The temptation is strong: Clean up the yard, declutter the house, and put it on the market without spending time and money sprucing the place up for sale. This is especially the case if you anticipate losing money on the sale.
Some real estate agents recommend you do little if anything to get your home ready for sale. This could work if you price the listing to look like a bargain. However, most buyers in today's market are nervous and picky. They aren't in a hurry and they want a house that's move-in ready.
An agent who is looking for a fast sale might steer his or her clients away from doing any fix-up work. It takes a lot of time and coordination, not to mention money, to get a home properly prepared for sale in today's market. Some agents don't want to take on the effort, or haven't the vision to see the home's potential. This could cost you on the sale.
One agent told his clients that they needn't do anything to get their house ready for sale. True, the house had inherent charm and good bones. But, the seller's furniture was much too big to show the rooms off to advantage. The dogs had damaged the hardwood floor and the beautiful garden was overgrown. The house didn't sell until the sellers found another agent who recommended a laundry list of items to take care of before selling, including moving most of the seller's furniture out and having the house staged.
Unfortunately, market values declined between the first and second times the home was listed. Even though the house sold quickly with multiple offers the second time it was listed, it sold for less than it would have if it had showed well the first time it hit the market.
HOUSE HUNTING TIP: Choose an agent to work with who has experience helping sellers prepare their homes for the market. Ask an agent you're thinking about hiring for references. Call past sellers and ask them how effectively the agent helped them get their home sold and whether they made back the money they invested getting the home ready for sale. A good agent should be able to supply you with a list of tradespeople who can help you paint, change outdated floor coverings and light fixtures, etc., at reasonable prices. And your agent ought to be able to provide access to the home for the people you select to help with the fix-up if you are out of town or at work.
Ideally, you should work with your agent who will help you prioritize the things that should be done to bring about a timely sale. For example, an outdated kitchen can usually be improved considerably by painting, changing light fixtures, refinishing or replacing a worn floor, and changing cabinet pulls.
It might make sense to change extremely old appliances and counters. However, it's not a good idea to gut the kitchen and completely remodel it for sale. You won't get that money back when you sell. The aim is to make cost-effective improvements that make your home appealing to the broadest number of buyers possible.
Painting is the least expensive improvement you can make that is likely to return more than you invest, provided you select the right colors. One seller repainted the exterior of his home before he selected a real estate agent. He painted it the same dowdy colors that adorned the house for decades. The first thing the buyers wanted to change was the exterior paint color.
THE CLOSING: For the best result, talk to a color consultant before you paint.
Dian Hymer is a nationally syndicated real estate columnist, and author.
By Dian Hymer
Monday, August 1, 2011
Refi before sale can backfire
Homeowners who anticipate that they will be selling their house within a few years want to net as much from the sale as possible. The usage of the verb "net" indicates that what matters is not how much they receive for the house but how much they have left after repaying the mortgage. Real estate agents counsel borrowers on ways to get the best sale price, such as repairing obvious defects, keeping the house sparkling clean for potential buyers to view, and so on. But some owners view an impending sale as a way to save money on the mortgage if they can refinance into a lower payment. The borrowers who do this often ignore the impact of the refinance on the size of the loan balance that they will have to pay when they sell. Here is an example: The current balance on a 4.125 percent mortgage is $300,000, with a payment of $1,685 and 23 years remaining. The borrower expecting to sell in two years refinances into a new interest-only adjustable-rate mortgage (ARM) at the same rate, reducing the payment to $1,031.
The refinance cost is $6,000, but the borrower reduces his payment by $654, which over two years sums to $15,696. Hence, by his logic, he is ahead by $15,986 minus $6,000, or $9,986.
What he has overlooked is that if he had stayed with his existing mortgage, he would have paid down the balance by $16,307, which would have resulted in net proceeds at sale $16,307 larger. His supposed gain of $9,986 is actually a loss of $6,321.
Of course, if the new loan has a significantly lower interest rate than the existing loan, the refinance could result in larger net proceeds at sale. But if the refinance is profitable over a short period, it would be even more profitable over a longer period, which means that the borrower should do it despite an impending sale rather than because of it.
