Monday, December 1, 2008
Saturday, November 1, 2008
How-to Guide Buying Your First Home
Finding the right first home starts with a price range and a short list of desirable neighborhoods. But there are many other factors you'll need to consider before investing in what may be your biggest asset.
**Before You Start
Grab your current household budget so you can consider your financial situation and your ability to make mortgage payments.
Ask family and friends if they can recommend experts, like a lawyer and an inspector, who can help with the home buying process.
Think about your lifestyle and how it might affect your choice of home and neighborhood.
Do a little research on current home prices in the neighborhoods you plan to target.
Topics
1. Buying Your First Home
2. How Much Mortgage Can You Afford?
3. Costs of Buying a Home
4. Ongoing Costs
5. Choosing a Neighborhood
6. Finding a Broker
1. Buying Your First Home
Home ownership is the cornerstone of the American Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban condo for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.
Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.
Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.
2. How Much Mortgage Can You Afford?
Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.
The housing expense ratio compares basic monthly housing costs to the buyer's gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.
The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.
Many home buyers choose to arrange financing before shopping for a home and most lenders will "prequalify" you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.
In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.
How Much Home Can You Afford?
Bob and Janet's combined income is $50,000 a year, or $4,166 a month. Their housing expense ratio of 28% yields a monthly maximum of $1,166 for mortgage, insurance, and taxes ($4,166 x 0.28 = $1,166).
Their total debt ceiling of 36% is $1,583 (4,166 x 0.36 = $1,500). Their monthly debt payments include a $200 car payment, credit card payments of $100, and student loan payments of $200. Subtracting this total of $500 from the $1,500 permitted leaves $1,000 in monthly housing payments.
3. Costs of Buying a Home
Many home buyers are surprised (shocked might be a better word) to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs. All this will probably add up to be between 3% and 8% of your purchase price.
4. Ongoing Costs
In addition to mortgage payments, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Make sure you understand how much you are willing and able to spend on such items.
Condominiums may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to buy, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable home in the neighborhood.
5. Choosing a Neighborhood
Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, taxes, transportation, and town services are other things to look at. Finally, learn the local zoning laws. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.
Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.
6. Finding a Broker
Brokers know the market and can be a valuable source of information concerning the home buying process.
Make sure that the broker has access to the Multiple Listing Service (MLS). This service lists all the properties for sale by most major brokers across the country. Brokerage commissions average 5% to 7% and are split between the listing broker and the broker that eventually sells the home.
Home Buying Costs
Down Payment 0% - 20% of purchase price
Home Inspection $200 - $500
Points $1,000 and up for 1% - 3%
Adjustments 3% - 8% of purchase price
Once you've determined a price range and location, you're ready to look at individual homes. Remember that much of a home's value is derived from the values of those surrounding it. Since the average residency in a house is seven years, consider the qualities that will be attractive to future buyers as well as those attractive to you.
Although it can be difficult, try to remember that you will probably want to sell this home someday. The more research you do today, the better your decision will look in the years to come.
Summary
Buying a home can mean building significant value through the years. Think carefully about how much you can afford to spend and consider borrowing guidelines like those used by Fannie Mae. Prequalifying with your lender is a good way to determine how much house you can afford. You will need cash for a down payment and closing costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment. In addition to your mortgage payments, you will also need to consider the other costs of home ownership. Schools, taxes, services, crime rates, transportation, and zoning are important considerations when selecting a neighborhood. Brokers usually represent the seller, but they can be valuable sources of information for buyers as well. A broker that belongs to the Multiple Listing Service will be able to offer a wider variety of homes to choose from. Remember to consider resalability when buying your home.
**Before You Start
Grab your current household budget so you can consider your financial situation and your ability to make mortgage payments.
Ask family and friends if they can recommend experts, like a lawyer and an inspector, who can help with the home buying process.
Think about your lifestyle and how it might affect your choice of home and neighborhood.
Do a little research on current home prices in the neighborhoods you plan to target.
