Category: Buying & Selling Homes

What to Consider Before You Buy a Foreclosed Home

A foreclosed home may be a great way to get a sweet deal on a house—but buyer beware!

Buying a Foreclosed Home

Photo: Flickr

With almost a third of the home sales in this country consisting of properties in some stage of foreclosure last quarter, purchasing a foreclosed home is a great way to pick up a terrific deal on a house. But foreclosed homes that have been abandoned or neglected for months—or even years—often come with hidden costs that can turn that bargain into a money pit. Here, a group of experts offer their top tips on steps to take if you’re in the market for a foreclosed home.

1. Invest in a home inspection. “For about $300-$400 dollars, a home inspector can provide a complete report on the structure, mechanical and major components of the home and property,” says Greg Herb, a licensed realtor and owner of Herb Real Estate in Boyertown, Pennsylvania. Charles Gifford, a licensed home inspector and owner of Amerispec in Jacksonville, Florida, agrees, adding that a home inspection by a properly credentialed home inspector will give you “a better picture of what you are buying and provide you with the framework to prioritize your repairs—or to walk away if it’s too much to handle.”

2. Seek out information on the house’s history. Many states require sellers of real property to complete a Seller’s Property Disclosure Statement (SPDS) as a part of any transaction. “The SPDS typically reveals any known material defects related to the property and provides the buyer with a historical perspective of the home, its maintenance, as well as any repairs or additions performed under the previous ownership,” says Herb. Often, however, these statements have certain exclusions, such as when a home is transferred between a husband and wife or between siblings. Another common exclusion is when a third-party seller, such as a bank or lending institution, owns the property as a result of a foreclosure. “When you purchase a foreclosure property from a bank that’s never been in the home, you lose the historical perspective as a buyer,” says Herb, who adds that a home inspection can help you learn about changes that may have occurred over the life of the property.

3. De-winterize the home. According to Gifford, who is also a member of the American Society of Home Inspectors (ASHI), if you plan to purchase a home that’s been unoccupied for several months, “the first thing you should ask is, ‘Are the utilities turned on?’” In foreclosed homes in many parts of the country, “the water is off, traps are filled with environmentally friendly anti-freeze, and water lines may be pressurized with air or blown out and fully drained,” to keep pipes from freezing and breaking, explains Gifford. Prior to a home inspection, the lines will need to be pressure-checked and energized. And, according to Gifford, you may need a licensed electrician to conduct a safety check on the property’s electricity before power is restored. “Each municipality has its own rules,” he says, “and out-of-town buyers may be required to pay a fee to turn on power and things can get complicated if there are three or four utilities to call before you can get everything operating. A good real estate agent should be able to provide you with referrals.”

4. Check for plumbing problems. The most catastrophic problems in abandoned or foreclosed homes are often caused by broken plumbing pipes or leaks. “Sometimes when you dig beneath the surface of a leaky toilet bowl that’s been shoddily repaired you’ll find that you not only have to replace the lead bend, but also whole floors, floor joists, and drywall that’s rotted or contains mold,” says Matthew Barnett, a licensed home inspector and owner of Brooklyn, New York-based Accurate Building Inspectors. An ASHI member, Barnett says controlling a mold problem can cost anywhere from a couple of hundred dollars to $20,000-$30,000 or more to repair and replace whole floors and walls made of plaster or drywall.

5. Investigate mechanical, water-heating, and electrical systems. “In abandoned houses with forced-air systems, dirt and debris and even small animals accumulate in the duct work,” says Barnett, “and if humidity has been around boilers or furnaces for long periods of time, the heat exchangers can corrode and you’ll need to replace them altogether.” This can cost between $3,000-$5,000, he says, depending on the type of system you’ll need. “Some utilities won’t light the pilot light of gas systems if the filters are dirty for fire safety,” adds Andrea Johnson, a Portland, Oregon-based licensed real estate broker and founding member and partner of U.S. REO Partners. This means you’ll need to assume the cleaning expense to test whether they’re operable.

Buying a Foreclosed Home - Signage

Photo: Flickr

6. Look for signs of deferred maintenance. “When owners simply give up and stop taking care of their home, there will be lots of maintenance issues, like the need to clean the gutters, clear debris off the roof, cut back overgrown vegetation, and caulk/seal tile in showers and tubs,” says Gifford, who adds that in certain distressed areas it isn’t uncommon to find that appliances, condensing units, and ceiling fixtures have been removed altogether. According to Barnett, “cheap repairs, like using duct tape or plumber’s putty over a leaking pipe or unprofessional wiring of a fan” can also lead to deeper problems, like mold or fire hazards, which may require costly fixes down the line.

7. Check for foundation cracks, roof, leaks and other exterior damage. “We tend to see it all—bad roofs, structural issues, water damage, and other big-ticket repair items,” says Gifford. “In arid climates, like Texas, the foundations of houses need to be watered or they can crack and ruin the house,” adds Johnson. For a home with a pool, Barnett recommends contacting a pool service to be sure the underground piping and equipment isn’t cracked or clogged. “A normal house inspection will cover the general condition of the pumping and filtering, the patio area, coping stones, and skimmers, but a pool service can try to get the system up and running to see if there’s any significant equipment damage,” he says. If there’s a problem, the owner may give you credit to get it running properly again.

8. Conduct a sewer scope. Especially for homes more than 20 years old, Johnson suggests investing in a sewer inspection. “Lines can be broken by tree roots,” she says, “or they may not be properly connected to public systems.” The lines may also be rotted, clogged, or damaged. A plumbing company can snake a video camera through the line to determine its condition.

9. Resolve any liens. “Many municipalities have regulations regarding the maintenance of properties,” says Herb. “If a bank owns a property, it will generally keep a lawn cutting schedule, but if it fails to do so, the municipality can place a lien on the property if it has to come in and maintain the lawn itself,” he says. “Any number of other liens may have been placed on the property by unpaid contractors, utilities, homeowners associations, and the like,” says Johnson. Prior to closing on a property, you’ll need to make sure all liens are thoroughly investigated by you and a title officer and remedied before title can be conveyed from the previous owner to you.

10. Re-key all the locks. “A lot of houses are on a master key system,” says Johson. “That means countless brokers, contractors, appraisers, and other people could have that key.” If you purchase a foreclosed home, she advises protecting yourself and your property by immediately installing new locks with new keys throughout before you move in.

About the author: Jean Nayar is a licensed real estate agent with Bond New York and the author of several books on decorating and design, including The Happy Home Project (Filipacchi Publishing), which was released this June.

What’s My House Worth?

Read expert tips to calculate a home’s value in a volatile market.

What's My House Worth?


Housing used to be a fairly safe investment — you put your money in and, in a few years when it was time to sell, your house would be worth more than you paid for it. Unfortunately, many sellers are discovering that those gains in home equity they thought they had gained during the boom years are nothing more than wistful memories.

That’s not entirely true for everyone, however: Even in this brutal real estate market, there are still areas where housing prices are holding steady or even increasing.

How can you know where you (and your home) fit in? It’s not an easy answer. Here are six tips for pricing your home correctly in a volatile housing market.

Prepare for a Reality Check
 If you bought your home at the height of the market (or if you cashed out home equity when times were flush), you may be in for the seller’s version of sticker shock. Real estate experts say that even when homeowners recognize that the value of houses all around them has fallen, they often still hold on to outdated ideas about what their own property is worth. If you’re getting ready to sell, it’s time for a serious reality check, says Cincinnati, OH-based real estate appraiser Lou Freeman.

Talk to More than One Realtor
When prices are going down and the volume of sales has slowed to a trickle, it may be time to talk to real estate professionals who work with buyers, at least for the purpose of determining the right price for your home. Working with a Realtor® who has a great record as a seller is usually the best first step.

“It’s so important to hear what buyers are thinking in today’s market,” says Katie Wethman, a certified public accountant and Realtor based in McLean, VA. “Too many agents — especially the ones with the most experience in the business — work primarily with sellers, and they never hear the most common objections of buyers.” Wethman says in this market, sellers might even consider working with someone who is primarily a “buyer’s agent,” or someone who specializes in helping buyers find homes. She says having them help you stage your home and market it may actually help you sell more quickly since they know precisely what feedback they’re getting from people currently looking.