Can you time a lock to your advantage? Home mortgage prices are based on the secondary market prices of mortgage-backed securities (MBSs), but changes in MBS prices seldom impact mortgage prices immediately. Typically, mortgage lenders set the prices they deliver to their loan officers and mortgage brokers in the morning, after markets open, and keep them unchanged through the day unless MBS changes during the day are large enough to justify the cost of another change.
The MBS market closes at 3 p.m. Eastern Standard Time (EST). Mortgage borrowers who have been cleared to lock by their lender can do it between 3 p.m. and 5 p.m. EST, and sometimes even later. In principle, therefore, a borrower who knows what happened to MBS prices that day could judge whether mortgage prices the next morning would be higher or lower, and therefore whether they should lock then or wait another day.
Some advisors encourage borrowers to lock as soon as possible, on the grounds that 1) borrowers can't predict future interest rates, and 2) locking ASAP may prevent larcenous behavior by the lender. Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
By Jack Guttentag
The refinance cost is $6,000, but the borrower reduces his payment by $654, which over two years sums to $15,696. Hence, by his logic, he is ahead by $15,986 minus $6,000, or $9,986.
What he has overlooked is that if he had stayed with his existing mortgage, he would have paid down the balance by $16,307, which would have resulted in net proceeds at sale $16,307 larger. His supposed gain of $9,986 is actually a loss of $6,321.
Of course, if the new loan has a significantly lower interest rate than the existing loan, the refinance could result in larger net proceeds at sale. But if the refinance is profitable over a short period, it would be even more profitable over a longer period, which means that the borrower should do it despite an impending sale rather than because of it.
Can you time a lock to your advantage? Home mortgage prices are based on the secondary market prices of mortgage-backed securities (MBSs), but changes in MBS prices seldom impact mortgage prices immediately. Typically, mortgage lenders set the prices they deliver to their loan officers and mortgage brokers in the morning, after markets open, and keep them unchanged through the day unless MBS changes during the day are large enough to justify the cost of another change.
The MBS market closes at 3 p.m. Eastern Standard Time (EST). Mortgage borrowers who have been cleared to lock by their lender can do it between 3 p.m. and 5 p.m. EST, and sometimes even later. In principle, therefore, a borrower who knows what happened to MBS prices that day could judge whether mortgage prices the next morning would be higher or lower, and therefore whether they should lock then or wait another day.
Some advisors encourage borrowers to lock as soon as possible, on the grounds that 1) borrowers can't predict future interest rates, and 2) locking ASAP may prevent larcenous behavior by the lender. Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
By Jack Guttentag
Up to 1M foreclosure filings pushed to 2012, beyond
RealtyTrac: Foreclosure activity drops to lowest level in nearly 4 years
Foreclosure activity fell 29 percent in the first six months of this year compared with the first six months of 2010, according to a report from foreclosure data site RealtyTrac.
A total of 1.17 million properties nationwide received foreclosure filings -- including default notices, auction sale notices or bank repossessions -- in the first half of this year, down 29 percent from the first half of 2010 and 25 percent from the second half, the report said. The nation's foreclosure activity rate was 1 in 111 housing units, or 0.9 percent of all units.
Foreclosure activity fell year-over-year for the ninth straight month in June, though it rose nearly 4 percent month-to-month. For the second quarter as a whole, filings fell nearly 11 percent compared to the first quarter and 32 percent compared to the second quarter of 2010, to a total of 608,235 properties. That's the lowest quarterly total since fourth-quarter 2007, the report said.
That low is not from an improving housing market or economy, however, said James J. Saccacio, RealtyTrac's CEO, in a statement.
"Processing and procedural delays are pushing foreclosures further and further out -- we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later," he said. "This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number."
For homes foreclosed in the second quarter, it took an average of 318 days for a home to go through the foreclosure process from the initial notice to the completed foreclosure, a 14.8 percent rise from 277 days in second-quarter 2010. The state to see the longest processing timeline was New York, at an average of 966 days, followed by New Jersey (944 days) and Florida (676 days).
By contrast, Texas (92 days) and Virginia (106 days) had the shortest timelines.
Bank-owned properties (REOs) sold in the second quarter took an average of 178 days to sell after being foreclosed, an 8.5 percent rise from 164 days in second-quarter 2010.
Properties took the longest to sell in New York (an average of 309 days), New Jersey (285 days), and Minnesota (268 days).