Topics
1. Buying Your First Home
2. How Much Mortgage Can You Afford?
3. Costs of Buying a Home
4. Ongoing Costs
5. Choosing a Neighborhood
6. Finding a Broker
1. Buying Your First Home
Home ownership is the cornerstone of the American Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban condo for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.
Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.
Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.
2. How Much Mortgage Can You Afford?
Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.
The housing expense ratio compares basic monthly housing costs to the buyer's gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.
The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.
Many home buyers choose to arrange financing before shopping for a home and most lenders will "prequalify" you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.
In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.
How Much Home Can You Afford?
Bob and Janet's combined income is $50,000 a year, or $4,166 a month. Their housing expense ratio of 28% yields a monthly maximum of $1,166 for mortgage, insurance, and taxes ($4,166 x 0.28 = $1,166).
Their total debt ceiling of 36% is $1,583 (4,166 x 0.36 = $1,500). Their monthly debt payments include a $200 car payment, credit card payments of $100, and student loan payments of $200. Subtracting this total of $500 from the $1,500 permitted leaves $1,000 in monthly housing payments.
3. Costs of Buying a Home
Many home buyers are surprised (shocked might be a better word) to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs. All this will probably add up to be between 3% and 8% of your purchase price.
4. Ongoing Costs
In addition to mortgage payments, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Make sure you understand how much you are willing and able to spend on such items.
Condominiums may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to buy, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable home in the neighborhood.
5. Choosing a Neighborhood
Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, taxes, transportation, and town services are other things to look at. Finally, learn the local zoning laws. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.
Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.
6. Finding a Broker
Brokers know the market and can be a valuable source of information concerning the home buying process.
Make sure that the broker has access to the Multiple Listing Service (MLS). This service lists all the properties for sale by most major brokers across the country. Brokerage commissions average 5% to 7% and are split between the listing broker and the broker that eventually sells the home.
Home Buying Costs
Down Payment 0% - 20% of purchase price
Home Inspection $200 - $500
Points $1,000 and up for 1% - 3%
Adjustments 3% - 8% of purchase price
Once you've determined a price range and location, you're ready to look at individual homes. Remember that much of a home's value is derived from the values of those surrounding it. Since the average residency in a house is seven years, consider the qualities that will be attractive to future buyers as well as those attractive to you.
Although it can be difficult, try to remember that you will probably want to sell this home someday. The more research you do today, the better your decision will look in the years to come.
Summary
Buying a home can mean building significant value through the years. Think carefully about how much you can afford to spend and consider borrowing guidelines like those used by Fannie Mae. Prequalifying with your lender is a good way to determine how much house you can afford. You will need cash for a down payment and closing costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment. In addition to your mortgage payments, you will also need to consider the other costs of home ownership. Schools, taxes, services, crime rates, transportation, and zoning are important considerations when selecting a neighborhood. Brokers usually represent the seller, but they can be valuable sources of information for buyers as well. A broker that belongs to the Multiple Listing Service will be able to offer a wider variety of homes to choose from. Remember to consider resalability when buying your home.
Wednesday, October 1, 2008
Your Home and Your Retirement
Many retirees are planning to access home equity, hoping it may make the difference between a comfortable retirement and just getting by. This article considers some of the strategies for tapping home equity, such as moving to a more affordable residence or obtaining a reverse mortgage.
Before You Start
Talk with your spouse or partner about using your home to help finance retirement. Are you in agreement?
Consider whether your plans are realistic. For example, ask yourself whether you could really downsize to a smaller home.
Begin looking into the cost-of-living implications that would be associated with moving to a different part of the country.
Check your most recent retirement account statement to determine whether you're already contributing the maximum amount.
Topics
1. Your Home and Your Retirement
2. Making a Move
3. A Reverse Mortgage: A Tool for Staying Put
4. Payout Alternatives
1. Your Home and Your Retirement
Unlike earlier generations of retirees, who paid off first mortgages and retired at the family homestead, today's Baby Boomers are looking to capitalize on home equity to enhance their retirement savings. Popular strategies for tapping home equity include downsizing to a smaller house or condominium, relocating to an area where the cost of living is more affordable, and taking out a reverse mortgage.
