Your home: Staging and de-cluttering – Where to begin?

Staged liv room
How you normally live in your home and how you live in your home when it is on the market are completely different. And for good reason. Just close your eyes and think about your home for a minute. Do you have areas of your home that contain piles constantly? Are your closets packed to the brim? Are your kitchen cabinets overflowing with cups and mugs from your favorite college bar? Does it clearly look like your pets and kids own the home and they are just allowing you to stay there?

Life on the market is just different. It forces you to live like a minimalist and it forces you to keep things picked up and organized. It is estimated that only 10 percent of home buyers can see the potential in a home. That means that 90 percent of them cannot look past all of the stuff and any deferred maintenance. One more stat for you: The National Association of Realtors says the average seller invests 1 to 3 percent of the asking price towards staging. That investment then yields, on average, an 8 to 10 percent return. So where do you start?

Thinning and de-cluttering are typically a great place to start. Our first advice to a seller when it comes to staging is “start packing because you are moving!” Therefore, any clothes or other household items that you are not going to need in the next 90 days should be packed up. You would be amazed how much more space the average closet could offer if it only contained the current season’s clothes.

To me the second most important place to attack is the kitchen. If you are a family of four, you probably don’t need 12 dinner plates, 12 appetizer plates, and 12 wine glasses available at all times. Just keep the bare minimum available and pack the rest. You may have to do more dish washing for a while, but your cabinets will feel so much more spacious. The same applies to your pantry, your kids’ cups, your spice cabinet, etc… It may feel empty to you, but it will feel spacious to a potential buyer.

So after you have packed everything you are not using, the question becomes what do I do with the stuff I don’t want. This is when it can get fun. It is almost like a game for me. Just ask my wife, Leah. If she even mentions getting rid of something, I will have it on Craigslist in a heartbeat. And Craigslist is a great way to sell items of value. But what about items that don’t necessarily hold that much value. At least in your mind they don’t.

Let’s start with one of my new favorites, freecycle.org. One of our readers, Irene Starr, turned me on to this service.Thank you Irene! Freecycle.org is like Craigslist, but all of the items are free. It is incredible! There are chapters all over the country and we have one in Kansas City. Essentially you can post items on there for donation OR you can post items that you are seeking. For example, currently the following items are listed to give away or are being sought out: Roofing materials, a treadmill, a mandolin, a wooden pallet, and scarves and a hat. I love the idea of a community dedicated to the reuse of household items.

What if you have items of no value to be removed? Let’s just call this stuff junk. I would suggest that you call 1-800-GOT-JUNK. They will haul pretty much anything away and only charge you based on volume. My experience with this company has been very positive. I even had them haul off an entire work shed behind a home in Prairie Village one year. They were prompt and in my opinion very cost effective.

Did you know that our local Goodwill at 89th Street and Wornall will accept old computers? Many Goodwill locations participate with Dell computers and their Reconnect program. They take the donated computers and either refurbish them and resell them through Goodwill or they are recycled responsibly to make sure that no environmentally sensitive materials are sent to a landfill.
If you would like more suggestions, I found a great article on Oprah’s website. You gotta love that Oprah! Here it is.

Our incredible stager, Kendra Garwood with Staging in Style, says “The less money you spend preparing your home to sell, the less people will offer you.” I agree completely.

Photo credit: REAL ESTAGING on flickr.com

Your home: A hot market = higher return on home improvement projects

PaintEvery January I not only look forward to beginning of a new real estate year, I also look forward to the latest Cost VS Value results. I utilize this information all year long when I consult with clients concerning upcoming projects or those that have been completed. This report breaks down the most common home improvement projects are and what the average return on investment has been for the prior year. Historically, it just broke the numbers down regionally. In the last few years they added the option to choose the closest major metropolitan city. It just so happens that Kansas City is one of the options. Yeah us!

So what are the top three projects when it comes to ROI? Here they are in order:

#1 Garage Door Replacement- 77 percent ROI
#2 Minor Kitchen Remodel- 75.3 percent ROI
#3 Entry Door Replacement- 67.56 percent ROI

Although the aforementioned projects have achieved the top three spots when it comes to ROI, they are not necessarily the best projects to undertake when preparing a home for sale.

Certainly the minor kitchen remodel is one of the best projects in my book. Keep in mind that the Cost VS Value report considers a minor kitchen remodel one that does not remove the existing cabinets but does replace the cabinet fronts and hardware. Additionally, the remodel should include new solid surface counter tops, new appliances, freshly painted walls and trim, and new flooring. For some that may sound like more than just a minor kitchen remodel. Major or minor, a freshened up kitchen is what the market expects these days and is becoming the minimum standard when it comes to resale.