Properties in the foreclosure process, typically short sales, sold in the second quarter took an average of 213 days to sell from the beginning of the foreclosure process, up from 195 days in second-quarter 2010, the report said. Nevada had the nation's highest foreclosure rate in the first half of 2011, with 1 in 21 units receiving a foreclosure filing -- a total of 53,217 properties. That's a decrease of 17 percent from the first half of 2010.
Foreclosure activity in the state fell year-over-year for the fifth straight month in June, despite a 19 percent jump in bank repossessions, the report said.
Arizona and California had second- and third-highest foreclosure rates among the states, with 1 in 36 units and 1 in 51 units, respectively, receiving a filing.
Properties in California accounted for more than a fifth of all U.S. properties to receive a foreclosure filing. The state had 263,500 properties with foreclosure filings -- the highest total among all states, even though it declined 23 percent compared to the first half of 2010.
A total of 113,641 properties in Florida received a foreclosure filing in the first half of 2011, a 59 percent drop from the same period a year ago.
Although overall foreclosure activity fell year-over-year in the state in June, on a month-to-month basis default notices and scheduled auctions rose 44 percent and 17 percent, respectively.
Arizona had the third-highest state total, with 77,525 properties receiving a foreclosure filing in the first half of the year. Foreclosure activity in the state fell 15 percent compared to the first half of 2010.
By Inman News
Foreclosure activity fell 29 percent in the first six months of this year compared with the first six months of 2010, according to a report from foreclosure data site RealtyTrac.
A total of 1.17 million properties nationwide received foreclosure filings -- including default notices, auction sale notices or bank repossessions -- in the first half of this year, down 29 percent from the first half of 2010 and 25 percent from the second half, the report said. The nation's foreclosure activity rate was 1 in 111 housing units, or 0.9 percent of all units.
Foreclosure activity fell year-over-year for the ninth straight month in June, though it rose nearly 4 percent month-to-month. For the second quarter as a whole, filings fell nearly 11 percent compared to the first quarter and 32 percent compared to the second quarter of 2010, to a total of 608,235 properties. That's the lowest quarterly total since fourth-quarter 2007, the report said.
That low is not from an improving housing market or economy, however, said James J. Saccacio, RealtyTrac's CEO, in a statement.
"Processing and procedural delays are pushing foreclosures further and further out -- we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later," he said. "This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number."
For homes foreclosed in the second quarter, it took an average of 318 days for a home to go through the foreclosure process from the initial notice to the completed foreclosure, a 14.8 percent rise from 277 days in second-quarter 2010. The state to see the longest processing timeline was New York, at an average of 966 days, followed by New Jersey (944 days) and Florida (676 days).
By contrast, Texas (92 days) and Virginia (106 days) had the shortest timelines.
Bank-owned properties (REOs) sold in the second quarter took an average of 178 days to sell after being foreclosed, an 8.5 percent rise from 164 days in second-quarter 2010.
Properties took the longest to sell in New York (an average of 309 days), New Jersey (285 days), and Minnesota (268 days).
Properties in the foreclosure process, typically short sales, sold in the second quarter took an average of 213 days to sell from the beginning of the foreclosure process, up from 195 days in second-quarter 2010, the report said. Nevada had the nation's highest foreclosure rate in the first half of 2011, with 1 in 21 units receiving a foreclosure filing -- a total of 53,217 properties. That's a decrease of 17 percent from the first half of 2010.
Foreclosure activity in the state fell year-over-year for the fifth straight month in June, despite a 19 percent jump in bank repossessions, the report said.
Arizona and California had second- and third-highest foreclosure rates among the states, with 1 in 36 units and 1 in 51 units, respectively, receiving a filing.
Properties in California accounted for more than a fifth of all U.S. properties to receive a foreclosure filing. The state had 263,500 properties with foreclosure filings -- the highest total among all states, even though it declined 23 percent compared to the first half of 2010.
A total of 113,641 properties in Florida received a foreclosure filing in the first half of 2011, a 59 percent drop from the same period a year ago.
Although overall foreclosure activity fell year-over-year in the state in June, on a month-to-month basis default notices and scheduled auctions rose 44 percent and 17 percent, respectively.
Arizona had the third-highest state total, with 77,525 properties receiving a foreclosure filing in the first half of the year. Foreclosure activity in the state fell 15 percent compared to the first half of 2010.
By Inman News
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