Regardless of which strategy you choose, it's important to be realistic about what your house may be worth when you retire. Home equity may add value to a diversified portfolio, but relying too much on your house to fund your retirement could work against you if the real estate market in your area drops considerably.
2. Making a Move
Selling your existing home and relocating to a more affordable house or condominium may be a reasonable option if you have considerable home equity and the shift won't negatively affect your lifestyle. As part of your research, remember to investigate the overall housing costs in your desired area. For example, real estate values and property taxes typically vary considerably by locale, sometimes even within the same state. Additionally, before relocating to a new area, you might want to spend significant time there to make sure it is compatible with your lifestyle and interests.
When calculating your home's sale price as part of the retirement income equation, be sure to use realistic assumptions. Real estate prices have dropped in recent years. When planning your retirement income, remember the importance of diversification -- owning a portfolio of stocks, bonds, and cash investments in addition to home equity -- to help guard against market swings in any one area, including real estate.
3. A Reverse Mortgage: A Tool for Staying Put
Tapping home equity doesn't necessarily require relocating. A reverse mortgage may be a solution if you have significant home equity and a desire to stay in your existing home. With a reverse mortgage, you receive a source of income by borrowing against your home's equity. Payouts are tax free and may be taken as a lump sum, a line of credit, or an annuity-like payment schedule.
To qualify, you and other owners (such as a spouse or partner) must be at least 62 years of age. You must own your home outright or be able to retire an existing mortgage with the money you receive from the reverse mortgage. As long as the reverse mortgage is in effect, you are responsible for maintaining your home, and for paying taxes and insurance. The loan plus accrued interest is due when you die or sell the house.
When evaluating a reverse mortgage, be sure to consider the fees, which may be substantial. You may have to pay a loan origination fee, in addition to servicing fees assessed over the term of the mortgage. Because of the relatively high fees, many experts recommend a reverse mortgage only if you plan to remain in your home for the long term. Also keep in mind that the amount you owe tends to grow over time, as interest (which is usually based on a variable, rather than fixed, rate) accrues on amounts that are gradually paid out. Over time, a reverse mortgage can completely exhaust the value of your home, leaving little if any assets left over for your heirs.
4. Payout Alternatives
Study payout options associated with a reverse mortgage carefully to determine whether one may work for you.
Payout Option Advantages Drawbacks
Lump sum. You receive a considerable sum. Interest accrues on the entire amount.
Line of credit. You have the flexibility to draw only as much as you need. Fees may outweigh the benefit if you draw only a small amount.
Annuity-like schedule You may receive a source of income for as long as you remain in your home.
Payments are not indexed to inflation.
Summary
Strategies for accessing home equity may include selling your house and moving to a smaller residence, relocating to a community where the cost of living is more affordable, or obtaining a reverse mortgage. Because real estate values may potentially level off or even decline, it's important not to rely too much on the value of your home to finance your later years. Consider using home equity to supplement a diversified portfolio that includes stocks, bonds, and cash investments. Accessing home equity by selling your house may have the greatest appeal if you are able to find alternate housing without significantly compromising your lifestyle. A reverse mortgage may work for homeowners who have considerable home equity and want to remain in their current residence. Payout options typically include a lump sum, a line of credit, or an annuity-type schedule of payments. When evaluating reverse mortgages, review the fees and overall cost of borrowing (total interest paid over time), which may be considerable.
Checklist
Read the fine print before signing any type of reverse mortgage, paying particular attention to details about fees and expenses.
Reinvigorate your traditional retirement saving initiatives by maximizing contributions to your workplace plans and/or IRAs.
If a reverse mortgage will make it impossible for you to pass along the full value of your home to an heir or heirs, consider revising your estate plan accordingly.
