Series: 20 Best-Kept Real Estate Secrets, Part IV

Now that the summer has wound down, it's time to get back to the grindstone and finish off our series with the final five tips for buyers.  Get those pencils up & ready!

6.  Avoid Sleeper Costs
Owning a home comes with a price, and most buyers are unaware of the financial impact a home can have on a budget.  Besides the obvious fix-it issues and DIY projects, things outside of your home can add up, also.  When purchasing, ask your Realtor if the area you are looking in is due for a tax increase.  Are there any special tax assessments you should be aware of?  One of the best exercises I suggest for renters is to live with your "future amount" even while renting.  For instance, let's say your rent is $1,100 per month, but the homes you are looking to purchase sit in the range of a $1,600 monthly mortgage payment - save the extra $500 per month and see how well you fare.  You might even - gasp - save that extra $500 per month for a downpayment!

7.  Don't Get Emotionally Attached
To all you right-brain thinkers out there, this one's a doozy.  As a Realtor, you see it all the time - a young couple walks into a beautifully staged home.  One loves it ("the Lover"), one hesitates ("the Logic").  Enter the guilt trip from the Lover as to why the Logic needs to even think about it, start an argument, make the Realtor uncomfortable, and everybody walks out mad.  Sound too familiar?  Unfortunately for the Lover, buying on emotions will break your heart in the end.  All buyers need to understand that there is a HUGE difference between emotions and instincts - you're buying a home, not dating it.  If you're going to be attracted to anything, get attracted to the logistics of the home...not the pretty outfit it had on the first night you met.

8.  Let's Get Physical
And, no, I don't mean the Olivia Newton-John song.  I mean give your prospective home a physical.  ALWAYS hire an inspector to go beyond skin deep - they are your "i" dotter and your "t" crosser.  All home inspectors now must be licensed in Illinois, so take advantage of that - they will be the ones that can tell you whether the homeowner did a band-aid job or truly fixed an issue.  It generally costs less than $200, but can be worth thousands of headaches solved.

9.  Research Before Bidding
Your Realtor should know there is a secret science to bidding.  There are two major things your opening bid should be based on: 1) what you can afford, and 2) what you truly believe the property is worth.  Is it an aggressive price?  Is your offer within 10% of what other homes sold for in that neighborhood?  Your bidding should depend on what the market is doing, and your Realtor should be the expert.  Here's an added tip - every seller respects a bid that's an oddball number (like $359,367) and takes it more serious...it shows you've done your homework.

10.  Stalk Your Neighbors...
...in a good way.  When seeing a home during an Open House, everything is perfect.  But that is during a quiet weekend.  Drive through the neighborhood during the week to get a real feel for it.  In my opinion, you should see a prospective home at least once in the morning, around noon, and at night to really learn the neighborhood.  Look for amenities - does the area have sufficient street lights?  If you have a young family, is there school bus stopping nearby?  What about public transportation?  Even if you don't have a family, buying a home in the right school district could affect your value up to 20%.  It's definitely something worth considering.

Series: 20 Best-Kept Real Estate Secrets - Part III

Welcome back to the last session we have for Sellers this summer.  No matter what the economy is doing, these tips are useful in any market.

6.  Don't Over-Upgrade
Before you start knocking down walls in a "what-started-as-a-do-it-yourself-just-turned-into-my-nightmare" sort of way, double think it.  Big Mistake.  When it comes to a home, minor improvements are more important in the end than the major ones.  Simple fixes are re-painting walls and getting inexpensive new curtains.  Always ask yourself, "What things ar getting the most use in this home?"  Handles, closet tracks, leaky faucets...fix those first.  When buyers see little problems like those, it makes them think more is wrong.  Besides, you can spend $40,000 on a new kitchen that won't fit that perfect buyer's lifestyle, anyway - so just make sure there is no water on the floor.  Leave the dreaming to them.

7.  Take the "Home" Out of Your House
As much as everybody rants and raves about your bubbly personality, take it out of your home.  The more personalized your home is, the less buyers can see themselves in it.  Your pride in your home could cost you in the long run.  Get rid of about 1/3 or your things, showcase your floor plan and maximize space.  Also, consider using a home stager to set it up in the best possible light - it could be the difference between something they "may" like and something they "have to live in."