Another reason to shop around is to make sure that you’re working with someone who not only knows the area and the market but is realistic about the current state of sales.

Use Your Comps Correctly
Any real estate expert will tell you one of the most powerful pricing tools anyone has are what’s called “comps,” or comparative listings. These are statistics for recently sold homes similar to yours, usually in location, size and/or amenities. But while any licensed Realtor or appraiser will have access to comps, it’s not always easy to choose the right ones or to read them properly.

First, make sure you’re looking at what has actually sold rather than what people with comparable properties are listing them for. “Too many owners focus on what other people are asking for their homes rather than what they’re actually getting for them,” Wethman says. And when you’re looking selling prices of comparative properties, pay close attention to the date the deal closed. “Even if a comp is just a few months old, you must apply regional trend data: If the market has dropped five percent in the last three months, you need to take that comp from three months ago and apply a greater than five percent drop to that price. Too many people price at the last sale without that extrapolation and they end up chasing the market down.”

“There is a saying in real estate that you can’t be objective about your own home,” Freeman says. “It’s true. When a Realtor tells you that the home you bought six years ago for $303,500 will now only fetch $285,000, you may find it hard to believe.”

Sometimes sellers ignore expert advice because they have a number in mind that they can’t get away from, says Todd Huettner, commercial and residential real estate financing broker. If you can’t get past that number and you don’t have to sell, it’s probably time to just sit on your investment and wait out the current storm. But sellers who have to divest themselves of their property are going to have to face some harsh realities.

“What you paid for your house has nothing to do with its current value,” he says. “What you ‘need to get out of the house’ has no bearing on current value, either.” This fact can be a harsh reality check when you consider you need to receive a certain dollar amount on the sale of your home in order to pay off your current mortgage.

To add to the complication of reading comps correctly, your Realtor needs to know and understand your unique situation. “Not every market is declining,” Wethman says. “Even in declining markets, there are neighborhoods that are doing just fine.”

Consider an Appraisal
If you’re still not feeling confident in your analysis of your home’s value, it’s worthwhile getting an appraisal, say the experts.

“Most homeowners depend on their Realtor to help price their properties, and Realtors usually have a great deal of knowledge about what is and what isn’t selling in any particular neighborhood or at a particular price point,” Freeman says. “But the cost of an estimate by a state licensed or certified appraiser who is familiar with your neighborhood could save you months of extended marketing time and thousands of dollars in carrying costs by helping you price your home correctly from the start.”

Make sure you choose someone who understands not only your area but your purpose in getting the appraisal. You want to choose someone who is willing to talk to you and explain things, says Huettner. “Call three appraisers and tell them what you are doing, and choose the one who is most willing to explain things to you and help you,” he says. “If you are selling your home, $300 to $500 is worth it to have your own independent expert opinion of what your home is worth, and it’s invaluable for educating yourself.”

Be a Nosy Neighbor
Finally, don’t be afraid to be what Realtors like to call “the nosy neighbor.” ”Start going to every open house in your neighborhood to get a feel for pricing vis-à-vis square footage, level of updating and so on,” Freeman says. “Realtors expect nosy neighbors. Don’t disappoint them.” An added benefit of being nosy: If/when the home sells, you will know more about it when you look at the comps.

While it’s important to realize the only number that really matters is the closing price, comparing the list to closing prices of the homes in your area will give you a good barometer for what direction prices are heading and how long you can expect to wait to find a buyer. “Drive around your neighborhood or go online to or other similar sites and view recently sold homes and listed homes,” Huettner says. “Just remember: Only closed sale prices matter.”

It can be tough to come to accept your home’s value in a declining or volatile market, Huettner says, but it’s better to deal with it when putting your house on the market than letting it languish for months if the price is too high. “You will eventually find out the market value of your home,” he says. “Don’t wait for the market to show you when you finally sell. It costs so much more that way.”

Online Home Price Evaluation Tools
Real estate pricing experts say one easy first step for people considering selling, or just wondering about their equity, is visiting online home price tools. While you shouldn’t put too much emphasis on these prices, they may be good starting points. Here are some online tools that can help you figure the value of your home:

  • Zillow allows you to plug in your home’s address to find recently sold properties on a map of your area. You can also check the prices of recent listings in your neighborhood, as well.
  • Trulia shows listings, price reductions, and even a “real estate heat map” of average list prices of homes in your area. The downside: It shows listing prices, not selling prices.
  • Domania, a website from Lending Tree, offers a “Home Price Check” section where you can type in an address and find out the selling price of a house sold within the past five years.
  • Local Real Estate Web Sites: Some large Real Estate groups may compile a listing of the recently sold properties in their area. One example is Crye-Leike in Tennessee; its website allows you to plug in the address for a specific property to find out what it sold for.

How To: Hold a Successful Yard Sale

A well-planned yard sale will leave your wallet fatter and your home de-cluttered. Proper planning, skillful organization, and a sense of humor will save the day —and your sanity. Here are tips to ensure success.

Even if you’ve had numerous yard sales in the past, here are a few pointers to make yours more successful.

Start Early
Even if your next yard sale is months away, start sorting through your belongings to get ready. Put each item in one of four storage containers: Keep, Toss, Yard Sale, and Undecided. “If you’re not using it in the next year, don’t keep it,” says Dave Valliere, senior product manager for home storage at . Except for maternity clothing and plus sizes, adult clothing doesn’t sell well either.

‘Ad It’ In
Advertise online and in your local paper. If you have baby items or antique furniture, say so. People will scan the ads looking for items they need, and if you have what they’re looking for they’ll come to your yard sale. “If your ad says ‘antique furniture’ or ‘60s modern,’ those kinds of identifiers will definitely be lures to people,” says Bruce Littlefield, author of Garage Sale America. “If I see ‘baby clothes’ and ‘Fisher-Price,’ I’m not running over to that sale,” Littlefield says. “But people who have a newborn will go.”

Sign Me Up
Check local ordinances on sign placement. Make your signs easy to read from the road and similar in design so people can follow them. “We get more business at our sale because our signs are professionally done,” says Nikki Fish of South Bend, IN, who hosts a major yard sale every year but enjoys shopping yard sales even more than selling. Paint or draw the arrows after you plant the signs to make sure the arrow point in the right direction. “Wild goose chases are very frustrating,” Littlefield says. With that in mind, take signs down when your sale is over.

Price Pointers
Visit other yard sales and thrift stores to get ideas on pricing. “My thrift store sells hardcover books for $1,” Heiska says. “If I were to try to sell my books for $3, people wouldn’t buy them.” You’re in business for the day to get rid of things you don’t want. Price accordingly.

To make it easier for shoppers, you can group items at the same price on one table, mark prices with colored stickers — all green stickers are 50 cents, for example — or put price tags on each item. Be sure you have lots of small bills and coins to make change.

And remember, everyone negotiates. If you keep your sense of humor and a smile on your face, your prospective buyers won’t be offended whether you accept their offer, make a counteroffer or turn them down, says John Lundgren, author of the ebook How to Turn Your Garage Sale into a Money Machine.

Finally, make sure price tags don’t damage the item. “If you put a price tag that’s going to pull off the cardboard of an old board game and ruin the aesthetic, people may not want it,” says Littlefield.

The most popular start time is 8 a.m. Saturday. But there are regional differences. Yard sales begin later in upstate New York and earlier in the South. Check ads in your local paper to determine local custom. If you have lots of stuff, host a two-day sale for Friday and Saturday, Saturday and Sunday, or two Saturdays. “If something doesn’t sell the first day, drastically reduce it the next day,” Heiska says.

Caging Early Birds
If you don’t want people at your home the day before, don’t advertise in the paper and don’t add arrows to your signs until sale day. “The moment you put your signs out, your yard is fair game,” Littlefield says. The night before, block your driveway so the doorbell doesn’t wake you. But be realistic: Mentally subtract at least 30 minutes from your advertised start time so you’re ready for early birds. “If they show up while I’m setting up, I’m happy,” Heiska says. “My goal is to sell the stuff. I don’t want to risk them not coming back just because they’re here before my official start time.” But don’t dicker with early birds. Stick to your prices. “If they discover this great pitcher that’s highly valued and collectible and you want $20, don’t let an early bird walk away with it for $10,” Littlefield says.