Don't base long-term financial plans on the assumption that your home will maintain or surpass its current value.
Before You Start
Talk with your spouse or partner about using your home to help finance retirement. Are you in agreement?
Consider whether your plans are realistic. For example, ask yourself whether you could really downsize to a smaller home.
Begin looking into the cost-of-living implications that would be associated with moving to a different part of the country.
Check your most recent retirement account statement to determine whether you're already contributing the maximum amount.
Topics
1. Your Home and Your Retirement
2. Making a Move
3. A Reverse Mortgage: A Tool for Staying Put
4. Payout Alternatives
1. Your Home and Your Retirement
Unlike earlier generations of retirees, who paid off first mortgages and retired at the family homestead, today's Baby Boomers are looking to capitalize on home equity to enhance their retirement savings. Popular strategies for tapping home equity include downsizing to a smaller house or condominium, relocating to an area where the cost of living is more affordable, and taking out a reverse mortgage.
Regardless of which strategy you choose, it's important to be realistic about what your house may be worth when you retire. Home equity may add value to a diversified portfolio, but relying too much on your house to fund your retirement could work against you if the real estate market in your area drops considerably.
2. Making a Move
Selling your existing home and relocating to a more affordable house or condominium may be a reasonable option if you have considerable home equity and the shift won't negatively affect your lifestyle. As part of your research, remember to investigate the overall housing costs in your desired area. For example, real estate values and property taxes typically vary considerably by locale, sometimes even within the same state. Additionally, before relocating to a new area, you might want to spend significant time there to make sure it is compatible with your lifestyle and interests.
When calculating your home's sale price as part of the retirement income equation, be sure to use realistic assumptions. Real estate prices have dropped in recent years. When planning your retirement income, remember the importance of diversification -- owning a portfolio of stocks, bonds, and cash investments in addition to home equity -- to help guard against market swings in any one area, including real estate.
3. A Reverse Mortgage: A Tool for Staying Put
Tapping home equity doesn't necessarily require relocating. A reverse mortgage may be a solution if you have significant home equity and a desire to stay in your existing home. With a reverse mortgage, you receive a source of income by borrowing against your home's equity. Payouts are tax free and may be taken as a lump sum, a line of credit, or an annuity-like payment schedule.
To qualify, you and other owners (such as a spouse or partner) must be at least 62 years of age. You must own your home outright or be able to retire an existing mortgage with the money you receive from the reverse mortgage. As long as the reverse mortgage is in effect, you are responsible for maintaining your home, and for paying taxes and insurance. The loan plus accrued interest is due when you die or sell the house.
When evaluating a reverse mortgage, be sure to consider the fees, which may be substantial. You may have to pay a loan origination fee, in addition to servicing fees assessed over the term of the mortgage. Because of the relatively high fees, many experts recommend a reverse mortgage only if you plan to remain in your home for the long term. Also keep in mind that the amount you owe tends to grow over time, as interest (which is usually based on a variable, rather than fixed, rate) accrues on amounts that are gradually paid out. Over time, a reverse mortgage can completely exhaust the value of your home, leaving little if any assets left over for your heirs.
4. Payout Alternatives
Study payout options associated with a reverse mortgage carefully to determine whether one may work for you.
Payout Option Advantages Drawbacks
Lump sum. You receive a considerable sum. Interest accrues on the entire amount.
Line of credit. You have the flexibility to draw only as much as you need. Fees may outweigh the benefit if you draw only a small amount.
Annuity-like schedule You may receive a source of income for as long as you remain in your home.
Payments are not indexed to inflation.
Summary
Strategies for accessing home equity may include selling your house and moving to a smaller residence, relocating to a community where the cost of living is more affordable, or obtaining a reverse mortgage. Because real estate values may potentially level off or even decline, it's important not to rely too much on the value of your home to finance your later years. Consider using home equity to supplement a diversified portfolio that includes stocks, bonds, and cash investments. Accessing home equity by selling your house may have the greatest appeal if you are able to find alternate housing without significantly compromising your lifestyle. A reverse mortgage may work for homeowners who have considerable home equity and want to remain in their current residence. Payout options typically include a lump sum, a line of credit, or an annuity-type schedule of payments. When evaluating reverse mortgages, review the fees and overall cost of borrowing (total interest paid over time), which may be considerable.
