loan, in which case you'll be paying the APR rate because the loan amount is higher, yet is still being compressed into a 30, 15 or ten-year term, depending on your loan.
Another way your monthly payment can change is by adding private mortgage insurance (PMI). If you put less than 20 percent of your home's purchase price as a down payment, lenders will require that you pay for PMI. Rates on PMI vary, but you can expect your payments to rise by 0.3 percent to 1.2 percent of the loan amount.
Last, your monthly payments can include escrows for hazard insurance and for property taxes. You should receive a statement from your insurer when it's time to renew your insurance, and your lender will divide the annual amount into monthly payments.
Your property tax authority will send you a new statement annually, usually in the spring or early summer. If you're basing your future payments on what the previous owner paid, you may be in for a surprise. Your tax basis will be based on the purchase price of the home. Most communities limit the amount that the taxing authority can raise property taxes every year.
Mortgage interest, PMI and property taxes are deductible from your income taxes if you itemize, but you still have to make the payments. For these reasons, you want to stick closely to borrowing guidelines such as loan-to-income and debt-to-income ratios.
Your mortgage should be no more than 28 to 32 percent of your gross income or 36 to 42 percent of your income including your monthly debts. That way you'll be able to handle any future changes in your monthly mortgage payments.
What will a home inspector be looking at and how you can prepare for a home inspection? The below listing may be helpful in preparing for a home inspection. Many of these items can be done with little or no cost and many are regular maintenance items for a home.
If you are one of the many homeowners looking to list your home for sale, how do you stand out to the millions of pet parents searching for their dream home?
Whether a dog person, a cat person, or someone who prefers the company of another pet species, 99% of pet owners say that they consider their animal to be family. When finding a home, 95% of animal owners believe it is important that a housing community allows animals.
A study by the National Association of Realtors (NAR) revealed that there are many aspects of the home buying, selling and owning experience that have been greatly impacted by our love for our pets.
This should come as no surprise, as $72 billion was spent on pets in the U.S in 2018. NAR’s PresidentWilliam E. Brown shed some light on the impact of pet owners and their home search.
“It is important to understand the unique needs and wants of animal owners when it comes to homeownership. REALTORS® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.”
New home builders have actually begun installing retractable pet gates that tuck away neatly inside door jams as a highly requested feature in new homes to attract pet-parents.
So, if you are a homeowner looking to sell in today’s pet-friendly environment, point out the features of your home that will attract pet owners:
If you’re working with a couple interested in buying a second home as an investment property, you might suggest they talk to a lawyer about setting up a limited liability corporation or other legal entity before they buy. That way, if they’re sued by someone who was on the property after they bought it, they can limit their damages and protect their personal assets against losses.
Suppose a contractor they hire makes negligent repairs to a deck and it collapses while tenants and guests are having a barbecue. The judgment in a case like this could easily exceed the equity the owners have in the property and even the coverage limits on their insurance policy.
Or perhaps they rent the property to a person who owns a dog not covered in a typical landlord policy and the dog bites someone on the property. State Farm, for example, determines risk based on a dog's bite history not its breed. The company paid $121 million in dog bite claims in 2016 at an average of $33,000 a claim. A claim of that amount might exceed the equity the homeowners have in their property. That could make their personal assets vulnerable to the judgment.
Or let’s say the carbon monoxide detector is faulty and the property has a 20-year-old furnace that develops cracks, releasing gas indoors. Tragically, a family of four staying in the property is killed. The owners could face four wrongful death actions caused by negligence.
These are rare occurrences, to be sure, but they point to the gravity of risks that investment property owners can face. In fact, the scenarios illustrate one of the main differences between real estate and other types of investments like stocks or bonds: real estate can carry risks that exceed the investment in the asset.
Of course, an owner’s first layer of protection is insurance, but owners might fail to recognize that their losses can exceed coverage limits. Or there may be exceptions or carve-outs in the coverage that exclude or limit the losses. These gaps in coverage might expose the owner to unlimited liability. In today’s litigious world, $100,000, $300,000, or even $500,000 liability coverage may be inadequate. Also, owners converting their home to an investment property might not think to take out landlord or vacant property coverage.