Lure Them In
Put the good stuff, the big stuff, and the manly stuff in easy view. “If a man is driving and he happens to see a lawn mower, a fertilizer spreader, a circular saw, or a weight bench, he’s more likely to stop,” says Heiska.

Don’t Sell It If It Isn’t Yours
Don’t sell your toddler’s toys, your husband’s baseball card collection, or Grandma’s heirloom dishes if the owner isn’t ready to let them go. “I remember buying some toys for my son and the little kid [who lived there] still wanted them,” Heiska says. “It was heartbreaking for me.” That makes other prospective buyers uncomfortable, too. If an item is not for sale, cover it up and/or add a sign that says “Not for Sale.”

Mind Your Money
A forgotten cash box is an easy target for thieves. Use a fanny pack, apron, or pocket to keep money with you at all times. If you’re worried about counterfeit bills, buy a special counterfeit detector pen at an office supply store. Make a mark on the bill, and it turns a different color if it’s counterfeit. Don’t take checks or large bills.

Space Is Important
Give people room to browse. If they feel pressured or watched, they’ll leave. “Every time they put an item back, they’re almost rejecting you and it’s embarrassing to them,” Lundgren says. “You have to back off and let people look at your items. Say ‘Good morning,’ then have a cup of coffee or chat with a friend.”

When your yard sale is over, store the leftover items in your bins for the next sale or donate them to charity and deposit your earnings in the bank. Your home will be less cluttered and, in a week or two, you might just be ready to go yard saling for your own new treasures.

House-Choosing Checklist

Ready to buy a home? There’s a lot to consider before selecting the right one. This home-buying checklist will help you decide.

Photo: Flickr

Buying a new home can be exciting, and it’s tempting to grab the first house you fall in love with. But exercising a little patience will go a long way toward turning your purchase into a haven instead of a headache. 

Renovation Potential
Don’t overestimate your abilities. Determine if the house you like needs work. Then assess whether you’re really capable of doing it, advises Jeff Beneke, veteran home renovator and author of The Fence Bible. Also consider whether the home has an extra room if you’re planning to redo several parts of it. “That way you can close off one room at a time, do what you have to do in that, move somebody into there, then close off another room,” he says.

Don’t overestimate the potential. Figure out whether the renovations are worth the time and expense. “Make sure that if you can’t do the work, you get estimates before you buy the house so you know what you’re getting into,” Beneke says. If the cost of the house plus the renovations will put the home’s value significantly above others in the neighborhood, it’s probably not the best investment — or you may need to scale back the renovations.

Think twice if the kitchen needs renovating. Unlike most other rooms in a house, you won’t have a spare kitchen to use while yours is under construction, says Beneke, who notes that remodeling can put a huge strain on marriages. If the kitchen only needs new countertops, that’s fine. But if you’re planning to move in and tackle a major kitchen renovation while living there, you might want to reconsider. Is your family really going to be okay with closing it off and eating takeout for a couple of months? Can you renovate in stages so the kitchen isn’t entirely out of commission?

Delve beyond the obvious. “Buyers tend to be romanced by pretty and clean, but you’re not buying pretty and clean,” says Alison Rogers, a real estate agent at DG Neary Realty in New York City and the author of Diary of a Real Estate Rookie. If you’ll need more phone and cable jacks or updated wiring for your home office, know that they can add hundreds of dollars to your move-in costs. “If you buy a house that’s very pretty but has entirely old windows,” Rogers says, “you may have to replace 30 windows at $200 a window or more.”

Those little things add up. So, don’t only imagine your sofa in front of the fireplace but also walk the house with an eye toward how you’ll use it. Is there a wall big enough for your large-screen, wall-mounted TV? If the previous owner used the fireplace decoratively, it could be because it needs a new flue or has other problems. If the bathroom or bedroom doors don’t have locks, you may need to budget another $100 or more to satisfy a privacy-oriented teenager (or parents).

Pretend you’re living there. Try out everything in the house: flush the toilets, turn on the lights, climb the attic stairs, check water flow in sinks and showers, imagine the steps you’d take (and counter space you’d use) when cooking a meal, and try to fit your cars in the garage. These little things that buyers tend to skip are the ones that will irk you on a daily basis.

Hire an inspector. “A lot of buyers sort of blow it off,” Beneke says. “It’s just one of those expenses they have to have to satisfy their lender. But in reality, a good inspection can uncover reasons you absolutely should not buy that house,” such as structural problems with the foundation. “Secondarily, a good inspection can tell you what the major problems are behind the walls. Most home buyers look at what they can see. An inspector’s job is to look at what they can’t see — condition of the roof, if there’s insulation, etc.”  Clarify that your contract to buy the house is contingent on a satisfactory inspection, then view the inspector’s report as an opportunity to go back and renegotiate the price.

Look up. “People tend to look at floors and walls, but it doesn’t occur to buyers very often to look up at the ceiling,” Rogers says. The ceiling can tell you whether the home has had water damage, which isn’t necessarily a deal killer but is another thing for the inspector to check.

Ask the current owners for a year’s worth of utility bills. “That’s the easiest way to check the energy use of the house — how much it costs to heat in the winter and cool in the summer,” Rogers says. “There’s a price for each buyer at which a less energy-efficient house may be worth it, especially if you can do things to make it more energy-efficient.”

Think long-term. “Americans move, on average, every six years but look to stay in the house for 15,” Rogers recommends. “The kids are little now, so you may need a playroom. But where will you put them as they grow up so you won’t hear their stereos? If you’re older, think about stairs and the ways the house can be adapted if you get a little less mobile.”

Size and Storage
Is the house big enough for the unexpected? If you’re a couple with one child, you may think all you need is a two-bedroom house. But you may decide to have another child or discover you need one of those bedrooms for a home office. Buy with the anticipation of growth.

Will your furniture fit? “If the house looks really immaculate, make sure all the furniture is there,” Rogers says. The owners may have put a desk or entertainment center in storage, leaving you to discover when you move in that the home doesn’t have as much room as you thought.

Measure your largest pieces of furniture, including height, for items like entertainment armoires, then bring along a tape measure while house hunting so you can verify that everything will fit. If you love the house but the armoire is too tall, weigh forgoing the home against the possibility of finding a new arrangement for your TV and stereo.

Don’t forget your non-furniture needs. “Running out of storage room is one of the principal reasons people buy new houses,” Beneke says. “They wind up needing more closet space, more garage space.” Yet when buyers are house hunting, they tend to forget all the belongings they’ve crammed in their attics, basements, garages, and sheds. Ask yourself: Where will my golf clubs go? Where will I store the suitcases?

“Take a tape measure and estimate the linear feet of closets you have, and think about how much storage space you need,” Rogers suggests. “Then, see how that maps out with how much the new house offers.”

Remember to look for out-in-the-open storage, too. For instance, if your current house has built-in shelving for your books, DVDs, and CDs and the new house doesn’t, will there be room for the shelving you’ll need to buy or build? If you display lots of collectibles or extra vases on shelves between your window and ceiling, will the new home’s ceiling height allow for that?

Count kitchen cabinets. Today builders are putting pantries back in houses because homeowners have found they really need them. Does the new kitchen match your old one in pantry space and a cabinet-by-cabinet count? If you had a pot rack in your old house, you’ll need to determine if one will work in the new house or if there’s enough space for your pots and pans, china and glasses, and the platter you use on Thanksgiving.

Does the laundry room work for you? Do you mind heading downstairs to the basement for every load? Will a laundry room near the home office create a noise problem? Will you have a place to fold and iron?

Don’t forget the garage. “My house was built in 1956,” Beneke says. “Cars were smaller then. You can’t get today’s Texas-size SUVs into my garage.” Ensure that whatever you want to store in the garage will fit.

Bells and Whistles
Don’t get enticed by granite. High-end countertops in kitchens and baths can make a great impression. “Don’t let them draw your eye at the expense of everything else,” Rogers warns. Attractive features like granite make it easy to overlook less appealing qualities. Be discerning: Is the rest of the room just as attractive? Are the cabinets in good shape? The appliances?