Checklist
Read the fine print before signing any type of reverse mortgage, paying particular attention to details about fees and expenses.
Reinvigorate your traditional retirement saving initiatives by maximizing contributions to your workplace plans and/or IRAs.
If a reverse mortgage will make it impossible for you to pass along the full value of your home to an heir or heirs, consider revising your estate plan accordingly.
Don't base long-term financial plans on the assumption that your home will maintain or surpass its current value.
Monday, September 1, 2008
Boost a home's sales price
1. Retouch the front shell
If your property's exterior isn't appealing, no one will want to see your newly remodeled kitchen. So property sellers must first ensure that their home projects a cozy, inviting feeling. "The shell--the outside front--is probably the most important area for improvement, the area where you can make the biggest improvement with the smallest amount of cash," says Pat Lashinsky, the president and CEO of ZipRealty. Touching up the paint on the front-entry portion of the house can be an inexpensive but effective way to make the entire property more inviting, Lashinsky says. "Really focus on that outside, external shell," he says. "You would be amazed by the amount of people that drive by a house and say, 'Ah, that's not for me.' And they can tell just by the way the upkeep and the outside looks.
2. Trim the greenery
Ensuring that the lawn, hedges, and flowers are well maintained helps make your home more alluring to prospective buyers as well. Property owners can hire professional landscapers or break out the lawn mower and get busy themselves. "Many people have landscaping that is overgrown and too heavy, and it is concealing a lot of the house," says Paul Zuch, the president of Capital Improvements. "Trim the trees, trim the hedges ... [and] add a little color to the flower beds."
3. Paint the interior
Putting a fresh coat of paint on the home's interior is a cost-effective way for sellers to make their home more appealing to buyers, says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. But when choosing the color, homeowners should be conservative. "The caution is that your favorite color may not be the favorite color of the buyer." Instead, homeowners are best off using neutral colors, Phipps says. "Go with something that is a very light yellow or a light cream with a contrasting white, so it just looks very fresh and crisp . ... Having the paint in good condition is almost more important than the color."
4. Don't forget the floors
Improving the condition of a home's flooring is also a smart move for sellers--and you don't need to refinish wood floors or install new carpets to make them more attractive. "If it's a hardwood [floor], has the floor been buffed?" says David Lupberger, a home improvement expert with ServiceMagic.com. "If you have carpets, have the carpets been cleaned?"
5. Make all major repairs
Because tighter lending standards demand higher down payments, today's home buyers won't have much cash left over for improvements once they've made their purchase. So it's imperative for sellers to make all major home repairs--fixing the leaky roof, rebuilding the front stoop--before they put the property on the market. "Repairs can't be ignored, because nobody has any extra money," Phipps says. To determine what needs to be done, property owners can scrutinize their homes themselves or bring in a home inspector to examine the property professionally. "The home inspection piece I think is something that is a huge value, particularly if there is something that is a question," Phipps says.
6. Put appliances under warranty
To give buyers more confidence in a home's appliances, Phipps recommends that sellers put them under warranty. Sellers can buy home warranties--which cover repair and replacement costs for many home appliances--from several different firms. "If I have got a 40- or 50-year-old house, it is going to be harder for me to persuade a first-time home buyer with a limited amount of cash to buy it because they will say, 'Well, what happens if something breaks down?' " Phipps says. "If I have a home warranty ... that solves that problem."