To get the right amount of protection, buyers should strongly consider a personal liability umbrella policy with $1 million to $2 million in coverage. But they should also consider forming and running a corporation or LLC. The type of entity they can form varies and is governed by state law, but nearly all states allow incorporated entities like limited liability corporations, partnerships, C corporations, and subchapter S corporations.
Deciding which type of entity to set up and how to structure it should be done with advice of counsel. The process may not be expensive. Depending on the area and particularities of the household, the legal work can be done for a few hundred dollars. There are also do-it-yourself forms online, but self-help isn’t recommended; these entities, whether for your own investments or your clients’, have to be set up correctly to get the maximum protection.
Investing in real estate can be a smart decision. The right property can outperform other investment vehicles. But because real estate investment comes with potential pitfalls, it makes sense to have sufficient insurance and for investors to consider setting up an LLC or other type of entity to separate their liability from their personal assets.
As concrete shrinks during the curing process, vertical cracks form in the concrete or block, some so small they can hardly be seen. This generally does not affect the basement wall structurally, but could allow moisture to enter if the outside wallâ€™s waterproofing isnâ€™t flexible enough to span the crack. If moisture is seeping through, you might consider having a basement waterproofing contractor review the leakage. Often a concrete crack can be injected with a sealer to limit further moisture infiltration.
Basements may have hairline to 1/16 in wide vertical cracks. Prominent vertical cracks 1/8 in wide or larger could be a sign of distress that may need reviewing.
Sometimes a concrete or block basement wall will bow inward and develop a horizontal crack mid-height; this is where the wall feels the maximum stress from the force of the earth pushing against it. If the wall is plumb (straight up and down and not tilting inward), you can potentially monitor it to see if the size of the crack changes. If the crack continues to enlarge or the wall is out of plumb, a structural engineerâ€™s review is recommended. Again, call the foundation contractor for estimates if it's not out of plumb.
There are several common types of diagonal cracks in basement walls. One of the most common is when the crack begins at the top of the concrete basement wall and moves diagonally down to a corner. This is usually accompanied with inward tilting of the top of the foundation wall. It can be caused by the earth pushing against the basement wall and an inadequate connection (i.e. missing anchor bolts) between the basement wall and the first floor framing.
Another type of diagonal crack can appear anywhere in the wall and is usually wider at the top and tighter at the bottom. This type of crack is usually caused by the foundation settling.
A third type of diagonal crack appears at the corner of a window or door opening. This can have several causes, but one of the most common is concrete shrinkage similar to that described in the vertical cracks section.
There is no quick rule for diagonal cracks or for your foundation wall tilting inward. If you are experiencing these in your basement walls, we recommend a review.
Stair stepping cracks are very similar to diagonal cracks except stair stepping cracks occur in concrete block basement walls and diagonal cracks occur in concrete walls. Causes are similar to the diagonal crack issues listed above.
These spaces typically have more shallow depth foundations than basements and are more affected by soils that dry and shrink during extended dry summer weather. If there are interior cracks in the drywall or in the foundation wall that open in the summer and close in the winter, then the foundation wall might need additional support. A structural engineer can assess the situation and make recommendations.
Most houses with brick veneer have triangular shaped cracks on both sides of at least one corner of the foundation wall â€“ occasionally the concrete corner will pop off. This is caused when the brick veneer expands and the concrete foundation below contracts, which is normal. Typically no engineer review is necessary for this situation.
When concrete cures (dries and hardens) it shrinks and wants to crack into relatively square sections; this is why you see control joints on sidewalks to provide weak spots where the concrete can crack without affecting the aesthetics, strength or safety.
Cracks may form with or without control joints. Tight cracks are not considered a structural problem. However, because basement and garage slabs are supported by the ground, Â¼ in wide or larger cracks, vertical displacement at a crack line (the slab on one side of the crack line is higher than the other), or slab settlement can be a sign of a failure of the ground below and a review is recommended.
Cracks may be harmless or may be an indication of a significant structural problem. It is important to pay attention to your home and monitor any changes to existing cracks or the development of new cracks in your basement walls.