8.  Kitchen First
Remodeling your kitchen will, on average, get you about an 85% return on your investment.  Even minor fixes can make a so-so kitchen shine - paint the walls and change the hardware on the cabinets.  If you can't afford to replace all of the appliances, try to put in at least one stainless steel appliance.  That way, you'll have buyers saying, "At least we won't have to buy a "fill-in-the-blank" instead of "We'd have to re-do the entire kitchen."  Lastly, save the bright blue and yellow kitchens for the Greek Isles - keep yours neutral.  As nice as it may look to the eye, the buyer's mind is figuring out exactly how much it will cost to fix it.

9.  Always Be Ready To Show
Here is a reality that not many Realtors will tell you as a seller:  You are now on buyer schedules.  Unfortunately in this day and age, that might mean you will have a showing at 7:00 or 8:00 in the evening.  That also means you could have a showing at 7:00 or 8:00 in the morning, which means the home needs to be in tip-top shape at all times.  On average for today's market, it typically takes between 8-9 showings for every bid you get.  So DVR that "CSI: Miami" and get out of that home!  Buyers can't see their new lives in your home with you on the couch.

10.  First Impressions are the Only Impression
Though your new soaker tub/whirlpool in the master bath is a great new feature, buyers are judging the exterior of your home before they even walk through the door.  The average buyer takes a measly 8 seconds to decide on buying your home...so you know what that means?  Your entranceway could be one of the most important "humps" to push them over.  Fix it up, clear the clutter, and make it inviting.  After all, no buyer will remember your fancy new tub if they have to step over muddy shoes, backpacks, and coats.

That's it for the Selling Side!  I hope everybody learned a little (if not a lot)...and keep on improving!

Series: 20 Best-Kept Real Estate Secrets - Part II

Welcome back to the Series of the Summer!  Let's take a look at the buyers today, shall we?

BUYING SIDE
1.  Keep Your Money Where It Is
Congrats on the new BMW that will match perfectly in the driveway of that home you have an offer on - unfortunately, the car might be the only place you have to live in once the mortgage underwriters see that on your credit.  Loan Status: DENIED.  In the 3-6 months leading up to the purchase of a home (no matter what the price is), don't change anything in your financial DNA.  Lenders want to see a complete and risk-free paper trail, so keep your assets where they are.  The age of technology we live in doesn't leave much room for error on your end, so don't try to paint that "false picture" by randomly shuffling your birthday cash advances you convinced your grandma to send you into your "New Home" account.  It won't get you very far.

2.  Get Pre-Approved
Chances are, any Realtor that is worth your time will make sure you have a pre-approval letter from a lender.  This is done for a few reasons:  1) to make sure you aren't falling in love with a home that is out of your price range, and 2) to make sure you aren't using the Realtor as a tour guide.  It's also good to remember the difference between a "Pre-Qualification" and a "Pre-Approval."  A Pre-Qual only requires basic information, and generally does as much good as spinning a "Wheel of Fortune" to see what they will give you - unreliable.  A Pre-Approval requires an actual mortgage application and financial background, giving the lender a pretty clear picture of what you're capable of.  So go ahead - flex those financial muscles and show 'em what you got.

3.  Draw The Line
Save the awkwardness at the Fourth Of July BBQ with the neighbors.  Get a property survey done to make sure you have a good idea of where your property lines are.  Some Realtors might say it's a nuisance, but it will be completely worth it in the end when you figure out your land actually goes back another 20 feet from where you thought.  If you don't have the documentation from the start, you could have extra legal troubles, fees, hassles, and costs down the road when your neighbor decides to build an amphitheater in his backyard that has most of rows "R" through "V" in yours.

4.  Don't Time the Market
Trying to guess when the market is at rock bottom is like trying to guess the number of jellybeans in that jar at the carnival - with some careful studying, you can be close, but you'll rarely be spot-on.  Don't obsess with it - Real Estate goes up, then down, then back up again, etc.  Instead of waiting for "THE" low, just buy "IN" the lows.  People often ask me when the best time to buy is, and my answer is always simple:  The best time to buy is when YOU find your dream home...period.

5.  Bigger Isn't Always Better
Won't your family be so impressed this Thanksgiving when they see you have the largest home in the neighborhood?  Absolutely - but future buyers probably won't.  The biggest homes in a neighborhood generally only appeal to a small audience.  Your home value (even if it is huge) will only go up as much as the other homes around you.  Real Estate 101:  Buy the worst home on the block, and make it a fixer-upper.