7. Make energy-efficient home improvements
Increasing your home's energy efficiency is another good way to make your property more attractive to buyers. Many such improvements--such as new windows or better insulation--come with federal tax benefits. In addition, a growing awareness of human impact on the environment means homes that have these upgrades will stand out from other listings. "If you have some cruddy old windows that are leaky and just not energy efficient, you can put in new replacement windows and take advantage of the tax credit," Zuch says. "It's not green washing. Those are really practical things that make your house more sellable." Many contractors will conduct a so-called energy audit free of charge to determine where efficiencies can be created, Zuch says. "If your house is more energy efficient-you use less energy, it's better insulated-it is going to be more desirable for a potential buyer," he says.
8. New light fixtures
Replacing old or broken light fixtures with new ones can also be a low-cost way to add value, Lupberger says. Installing a nice new light fixture in the foyer near the home's entrance can be a particular benefit, he said, because it can make a strong first impression on would-be buyers. Creating an inviting feeling in the interior entryway, in turn, helps get home shoppers more interested in checking out the rest of the property. "I am not going to redo the house," Lupberger says. "But I can update those features so that somebody can walk in and say, 'You know what? [the homeowners] took care of this.'"
9. New stove in the kitchen
While some homeowners might think the only way to jazz up a dated kitchen is a full-on remodeling job, Lashinsky recommends a much less costly alternative: buying a new stove. "If there is an updated stove in the kitchen, it is amazing how that draws people in, and people say, 'Wow, this kitchen is going to be great,' " Lashinsky says. While upscale homeowners may have to shell out for top-of-the-line appliances to maintain their kitchen's décor, others can budget well under $1,000 for the upgrade. "You can get a really nice stove for $700 or $800," Lashinsky says. "You can basically have the look of a new kitchen that is going to be really enticing to someone-and what you are really trying to do is differentiate your house from somebody else's."
Property owners in neighborhoods where most homes have granite countertops can consider making this upgrade as well. But Lupberger says the project makes sense only for homeowners with extremely dated kitchens that are going to serve as a serious impediment to finding a buyer. A real estate agent with experience in the local market can help you determine whether or not the upgrade is essential, he says.
10. Freshen up the bathrooms
Getting rid of mildew stains on the bathroom caulking can boost a home's appeal as well. Such stains "scream, 'These people haven't taken care of this house. It's going to be a money pit,' " Zuch says. Use a razor blade to remove the old caulk, and replace it with new, mildew-resistant caulk, Zuch says. And rather than remodeling the entire space, homeowners can reinvigorate a worn-down bathroom by replacing cracked sinks, Lupberger says.
If your property's exterior isn't appealing, no one will want to see your newly remodeled kitchen. So property sellers must first ensure that their home projects a cozy, inviting feeling. "The shell--the outside front--is probably the most important area for improvement, the area where you can make the biggest improvement with the smallest amount of cash," says Pat Lashinsky, the president and CEO of ZipRealty. Touching up the paint on the front-entry portion of the house can be an inexpensive but effective way to make the entire property more inviting, Lashinsky says. "Really focus on that outside, external shell," he says. "You would be amazed by the amount of people that drive by a house and say, 'Ah, that's not for me.' And they can tell just by the way the upkeep and the outside looks.
2. Trim the greenery
Ensuring that the lawn, hedges, and flowers are well maintained helps make your home more alluring to prospective buyers as well. Property owners can hire professional landscapers or break out the lawn mower and get busy themselves. "Many people have landscaping that is overgrown and too heavy, and it is concealing a lot of the house," says Paul Zuch, the president of Capital Improvements. "Trim the trees, trim the hedges ... [and] add a little color to the flower beds."
3. Paint the interior
Putting a fresh coat of paint on the home's interior is a cost-effective way for sellers to make their home more appealing to buyers, says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. But when choosing the color, homeowners should be conservative. "The caution is that your favorite color may not be the favorite color of the buyer." Instead, homeowners are best off using neutral colors, Phipps says. "Go with something that is a very light yellow or a light cream with a contrasting white, so it just looks very fresh and crisp . ... Having the paint in good condition is almost more important than the color."