Think about how you use the space. After Rogers’s mother-in-law moved, she found she missed the second refrigerator that she had in her old house because it was so handy for entertaining. For families, the kitchen tends to be a gathering place. Does the one you’re considering offer enough room for more than one person to cook, or for the kids to do homework while you make dinner? Does it overlook the backyard so you can keep an eye on them while they’re playing?

Beware of bathrooms. Don’t let a luxurious toilette steal your heart. “A double sink in the master is very useful, especially if you have two working people getting ready at the same time,” Rogers says. “But I really don’t think anybody needs a rain forest showerhead or the over-the-top Jacuzzi. I’m not sure those are the things you actually end up using.”

Don’t fall in love with the decor. The current owners’ antiques may look right at home in the house, but soon they’ll be looking right at home in their new place. Will your more eclectic furniture fit in just as well?

“If you think a room looks very nice because of the draperies with silk linings, you should be aware that those are not necessarily part of the contract for the home,” Rogers warns. The same with the custom-made blinds in the office and the light fixtures that really make the home spectacular. Determine if you can live without details like these. If you must have them, specify in the contract that you want them.

The Neighborhood
Proximity. If you’re used to talking with neighbors over the fence, walking together for exercise, or meeting at the local coffee shop, see if your new neighborhood will offer the same. “Be sure that dream house on an acre or two isn’t like a desert island where you have to drive to see anyone,” says Bert Sperling, founder of Sperling’s Best Places and author of Best Places To Raise Your Family.

On the other hand, if you’re a more solitary person, ensure that the home has enough space between you and your neighbors for your comfort level.

Is the house close to the places that are most important to you? Scout out the nearest grocery store, gas station, school, and place of worship — not to mention learning how far the house is from your workplace. Will it bother you to drive 15 miles to get to your favorite bookstore?

Surroundings. Study other homes in the neighborhood. If you want your property values to go up, it’s better to buy the worst house in a great neighborhood and improve it than to choose the best house on the block. If the neighborhood has plenty of homes for sale, it could be on the decline.

Do you see signs of renovation? That can indicate that people are committed to the area, which gives a better chance for property values to increase. If you have small kids, do you see pools or bikes or swing sets in lots of other yards? That might mean your kids will have new friends nearby. Do you see cars on blocks in several driveways or yards or old appliances and other junk behind fences at nearby houses? That’s often a sign of homeowners who don’t care about curb appeal, and it could be an indication of a neighborhood that’s losing value, Sperling says.

People. A surprising study by Harvard political scientist Robert Putnam found that the more you have in common with your neighbors, the more likely everyone is to feel a connection to the community. That’s important when neighbors want to rally to oppose a new, nearby big-box store.

It’s wise to discover what’s important to most of your neighbors. “In some neighborhoods, for instance, the church is the main gathering place, and you might feel left out if you’re not part of that,” Sperling says.

Spend some time in the neighborhood to determine if it’s a good fit. “One of the things I always do is go hang out at night, listening for parties, listening for dogs, checking out the traffic flows mornings and nights, getting a feel for things,” Beneke says. “It adds a whole lot of comfort.”

Economy. Sperling insists that the condition of a local economy can make or break your move. “A poor or declining economy is like a cancer and can affect everything from social services to infrastructure to schools,” he says. Typically, cities that are in smaller metro areas or that have colleges or are home to a state government have the best economies. “Good times or bad,” Sperling says, “those people are always going to be employed.”

Home Appraisal Basics

Home appraisals are a vital and important step in financing a purchase, refinancing an existing mortgage, or obtaining a home equity line of credit. Here’s an overview of what you can expect and how appraisers come up with their numbers.


You know what you paid for your home and how much the house next door costs. You know what you’ve put into renovations. But what you may not know is how much a lender is willing to finance if your house is for sale, if you’re in the market to refinance, or if you’re considering adding a home equity line of credit (HELOC). That’s where an appraisal comes in. Appraisals can also be used to divide property during a divorce or estate settlement, determine a home’s value in order to remove mortgage insurance, or set a value for tax purposes.

In real estate transactions, appraisers determine a property’s fair market value, which is the most likely price for which it would sell in a free market. The lender then uses this information to determine how much to lend against the property, whether it’s an outright sale, a refinance, or a home equity. If you aren’t familiar with the appraisal process, it helps to see how professionals arrive at the numbers that help lenders arrive at a figure. Here’s a look at how they work.

The Basics
Since the government controls how appraisals are conducted, they’re awash in regulations. As a general rule in selling a home, the appraiser is hired by the lender and the lender passes the cost along to the buyer, usually in the application fee. In a refinancing or when obtaining a home equity, the homeowner pays for the appraisal.

An appraiser compares the sale price of a home with that of similar homes that have recently sold in the same area. These are called comparables. Although there is no set rule, when a lender agrees to finance a mortgage, he wants to see a minimum of three comparables. Appraisers try to make an apple-to-apple comparison. For example, an appraiser would not contrast a 1,700-square-foot ranch with a two-story Cape Cod that’s twice the size.

The cost of an appraisal varies by region, but a buyer should reasonably expect it to add $300 to $500 to closing costs. A homeowner who refinances or adds a second mortgage may be asked to pay the fee up front.

Appraisals Estimate Value
John Bredemeyer of Realcorp, an Omaha appraisal firm, says the appraisal is not an analysis of the agreed-upon sales price but an opinion of the property’s value. “The price is the part that the buyer and seller agree on, and it can be the same as, higher than, or lower than the market value,” he says. The appraisal, on the other hand, is an estimate of the most likely price the property would fetch under normal market conditions and it is used to determine how much money the owner can borrow with the house as collateral.

A real estate appraiser inspects the property, but this step isn’t the same as a home inspection commissioned by a buyer. An appraiser estimates a home’s value while an inspector looks at its physical condition. Both an appraiser and inspector check out the inside of the home, but an appraiser is there to verify the number and types of rooms, floor plan, square footage, age, general condition, and listed amenities. An appraiser may measure the rooms and lot, noting the location as well as obvious defects. Inspectors report on both large and small problems. For example, while an appraiser would not check electrical outlets to make certain they are working, an inspector would.

The Appraisal’s Too Low—Now What?
What if the property appraises for less than the amount you’re hoping for? Bredemeyer says you can challenge the appraisal by presenting additional information. Consider having your real estate agent put together a package of comparables that weigh in your favor or point out amenities that might have been overlooked. There’s no guarantee you’ll receive an adjustment on the appraisal, but it’s worth trying.

Head Off Potential Problems
Rather than being hit with a low appraisal, avoid the kinds of problems that derail sales. For example, if you failed to obtain proper permits when you remodeled or put an addition on your home, you might have an issue.

In many cases, unpermitted work can stop a home’s sale faster than a hammer drives a nail. How can you tell if an addition is properly permitted if you didn’t add it? Take a look at the sketches on file at your county or city property tax office. Chances are good that if the addition doesn’t show up, the project didn’t have a permit.

Although lack of a permit won’t necessarily stop a home sale from going through, it could affect the evaluation. If permits are found lacking, Bredemeyer suggests talking to local officials and securing one after the fact. It may cost you a penalty, he says, but in most places there won’t be a problem if there’s no conflict with setback lines or zoning.

Another surefire way to lower your future appraisal value is to overbuild for the neighborhood. If the streets of your subdivision are lined with modest three-bedroom homes and you double the investment on your place, you’re going to have a hard, if not impossible,  time finding comparables. Owning the biggest and fanciest house on the block can be a deal killer when the appraisal comes through. Bredemeyer recommends checking with an appraiser before you proceed with big projects. “Engage an appraiser on the front end,” he says. “Don’t wait until you’ve got a dog in that fight.”

Advice from an Appraiser
John Brenan, director of research and technical issues for the Appraisal Foundation in Washington, D.C., says each state has its own licensing requirements. His agency makes sure appraisers stick to the rules. Both the buyer and seller “are caught up in the emotion of the transaction,” Brenan says. “The bank needs to know what it’s worth from an independent, impartial analysis.”

Brenan advises homeowners to make sure improvements match the area and understand that your investment won’t always yield a dollar-for-dollar return on appraisal. “Cost does not necessarily equal value,” Brenan says.