Again, I hope you're writing this stuff down.  Back to sellers next week!

Series: 20 Best-Kept Real Estate Secrets

I've decided to do a four-part series to share with you all the best-kept secrets in the Real Estate industry.  Some you may already know - but some will shock you.  I will have 10 buyer secrets and 10 seller secrets in all, so enjoy!

Selling Side

1.  Underprice It

Risky?  Yes.  Worth it?  Absolutely.  This strategy, according to reknowned real estate mogul Barbara Corcoran, is the single best strategy when selling your home.  All you have to do is take market value, shave off 15%-20% with your asking price, and you will be stampeded with buyers and multiple bids, even in the worst markets.  Even if you price it around market value, think about re-evaluating it after about 30 days.  And ALWAYS remember - 9 out of 10 times, the first offer you get will be the best offer.  NEVER refuse that first bid.

2.  Clean Your Closets

Yes, buyers will open those closet doors, and every closet should be half-empty.  Storage and closet space is at a premium, and every square inch of storage should be celebrated.  Go ahead, get a forward-shot at the moving process, and clean out those clothes you probably never wear anyway.

3.  Light It Up

The second most important thing to buyers (after location) is good light.  In order to maximize the light in your home, take down drapes, clean windows, and up your wattage in your light bulbs.  Whichever area you and your Realtor decide has the most impact should contain the focus light.  Save the "mood lights" for the Olive Garden, and crank it up!  Also remember that in this busy world, some buyers now have to look at homes after sunset, so don't forget outdoor lighting - it makes a big difference.

4.  Play the "Agent" Field

Awesome - you found out your college buddy is a realtor while you were throwing back Jose Cuervo at the bar.  Working with him to sell your home should be a breeze!  Wrong.  Hiring the wrong broker could be disastrous.  You have a right (and a responsibility) as a consumer to examine your options.  Interview more than one agent (even if it is your friend).  One of the best things to do is make the Realtor sell your home back to YOU - after all, if he or she can almost make you not want to move, can you imagine what they are capable of with a new buyer?  Make sure your realtor embraces every ounce of new technology available in order to best sell your home. 

5.  Beware of Pets

ANY pets should be out of the home for showings.  Nothing makes a buyer lose interest faster than the smell of pet food or hair.  In a recent poll, most buyers automatically assumed that, when a pet was present in the home, there was pee on the floor.  I was recently showing a buyer around a home when we noticed a cat.  Not knowing if my clients were allergic or not, I walked over to the cat to try and put it downstairs in the basement - needless to say, when the hissing and scratching started, my buyers didn't care how beautiful the hardwood floors were...we left.  When your home is a pet-free zone, it will sell much faster.

And so ends Part I...I hope you all are taking notes!

6 Worth-The-Price Fix-Ups

So you want to put your home up on the market.  In economic times such as these, you're going to want to try anything and everything that will be able to set you apart from the competition.  Do-it-yourself projects give sellers the biggest return for their buck.  Below are 6 very simple (& cost effective) ways to smidge ahead of that annoyingly perfect home for sale around the corner from you.

1.  Cleaning and Decluttering.

Cost:  $290

Return:  $1,990

Remove any personal items, declutter countertops, organize closets and shelves, and make the home shine like never before.

2.  Brightening.

Cost:  $375

Return:  $1,550

Take a Windex swipe at all of your windows - inside and out.  Think of replacing some of those curtains you've had for years.  Update lighting fixtures.  Remove anything that blocks light from the windows.

3.  Smart Staging.

Cost:  $550

Return: $2,194

If HGTV doesn't give you enough inspiration, think about hiring a professional stager.  Not only does it add a pair of fresh eyes to a home you've seen for the past few years, but it also gives you the chance to step out of your bubble and try something new.  Rearrange furniture, bring in new accessories, incorporate artwork, and play soft music in the background for all showings.

4.  Landscaping Enhancements.

Cost:  $540

Return:  $1,932

Punch up the curb appeal by adding bark mulch, bushes, and flowers.  For quality plants and flowers already around your home, make sure they are well-cared for and manicured.  If you are still stumped, try going to your local nursery for some inspiration.  Remember - color adds value.

5.  Repairing Electrical or Plumbing.

Cost:  $535

Return:  $1,505

Fix the leaks under the sink and remove mildew stains (especially because it makes people think of that terrible "mold" word).  Update the electrical system with new wiring for modern appliances, fix lights or outlets that don't work, and replace old plug points with new safety features.