4. Don't forget the floors
Improving the condition of a home's flooring is also a smart move for sellers--and you don't need to refinish wood floors or install new carpets to make them more attractive. "If it's a hardwood [floor], has the floor been buffed?" says David Lupberger, a home improvement expert with ServiceMagic.com. "If you have carpets, have the carpets been cleaned?"
5. Make all major repairs
Because tighter lending standards demand higher down payments, today's home buyers won't have much cash left over for improvements once they've made their purchase. So it's imperative for sellers to make all major home repairs--fixing the leaky roof, rebuilding the front stoop--before they put the property on the market. "Repairs can't be ignored, because nobody has any extra money," Phipps says. To determine what needs to be done, property owners can scrutinize their homes themselves or bring in a home inspector to examine the property professionally. "The home inspection piece I think is something that is a huge value, particularly if there is something that is a question," Phipps says.
6. Put appliances under warranty
To give buyers more confidence in a home's appliances, Phipps recommends that sellers put them under warranty. Sellers can buy home warranties--which cover repair and replacement costs for many home appliances--from several different firms. "If I have got a 40- or 50-year-old house, it is going to be harder for me to persuade a first-time home buyer with a limited amount of cash to buy it because they will say, 'Well, what happens if something breaks down?' " Phipps says. "If I have a home warranty ... that solves that problem."
7. Make energy-efficient home improvements
Increasing your home's energy efficiency is another good way to make your property more attractive to buyers. Many such improvements--such as new windows or better insulation--come with federal tax benefits. In addition, a growing awareness of human impact on the environment means homes that have these upgrades will stand out from other listings. "If you have some cruddy old windows that are leaky and just not energy efficient, you can put in new replacement windows and take advantage of the tax credit," Zuch says. "It's not green washing. Those are really practical things that make your house more sellable." Many contractors will conduct a so-called energy audit free of charge to determine where efficiencies can be created, Zuch says. "If your house is more energy efficient-you use less energy, it's better insulated-it is going to be more desirable for a potential buyer," he says.
8. New light fixtures
Replacing old or broken light fixtures with new ones can also be a low-cost way to add value, Lupberger says. Installing a nice new light fixture in the foyer near the home's entrance can be a particular benefit, he said, because it can make a strong first impression on would-be buyers. Creating an inviting feeling in the interior entryway, in turn, helps get home shoppers more interested in checking out the rest of the property. "I am not going to redo the house," Lupberger says. "But I can update those features so that somebody can walk in and say, 'You know what? [the homeowners] took care of this.'"
9. New stove in the kitchen
While some homeowners might think the only way to jazz up a dated kitchen is a full-on remodeling job, Lashinsky recommends a much less costly alternative: buying a new stove. "If there is an updated stove in the kitchen, it is amazing how that draws people in, and people say, 'Wow, this kitchen is going to be great,' " Lashinsky says. While upscale homeowners may have to shell out for top-of-the-line appliances to maintain their kitchen's décor, others can budget well under $1,000 for the upgrade. "You can get a really nice stove for $700 or $800," Lashinsky says. "You can basically have the look of a new kitchen that is going to be really enticing to someone-and what you are really trying to do is differentiate your house from somebody else's."
Property owners in neighborhoods where most homes have granite countertops can consider making this upgrade as well. But Lupberger says the project makes sense only for homeowners with extremely dated kitchens that are going to serve as a serious impediment to finding a buyer. A real estate agent with experience in the local market can help you determine whether or not the upgrade is essential, he says.
10. Freshen up the bathrooms
Getting rid of mildew stains on the bathroom caulking can boost a home's appeal as well. Such stains "scream, 'These people haven't taken care of this house. It's going to be a money pit,' " Zuch says. Use a razor blade to remove the old caulk, and replace it with new, mildew-resistant caulk, Zuch says. And rather than remodeling the entire space, homeowners can reinvigorate a worn-down bathroom by replacing cracked sinks, Lupberger says.
Sunday, August 3, 2008
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