But it’s also worth remembering that those improvements may very well be what sells your home.

If you need a qualified appraiser, check out the organizations listed on the Appraisal Foundation website.

Flipping: Remodeling for Resale

If you’re in the market to buy a house to rehabilitate for profit — also known as “flipping” — you’ll need to play it smart. Here are some common errors as well as the best approach.


With a glut of distressed properties on the market now, people are eager to make deals. But there’s little room for error. You have to be smart about the houses you buy and the repairs you make. You also have to be prepared to hold your property for the long-term, or you could wind up with a house you can’t sell and a mortgage payment you can’t afford. But if you’re going to try to flip houses, here are some things you have to know.

Finding the Right House
Real estate investors live and die by the numbers. You have to fall in love with the deal, not the house. And great deals aren’t going to jump out at you. Experienced investors spend time every day looking for distressed property and have a network of people scouting deals for them.

Some investors make a point of taking a different route home from work to look for possible deals. Others, like Sid Davis, a real estate investor and the author of Home Makeovers that Sell: Quick and Easy Ways to Get the Highest Possible Price, recommend picking out a particular neighborhood and driving through it regularly. “Look for the best deal in the best neighborhood,” Davis says. “Even in the best areas, there are always people who need to sell quick. Pick a target area you want and make up flyers that say, ‘I can close in a week’ or ‘Cash up front.’ There are a lot of people in trouble. ”

Look for is a house that’s priced far below market value, experts say. That’s the only way to make money in today’s market.

Finding Financing
Even when mortgage underwriting was loose, bankers were tougher on investors than on owner occupants, requiring more money down and charging higher interest rates and fees. Today lenders are tighter than ever when it comes to lending money for real estate investment.

For rehabbers who own a home, it may be easier to get a home equity line of credit and use that money for the required down payment. But understand what you’re doing: You’re putting your own home at risk if you can’t sell the property and fall behind on the payments.

Thinking Long-Term
Many professional real estate investors view flipping as a shortsighted approach to the business. Virtually the only advantage, Jones-Cox says, is a quick profit, but the capital gains taxes eat a big chunk of that — and the current market conditions aren’t conducive to a speedy sale. Plus, rehab projects are notorious for taking longer and costing more money than anticipated. It’s far better to hold the house and enjoy the long-term benefits.

Davis, who has flipped seven houses in one year, agrees, saying, “I made $10,000 to $12,000 per house and thought I was pretty hot stuff. It was the dumbest thing I ever did. If I’d kept them as rentals, I’d have $1.5 million in equity by now.”

Perhaps the smartest way to approach flipping right now, especially for the new investor, is to buy a house as an owner occupant, live in it for two or three years while fixing it up, and then sell it for a profit. You’ll get a better interest rate on the financing, eliminate the larger down payments required of investors and the hefty capital gains tax that flippers pay on the houses that they buy and sell quickly, and give the house time to appreciate. “That’s a pretty spectacular strategy to make $50,000 or $100,000 and not pay taxes on it,” says Vena Jones-Cox, a Cincinnati -based real estate investor and past president of the National Real Estate Investors Association.

Making the Right Renovations
Once you find the house, you need to make a renovation and repair budget. The first step is establishing an approximate sale price. That’s accomplished by running a comparative market analysis of houses similar to the one you’re selling in location, age, square footage, bedroom and bathroom count, age, and features. Look at the prices of the houses that are selling — as well as those that have been sitting for months, recommends Dean Graziosi, a Tempe, AZ-based real estate investor and the author of The Real Estate Millionaire. That will give you a good idea of what to include in your rehab.

Then deduct how much you paid for the house, your other expenses (such as a real estate agent’s commission), and the profit you’d like to make. “That will tell you how much you can spend,” he says. The repair rules for rehabs are quite similar to those recommended to home buyers getting their own house ready to sell: First impressions are critical, so pay close attention to the front yard, the exterior of the house, and the entryway; kitchens and master baths sell the house; don’t impose your decorating style on the buyers; and keep colors in a neutral palette so buyers can make it their own.

The biggest mistake Jones-Cox sees investors make in their rehabs is spending money on upgrades that don’t add value and aren’t appropriate for the neighborhood. “They get into these properties, fall in love with them, and think it would be great to put a hot tub in the bathroom of a $125,000 house,” she says. “They’re not reasonable about what should be done, go way overboard, and never get their investment back.”

Diane Saatchi, a senior vice president of the Corcoran Group who is based in East Hampton, NY, sees the same thing in multimillion-dollar rehabs. “Sometimes people overspend in ways that are not that important,” Saatchi says. “Someone will put in an expensive generator and not have enough closet space or storage space for the size of the house. Or they’ll do something that doesn’t suit a neighborhood. If it’s a neighborhood where all the houses have garages and you turn the garage into an exercise room, that’s stupid.”

If you think like a successful real estate investor and consider flipping or rehabbing as a longer-term investment, you’re more likely to succeed.

There are dozens of ways to botch a remodeling job done for resale. At the top of the list are:

  • Not doing your homework. There are so many houses on the market for sale today, the competition for buyers is fierce. Check out the competition before you start knocking out walls. The easiest way to do that is to visit open houses in the same price range.
  • Going overboard. You want your house to stand out but not like a sore thumb. Make yours a little better than the competition but maintain consistency with the neighborhood.
  • Ignoring the yard. Some rehabbers spend all their time on the interior and forget about the exterior. The lawn needs to be in the best possible shape.
  • Cutting corners. There’s a big difference between doing things as inexpensively as possible and turning a blind eye to major problems to save a buck. Don’t just clean and paint when something should be repaired or replaced.
  • Hiring unlicensed contractors. Problems with the structural integrity of the house or its major systems — heating and cooling, plumbing, and electricity — need to be repaired by licensed, insured professionals.
  • Trying to do it all yourself. If you haven’t done some of the trickier home improvement jobs that you have lined up for your house — such as electrical or plumbing work — now is probably not the time to attempt it. You’ll get frustrated and perhaps even injured. Hire a professional and ensure that you allocate that cost in your repair budget.
  • Underestimating the time frame. You should probably pad the time allotment for completing the job — especially if you can’t pay an extra month or two on the mortgage. If you’re holding two mortgages, establishing a realistic time line is critical.

Can’t Sell It? Rent It Out

Becoming a landlord may be your best option.

Photo: Flickr

It was an unsuccessful attempt to downsize for a smaller house payment that led Joseph Cortez, a realtor in Corpus Christi, TX, to become a landlord.

“My wife and I started building a house because we were pregnant with our first child,” he explains. “In an attempt to downgrade our payment, we built a house 300-square-feet smaller than our current one. But in the process, we had several weather delays, and construction took longer than expected. My wife became more pregnant and she and the house were due around the same time.”

When the Cortezes thought of moving with a newborn, they were overwhelmed, so they put their new house on the market. But it wasn’t as easy to sell as they had hoped. After a good deal of interest but no offers, the couple was asked if they would allow someone to rent for a year, then buy the home. “We took it,” he says. “We make approximately $15 a month in profit.”

The circumstances may be different, but the story is the same for homeowners across the nation. As the market continues to sputter, some who had hoped to sell are now finding themselves turning into reluctant landlords.

Deciding to Rent Out Your Home
The decision to rent your home out can be a tough one, both emotionally and financially.

Decide if the loss you would take by selling the home for less than you owe now is more than any loss you’d sustain while renting it out, says Bret Holmes, president of Advanced Management Group , a property management company based in Las Vegas. “You have to calculate if you were going to sell today, what kind of loss you’d take,” he says. “Then consider how much you’re going to lose in the gap between how much rent you’re bringing in and how long you want to rent it out.” For example, if you have a $100 negative cash flow each month you rent out your house and you think you’ll rent it for two years, you’ll lose $2,400 on the house over that period of time. If that’s more than you’ll lose by selling it at a loss, it’s probably best to just get it over with, Holmes explains. Otherwise, he says, renting it makes sense.

Emotionally, of course, there’s an entirely other set of issues. “It creates emotional ties and makes it hard to see someone not take as great care of the property as the owner once did,” Cortez says. You have to step back and look at it objectively to be a better landlord.