6.  Replacing or Shampooing Dirty Carpets.

Cost:  $647

Return:  $1,739

Nobody wants to walk through a home thinking they're going to have to spend money right away.  Help clear the air by getting the carpets cleaned or replaced, giving your buyers the chance to truly see the potential for themselves in your home.  If you have hardwoods, see if there is something you can do for those late-night creaky spots.

Whether you hire out or do them yourself, these six things can make a huge difference in the way your home is seen.

Foreclosures and the Twin Cities

So for those who don't know, I have a brother that lives in the Twin Cities area of Minnesota.  I just recently read through this article and thought he would be interested in it.  Hopefully, you all are, too!

Since March of 2010, median sales prices of the homes in the 13-county Twin Cities metro area fell 15.2 percent to $140,000 from a report recently released by the Minneapolis Area Association of Realtors (MAAR).  Last month, distressed properties (most of them foreclosures) made up 55% of the closed sales.  Those closed sales fell 3.5%, the number of new listings coming onto the market fell 30.2%, and pending sales fell 17.6% year-over-year.

MAAR attributes these declines partly to the expiration of the federal homebuyer tax credit program that spurred sales in the Spring of 2010.  Though the outlook may seem a tad dismal, the association showed a few positive signs on the road to recovery.  The area has maintained strong corporate balance sheets, unemployment claims have slowed down, and there have been 13 months of solid job growth. 

So what does this mean to the sellers in the area?  They can expect their up-to-date home and on-time mortgage history to be compared with distressed, and more often cheaper, properties around them. 

In the metro area, sellers (including distressed properties) received around 88.6% of the original asking price last month, and was on the market for an average of 152 days, a 17.8% rise year-over-year.

According to recent comments from Realtors/Brokers in the Twin Cities, the fastest-selling properties are bank-owned because their pricing continues to be the lowest of all median prices.  The slowest-selling properties are townhomes, attributed to the low demand and high supply.

Looking into the future, worries lay beyond the Twin Cities area to the rest of the country.  Financing through the FHA is increasing as they raise the monthly mortgage insurance price, increasing interest rates seem to be looming, and the government is considering big changes to the mortgage market. 

Optimistically speaking, however, there are many buyers now realizing they can own for less than rent, and that attractive prices are here to stay for a while.

For those readers in the Twin Cities Area, including you, my dear brother, maybe it's time to start grabbing those deals.  But then again, when was the last time you listened to advice from your older bro?  =)

Loan Modification Programs - Success?

With another wave of foreclosures hitting the market, it might be time for a lot of homeowners to face a hard and difficult reality.  The big "F-word" is something nobody wants to speak about because of the harsh stigma attached to it.  When I asked some fellow acquaintances what the word "foreclosure" meant to them, some of the popular words were "poor," "dirty," and "lots of work."

That, to me, is unfortunate.  Those words place a stereotype on the millions of Americans that are going through a difficult situation, and are having to use this as a last resort.  Does that make them poor?  No.  Does it make them or their home dirty?  No.  In fact, I applaud the many people who have fought to the death to do everything they could to keep their home.

Unfortunately, the resources available to those homeowners have more bark than bite.

The Troubled Asset Relief Program (TARP) was funded by the government to help absorb the overwhelming number of foreclosures set to hit the market.  This past week, the Congressional Oversight Panel explained that TARP funds were to be used "...in a manner that protects home values, college funds, retirement accounts, and life savings; preserves homeownership and promotes jobs and economic growth; maximizes overall returns to the taxpayers of the United States."

So was it Mission Achieved?

One of the ways TARP was set to protect home values (both of those consumers in financial crisis and those who weren't) was through the Home Affordable Modification Program (HAMP).  It was supposed to prevent three to four million foreclosures.  To date, the plan is on track to help only 700,000 to 800,000 homeowners.  That would be about 25% of the goal - you be the judge.

Another program initiated to help was HOPE for Homeowners.  Established in 2008, it permitted the FHA to insure refinanced distressed mortgages.  Due to poor initial design, lack of flexibility, and reliance on voluntary principal, it was only able to help a handful of families refinance.

Success is measured on different scales by different perspectives.  TARP was set up to help home values from being crushed under the blanket of foreclosures.  In my opinion, the only thing it seemed to do was delay the inevitable.