Know Your Local Laws
The first thing you should do if you decide to rent is research your local laws. For some areas, you may have to have a business license if you want to rent your home.

“We had to get a business license from the Washington, D.C., government when we leased our property,” explains Bronagh Hanley, who became a landlord when she moved from D.C. to the West Coast with her husband and the couple decided they didn’t want to sell their home they’d worked on so hard for so long. But Hanley didn’t anticipate the difficulties with getting the document. “It took forever,” she said. “They had random repairs they wanted us to make, there was a substantial fee, and they had to schedule an inspector to come to the house.” The whole process took about a month, and Hanley says this is something potential homeowner/landlords need to keep in mind because not only can it disrupt your timetable, it is also emotionally exhausting.

Potential landlords also need to educate themselves about equal housing opportunity laws says Braun Mincher, president and managing broker of Aggie Real Estate LLC and Aggie Commercial LLC   in Fort Collins, CO. “If you do something like charge a larger deposit because a family has a pet, that’s fairly standard practice and wouldn’t be considered discrimination,” he explains. “But you obviously can’t change your practices based on race, sex, creed, culture, religion, or anything else like that. It has to be based on your actual risk.”

Finding the Right Rent Price
Deciding what to charge on rent can be tricky, Mincher says, because often the amount you could rent a property for isn’t really connected to what you should be able to sell the property for.

“That’s hard for a lot of people to understand because they want to make up that mortgage payment,” Holmes says.

And while how much you’re paying the bank will figure in somewhat to what you charge, it’s key to do your research on what similar houses are renting for, much like you’d look at comparative properties when figuring out an asking price for sales.

“Of course you want to take a realistic look at your PITI [principal, interest, taxes and insurance payment costs] if you have a payment on the home, which most people do,” he says. “But you also have to consider what the market will bear in terms of rent.” Mincher says that if you bought a townhouse at the height of the market, you’re probably not going to make up a $1,200 payment if all the other similar houses are renting for $900 a month.

Another factor to consider is insurance. You will pay more for insurance on a home you’re renting out, despite the fact that you’re not insuring the contents, only the structure. Call your homeowners’ insurance company and talk to them about any rate increases that will result from changing your residence status on the house so you can figure that into the price you’ll charge a renter.

And for homeowners who paid a premium for granite countertops, gorgeous hardwoods, or full-stainless-steel kitchen, there’s more bad news. These extra features don’t necessarily translate into higher rent prices. “You may have less vacancy because of these things, but you’re talking to renters, not buyers,” Mincher explains. “They don’t care as much about your beautiful landscaping. So, figuring out what to charge is a challenge.”

How should the average homeowner who’s thinking about renting confront the challenge? “You really just have to check newspapers and online ads and get a feel for what a home in your price range within about a three-mile radius is going for,” Holmes says. Other good sources of information include a trusted broker or realtor; if you have a good relationship with someone in real estate, he or she may be able to offer you useful advice.

Finding the Right Tenants
Once you’ve priced your house and you have interest from a potential renter, it’s critical to perform due diligence in checking out the person or people you’ll be entrusting your home to.

“On their own, people can verify employment by contacting a current employer,” Holmes says. “Get paycheck stubs to make sure they’re making what they say they’re making. Also do a rental history check. Call previous landlords and see what kind of information you can get.”

Also, consider outsourcing some of the rental screening process. “If a person wants to do a full screening, the process is pretty intensive because you basically become a credit reporting agency,” Holmes says. For that reason, homeowners should consider looking at companies that complete the tenant screening process for you, he says. They’ll do credit checks, eviction checks, criminal background checks, and other similar screenings.

A tenant screening company is how Hanley found her first renters. “We hired a rental management company to find the tenants since they had the skills and resources to do the credit and background checks,” she says. “We paid them a percentage of the first month’s rent for their services. It was well worth the money, since we ended up with an accountant couple from Wisconsin who were the best tenants!”

Are You Ready to Be a Landlord?
Once your tenants are in place, your main duty as landlord is to maintain the property. But if you’re living in a different city, state, or even country, how do you handle it when a pipe breaks or the air conditioning dies mid-August?

“I advise people to get a home warranty program in place,” says Holmes. “Things are going to go wrong — they always do. A home warranty program prevents a huge out-of-pocket expense when it happens.”

Most home warranty programs have a premium you pay once a year. Then, whenever something goes wrong that your homeowner’s insurance won’t cover ­— like a dishwasher that leaks or a refrigerator that won’t cool — you call the home warranty company. You’ll pay a “co-pay,” usually $50 to $60, and the home warranty company picks up the rest of the repair tab.

If you don’t want to pay the initial premium of the home warranty, however, employ a handyman. “Going outside your comfort zone can cost more money than repairmen,” Cortez says. “It’s many times worth it to hire an expert. Find a good all-around handyman that is trustworthy.”


Money Management
While the process of getting a property rented and managing it can be all-encompassing for novice landlords, dealing with the dollars and cents is a critically important factor.

Insurance: Talk to your insurance company about renting out your property, Mincher says. “You’re going to transfer your coverage from a homeowner’s policy to an investment property policy, which will cover the actual structure but not the contents,” he says, adding that it is critical that landlords make it clear to their renters that their coverage does not protect the renter’s possessions or liability. “Renters’ policies are so cheap,” he says. “We pretty much make our tenants get them. We practically walk them down to the insurance office.”

Taxes: This can be complicated for owner/landlords. If you plan on selling the property in the next few years, you probably just want to deduct your property taxes as you normally would. But if you’re transferring it to a true investment property and don’t plan to sell for a while, there can be other tax benefits. You can depreciate rental property, says Mincher, which is a real tax benefit because home prices actually should appreciate. “If a property is held for investment purposes and you generate rental income, you can depreciate the property,” he explains. While it’s best to consult an accountant, he explains that residential properties are depreciable for 27-1/2 years. “So, if I owned 50 rental properties, I can depreciate an average of $10,000 a year for each one; that’s $500,000 a year in tax deductions I get that I never had to write a check for.”

Collecting deposits and rent: Take your renter’s security deposit and open a separate bank account for it, Mincher says. “Note on the account that it is a ‘trust’ account, which signifies that it’s someone else’s money you’re holding,” he says, explaining that since it’s a deposit and the renter should get all or most of it back if they uphold their agreement, it’s really their money, not yours. Mincher says setting up another account for rent is also a good idea. “I used to have 20 tenants at my door the first of every month waiting to pay their rent,” he says. “But I came up with a system where I send them an invoice and a deposit slip now, and they can just deposit their rent at any branch of my bank each month instead of trying to come to my house to do it.” He also suggests setting up automatic draft so tenants can elect to just have their rent drafted out of their account each month. “Almost any bank can set that up,” he says.

Returning deposits: You can’t just collect a $2,000 deposit and then only decide to return $1,500 of it when the renter moves out, Mincher says. “You have to send them a detailed itemization,” he says. Once your tenant moves out, make sure to call all the utility companies your tenant had service with to see if there are any outstanding bills. If so, deduct that from the deposit, says Mincher, along with a detailed, itemized list of any repairs you’ll have to make.

Legal Matters: Protecting Your Interests
No matter how much you may trust your renter, never do business based on a handshake and a spoken agreement.

“Getting a good lease is very, very important for both novice and experienced landlords,” says Mincher, who recommends making an appointment with a real estate lawyer to go over your documents before you have anyone sign. It may cost a little more, but it’s a price worth paying when you consider the consequences of a lease gone bad. A local real estate lawyer should know the rental laws, which can vary from municipality to municipality. You can also check with property management companies, your area housing department or your local board of realtors for less formal advice.

“This way you can find out if there are any forms or attachments that need to be part of a lease, because if you don’t know about these, there can be some pretty dire consequences,” Mincher says, adding that in the college town of Fort Collins where he lives and rents property, landlords also have to have an occupancy disclosure form. “This came from people cramming multiple college kids into one house,” he says. “Now tenants have to sign a form that acknowledges the city has a rule that no more than three unrelated people can live in one house.” If this form is missing, says Mincher, the landlord can be fined $1,000 a day .

Besides hefty fines, Mincher says there are some forms that are required to actually make a lease valid. “For example, if a house has a building permit from before 1979, you have to have one of the EPA lead-based paint disclosures as part of the lease, or it’s totally void ,” he explains.

And while you hope for the best with your tenants, Holmes says it’s wise to prepare for the worst. “Make sure all state laws are addressed, so that if you do have to evict somebody, you have the law on your side,” he says, adding that a consultation with a real estate lawyer is the best way to handle this. “If you don’t and you go to an eviction proceeding and there’s a loophole you missed in the lease, someone could end up living in your house rent-free.

Property Management
Hiring a property management company can take a lot of the headaches out of renting your home if you choose the right one. Management companies will usually take a portion of each month’s rent in exchange for handling the screening, rent collection, repairs and other day-to-day landlord management aspects.

Property managers will likely either take a percentage of the monthly rent — anywhere from 10 to 15 percent is common — or they’ll take charges upfront, sometimes as much as the first month’s rent. “As your novice owners go, that 10 percent of their monthly rent is probably a big part of that nut,” Mincher says. “Say their payment [PITI] is $950.00 a month and they’re renting [the home] for $1,000.00. If they manage it themselves they can probably make those numbers work, but if they put a property manager in the mix, they are now only getting $900 in rent.”

Management companies will handle tenant screening, credit reports, and other checks before the tenant moves in. But you have to choose the right company or person. “Pick someone who is more geared toward management than sales,” Holmes says. “Especially if you’re just looking to recoup as much money as you can until the market comes back around. If you don’t have someone who has experience getting a house rented, it could sit on the rental market longer than it should.”

How To: Stage a Home

Staging your home sets the scene for potential buyers. A well-staged home can help it sell faster and for more money. Here are some basics for prepping your house.

Ho To Stage a Home


Much like detailing a used car prior to sale, staging a home allows it to put on its best face. Not to be confused with decorating, staging is about presentation, cleanliness, and drawing positive attention to the space inside. According to, the Web site for a unique program that provides certification and training to become an Accredited Staging Professional (ASP), 93% of homes staged by an ASP sell in less than 31 days. Home sellers can choose to do the staging themselves, take guidance from a qualified realtor, or hire an accredited professional.

Letting Go
The first step when staging a home to sell is to cut emotional ties, which means temporarily living without your most precious belongings surrounding you. When the house is put on the market, it should be thought of as a product, not a home. Although you might still be living in it while it’s for sale, it should not look that way to potential buyers. “The way that you live in your home and the way that you market it and sell it are two different things,” says Barb Schwarz, author of Home Staging: The Winning Way to Sell Your House for More Money and recognized as one of the founders of the home staging industry. “Once your home becomes a house, it can become a product, and people want to buy the product that has the best wrapper.” One way for the seller to be able to look at his home objectively is to take tours of homes for sale. “A walk through the neighbor’s house can help the home seller to see things from the homebuyer’s point of view,” says Craig Schilling, founder of Real Estaging, a home staging company in Chicago.

Selling the Space
Part of letting go means packing up all unnecessary “junk.” Anything that can be lived without should be packed up and either tucked away or put into storage. Put away knickknacks, memorabilia, superfluous furniture, lamps, or anything else that adds to the home’s clutter and distracts from what is really important: the space. “You’re supposed to be selling the space, not the stuff,” says Schwarz. “The value of the house is in the space.” When potential buyers walk through an unstaged home, they tend to focus on everything but the space, particular in an overly cluttered home. A sparse, staged home is open, allowing the size of the rooms to be the main attraction.

Packing alone isn’t enough, however. The staged home must sparkle, and to do that will take some elbow grease and attention to detail. “A staged home needs to be Q-tip-clean,” adds Schwarz. For the exterior of the home, cleaning can mean power-washing the siding, scrubbing and staining the deck, and taking down unsightly cobwebs. Inside the house, any dust, stains, and scratches must go. Every corner of every room—from the windows to the baseboards—should be made to look new.

Setting the Stage
With clutter packed away and all the surfaces shining, homeowners should go through each room arranging furniture and configuration to best present the space. Also, each room should clearly look like what it’s designed to be. “Make each room what it is,” suggests Schwarz. “If it’s a dining room, make it a dining room.” Consider the focal points of each room, and arrange those focal points to accentuate space and function. In bedrooms, for example, the bed is the focal point. When a potential buyer stands in the doorway to look inside a bedroom, the bed should not block the view of the room or make the room look small. If certain rooms lack the necessary furniture to make them what they are, the homeowner might consider borrowing or renting furniture for staging purposes.

Another investment worth making is in paint. Neutral and light colors will make a room look big, while dark walls shrink the size of a room. Furthermore, off-kilter colors and color combinations can make for a bad first impression of a home. The small investment in time and money to paint the walls can make the difference when it comes to time on the market and selling price.

Hiring a Professional
The home staging business is a fast-growing industry, and there are many people who call themselves professional home stagers. Accredited staging professionals are typically members of the International Association of Home Staging Professionals and can be found by searching by ZIP code on both organizations’ Web sites. When hiring a professional home stager, homeowners should ensure that the professional is certified as well as protected and insured. “Homeowners should call and meet two or three professionals,” says Schwarz. “Home staging is about commitment, and homeowners should know that everyone involved is committed to the job.” Home stagers can be hired to perform a range of staging services, from simple consultationto a complete “enhancement,” where the stager might bring in his/her own props, furniture, and artwork as part of the staging process.

Additionally, more and more realtors are becoming staged-home-savvy. Many are choosing the ASP certification, while others are educating themselves on the ins and outs of the practice. When choosing a realtor to help sell the home, homeowners should inquire into staging experience and ask about rates. Although the cost to have a home professionally staged will vary by market, homeowners should expect to pay anywhere from $1,000 to $3,000. “Homeowners need to remember that they are not just paying for the props or the advice; they are paying for the actual time it takes to stage the home,” says Schiller.

Whether you hire a professional home stager or use the funds toward a DIY staging job, home staging is a worthwhile investment that will almost certainly sell your home more quickly and increase your return on investment.

Maximize Appeal
The exterior of the home is the first thing a potential buyer sees, so make sure to tend to landscaping needs, make small repairs, and clean dirty siding. Here are some other quick essentials for the interior:

Pack before you move. Put everything that you can do without until your move into boxes and then put the boxes in storage or somewhere completely out of sight.

Clean. Go room to room and clean every surface until it sparkles. No cutting corners! Don’t forget the windows.

Create space. Arrange the furniture in each room to accentuate the space. Remove as much furniture as possible without making the room appear vacant. Make every room seem bigger than it is.

Paint. Freshen up your walls and make colorful ones neutral. Dark rooms are smaller in appearance, and off-kilter color combinations are distracting.

Eliminate odors. It’s not just what is seen that matters. Unsavory smells will turn the buyer off. Clean carpets, get rid of pet and food odors, light some candles, and put out some potpourri.

Lighten up. Open blinds, pull up shades, and turn on lighting.

How To: Find Affordable Housing

Start by looking into government programs.


In most areas of the U.S., housing costs are rising faster than wages. To meet the federal government’s definition of housing affordability, costs should not exceed 30 percent of household income or 60 percent of the area’s median income. Looked at it this way, the issue of affordability becomes very personal. What may be affordable for some will not necessarily be affordable for all.

Financing a Home
Virtually all people purchasing homes are doing so with money borrowed from a bank or mortgage company. A mortgage is a legal agreement between buyer and lender that uses the house being purchased as collateral or security for the loan. Before lenders loan money for a house, they make sure that the buyer has enough monthly income to cover the costs of principal, interest, property taxes, and insurance (PITI). Most mortgage programs require that those payments not exceed 30 percent of the borrower’s monthly income. To keep the monthly payment affordable, a buyer might have to raise $25,000 or $30,000 for a down payment. For many first-time buyers, this kind of cash is out of reach.

Help Is Available
If you cannot find a home in your community that you can afford using traditional mortgage formulas, look into special programs to assist first-time homebuyers. A variety of programs have been spawned to help people get into home ownership. Some of the programs are federally sponsored, some are state-sponsored, and most rely on a mix of federal, state, and private funding subsidies to make them work.

Much of this assistance is tailored to people at or below the area median income (AMI). Some of the programs offer low-interest financing, down-payment assistance, or both. There are also programs designed to keep housing affordable by offering limited or shared equity clauses that restrict the future resale price of the home. Generally speaking, the more assistance one accepts, the more restrictions there will be on the terms of ownership or resale.

Get Prepared
Buying a first home takes a lot of work. Begin by getting the lay of the land, your own and that of the community where you wish to live. Start a first-home file for basic information, your financial records, and employment information. Learn as much as you can about the housing market in your area — read real estate ads, talk with real estate agents, and study the real estate transactions section of your local newspaper. Learn the terms and numbers. Know what homes cost in your target area, what your monthly income is, what your monthly financial obligations are, and how much you think you can afford. Start to reduce your monthly debt and open a savings account that is dedicated to your first home. Even if you only save a few dollars a month, you will be moving in the right direction.

Locate Your Resources
Not everyone can buy a home, but there are programs and services like the Section 8 federal housing subsidy program that assist low- and very-low-income people with housing costs. Section 8 vouchers have traditionally been used for rental housing, but can now be used to purchase a home. This Section 8 program is usually run through local or state housing authorities. Every region of the country and most states have programs to help first-time homebuyers. State housing finance agencies or a NeighborWorks office ( see below ) are good resources. If you are a veteran of the military, contact the Veterans Administration for the latest information on homeownership assistance.

Community land trusts (CLTs) put together packages of funding to help offset the cost of housing for low- and moderate-income families and individuals. These organizations develop perpetually affordable housing by limiting the resale price of the home if and when the homeowners decide to sell. These limited- or shared-equity clauses keep the house affordable for the next eligible buyer and preserve the original homeownership subsidy for the life of the home.

Know the Limitations
Most home-buying assistance programs have income limitations and are often reserved for people earning 80 percent or less of the area median income. Most programs also require enough income to make the monthly mortgage payments. Program staff can help you verify and maintain your eligibility for homeownership subsidies until a match can be made.

It is important to understand under what circumstances you might be required to pay back the subsidy. Employer-assisted housing programs, for example, may have a residency or employment requirement — to get housing help you may need to stay in the home and work for the company. With CLTs, the selling price of the home will be limited should you decide to move. The price limitation may be a predetermined fixed price, but is usually determined by a formula. Have any restrictions and formulas explained to you and get them in writing before you commit.

Resources: NeighborWorks
Chances are NeighborWorks supports a housing agency or neighborhood program in your community. This nonprofit agency was established by Congress in 1978 to build partnerships that result in affordable housing and homeownership for low-income community members.

NeighborWorks’ goal is to revitalize communities through homeownership, housing rehabilitation, housing vouchers, equity protection, minority homeownership, ongoing education about homeownership and care, community economic development, and aging-in-place solutions. The NeighborWorks network has more than 240 community-based programs and operates in all 50 U.S. states to create stable, sustainable communities.

One Warranty for Everything

Explore insurance plans that take over when the old coverage runs out.

Home Warranties


If your furnace dies on a blustery winter morning, you’ll need a few hundred dollars to get it fixed or, worse yet, a few thousand dollars to have it replaced. The same could be said for the refrigerator, oven, plumbing system, water heater, air conditioner, electrical system, washing machine, clothes dryer, or garbage disposal. Unless, of course, it’s under warranty or covered by a home service plan or home warranty.

When Things Go Wrong
The complexity of modern homes, and the cost to keep them running smoothly, is one reason more homeowners than ever before are turning to home warranties. The other reasons are the aging of the American housing stock, and the desire homeowners have for, as home warranty companies invariably put it, “peace of mind.”

Home warranties, also known as home service plans, are not new—they have been around since at least 1971. According to the Better Business Bureau, home warranties and service plans overall are increasing in popularity.

The appeal of home warranties is obvious. For an annual flat fee of about $400 or less, most warranties will pay for repair or replacement of your home’s appliances and systems that fail because of normal wear and tear. Policies are typically issued without a home inspection, take effect 30 days after payment is received, and cover appliances and systems that were in good working order when the policy was ordered.

With just one toll-free call, a good home warranty can make life simpler no matter what goes wrong. There is typically a deductible to pay when a service technician comes out. Deductibles range from $35 to $100, but the policy pays for covered repairs beyond that.

Who Needs a Home Warranty?
If you just bought a new home, your builder likely handed you a stack of warranty and maintenance documents for various elements in your home. Virtually all new appliances and systems are already covered by a manufacturer’s warranty. A home warranty will not kick in until those warranties have expired.

The National Institute for Consumer Education at Eastern Michigan University states that most defects in appliances show up while the item is still under the manufacturer’s original warranty, or after a store-bought extended warranty has expired. So, while you may be encouraged to buy third-party extended warranties for individual appliances at the time of purchase, the consumer Web site believes, “The only ones getting a good deal are the sellers, who find these programs very profitable.”

Dollar for dollar, it’s far better to purchase a home service plan or home warranty that takes all systems and appliances into account, no matter the age or place of purchase. Indeed, home warranties make great sense when the house and its appliances and systems start to wear, perhaps after 10 years.

Help Your Home Sales
Most home warranties or service plans are transferable, so a warranty brings a level of security to a home’s sale, especially as it moves through escrow. According to some real estate experts, a home with a warranty in place sells faster than one without. And new homeowners, who might have overextended themselves financially to buy the house, may not have a cushion for unexpected repairs. Just make sure that your plan can be transferred with the house before making any promises.

Granted, there will always be handy people who prefer to make their own repairs. These people may be better off banking or investing the $400 policy cost, and using it when needed. Likewise, people who want the freedom to hire the repair company of their choice might not be happy with contractors approved by the warranty company. Read the home service plan carefully and see if your needs are met by their coverage.

Choosing a Home Warranty
All policies and companies were not created equal, and the key to choosing the right home warranty is research. You need to know what’s covered and what isn’t.

Policies vary radically, making it impossible to list all the variables here, and only your study of the fine print will help you to manage your expectations. Most policies cover these home elements: air conditioning units, central heating units, ductwork, electrical systems, paddle fans, plumbing systems, water softeners, water heaters, refrigerators, built-in dishwashers, built-in microwaves, ovens/ranges, garbage disposals, built-in trash compactors, central vacuums, and washers and dryers. If it’s the security system you’re looking to cover, or a pool or spa, you may wish to look further.

A good first step would be to list the issues with your home that concern you the most, and read individual policies to determine the level of coverage. If you live in Tucson, AZ, for instance, you’re probably more concerned with the air conditioning system coverage than if you live in Bangor, ME. In the North, furnace coverage is much more of a priority.

Understanding What Is Covered
Don’t just glance over the contract or you’re likely to be disappointed later on. One policy may say it covers invasions of pests, a definite plus, but the fine print excludes termites, carpenter ants, rats, and wood-boring beetles. Again, policies might list the “plumbing system,” but exclude damage done to pipes by tree roots. This may or may not be a problem for you. Take the time to read the contract before you decide.

Once you find a policy that covers your “hot-button” issues, either with a basic plan or with added options that cost more, ask yourself who will make the repairs. Most companies have agreements with outside contractors to do the work. If you bring in your own favorite plumber who is not approved, the repair will not be covered.

Definitions of how plans can be sold vary from state to state. In some areas they are considered warranties; in others, they might be sold as insurance or as a service plan or contract. Also, many states have their own laws and restrictions for warranty programs. In Nevada, for instance, the breakdown of heating or air conditioning renders the residence uninhabitable. As a result, service must commence within 24 hours.

The peace of mind you seek in a home warranty will only come if you buy the right policy, from a reputable company. Time spent researching the policy and company now will pay off later when you’re most likely to need it.

How Long Things Last
Life estimate in years:
• Dishwashers: 5-12.
• Disposals: 5-12.
• Washers and dryings: 8-12.
• Water heaters: 8-12.
• Refrigerators: 15-20.
• Stoves: 15-20.
Gutters and downspouts (galvanized): 15-20.
• Gutters and downspouts (copper): Life of home if well maintained.
• Warm air furnace: 8-12.
• Heat pumps: 8-12.
• Air conditioning compressors: 8-15.
• Gas-powered air condition: 8-15.
• Hot water boilers: 30-15.

Source: Freddie Mac