The next project that I would recommend would be anything that would help create a master suite. I realize that sometimes it is just not in the budget to add a suite to a home. So if that is not possible, make sure that the closest bathroom to the master bedroom has been updated. I would also suggest that you maximize and organize any and all available closet space. You would be amazed at how much more marketable a bedroom can look with a good quality closet organizer installed. The National Association of Realtor’s 2013 Profile of Home Buyer’s suggests that the majority of recent home buyers would have preferred more or larger closets and more storage overall.

Lastly, if you have the opportunity to create a second living space without changing the footprint of your existing home, go for it. A good example would be an unfinished basement that could be turned into a family room, or an unfinished attic in a Cape Cod that could be turned into additional bedroom space — or better yet a master suite. One of my favorite projects is when a Cape Cod owner has attic space above the garage adjoining an upstairs bedroom (hopefully the master) and turns it into a huge walk-in closet. I have yet to see that project not pay for itself.

One quick word of advice, if I may? Please consult with your Realtor and a great contractor (like Lance McCarthy of ReTouch and my fellow columnist) before you take on any projects. Sometimes the best solution for your existing home is to price it appropriately to overcome any potential objections and save your money for your new home. You may end up coming out ahead in the end.

If you would like more information about the 2013 Cost VS Value report, please email me and I will send you the PDF version for our Kansas City area.

Photo Credit: Phil Roeder on flickr.com

Your home: How to make an offer that a seller cannot refuse

Cash

It is January 2014 and the market is already heating up. Inventory is still low and buyers are hitting the streets already in pursuit of a great home. If you ask most buyers about their concerns or struggles in today’s market, they pretty much all have the same two answers: not enough to choose from, and once they do find a great home, how they can win the bidding war.

Yes, I said the bidding war. At last count, my wife Leah was involved in more than 20 bidding wars in in 2013 and I was in about 13. 2014 seems to be trending the same way. In some parts of our city, there are only two months of inventory available which constitutes a STRONG seller’s market.

So when it is such a seller’s market, how do you position your offer for success? How can you make your offer stand out from all of the rest? Or, how can you convince a seller to accept your offer before any other offers come in?

Here are some best practices when creating your offer. I use this same criteria to evaluate the pros and cons to each offer that we receive on our listings as well.

1. You only have one chance to make a first impression. What lasting impression will your offer leave? When inventory is tight, we coach our clients to make a strong offer right away. There is no time for poker here. Make an offer based on actual comparable sales in the area and then take in to account the current inventory. If there is only one or two homes for sale in a highly coveted area, you better be ready to pay top dollar. Please keep in mind that top dollar today is still well below 20 percent of the peak values that we once had in 2006. Also, if the last two or three homes in the area have sold for 103 percent of list price, you might consider offering more than list price to get the sellers attention and to possibly scare away any other offers.

2. Place time on the seller’s side. Allow the seller to name the closing and possession date. Yes, you may want your new home tomorrow, but the seller may desire 60 days before they have to move. Time is money (or can be) in this case. I have seen sellers accept a lower offer on their home simply because the buyer allowed them to set the pace of the closing timeline. Lastly, allowing a few days in between closing and possession is crucial for most sellers. It amazes me the number of offers that we receive on our listings with closing and possession on the same day. Didn’t the buyer notice all of the furniture and belongings in the house when they viewed it? Do they think that the sellers are magicians and can make it all disappear? Abracadabra is a cool Steve Miller Band song, but will not help the sellers move out more quickly. Give them time.

3. Get pre-approved, not just pre-qualified. In a column last September we covered the difference between a pre-approval and a pre-qualification. In a nutshell, a pre-qualification is an opinion based upon a short interview process whereas a pre-approval is credit score driven and all documentation referenced on the loan application has been verified. In my opinion, an offer presented without a pre-approval letter accompanying it is not worth the paper it is written on. I also think that the loan officers cell phone number is important. I always want to speak with the loan officer briefly before presenting it to my clients. Sometimes these offers come in over the weekend. That is why just an office phone number is not sufficient.

Please remember: Cash is still king. No matter how strong the pre-approval is. In a bidding war, it is really hard to beat a cash buyer. Especially if they are waiving their right to an appraisal.

4. Make the offer as “clean” as possible. Just because your sister got all of her closing costs covered when she bought in 2006 does not mean that you should ask for the same. She also paid more for her house in 2006 than she would today. That is because the market has shifted. It is a different world in 2014.

If you don’t need the seller to pay for a home warranty, then don’t ask for it. The same thing goes for closings costs. It may come down to two offers with the same sales price, but one is asking for more financial concessions from the seller.

Please remember that there are no steadfast rules that sellers must follow when considering an offer. Sometimes that will surprise everyone with their response. Just keep in mind, as with most things in life, everything happens for a reason in real estate. If you miss out one house, that just means that there is a better one for you just around the corner.

Photo Credit: ota_photos on Flickr.com

Your home: Millennials are having a hard time becoming homeowners

OLYMPUS DIGITAL CAMERAAs the housing market continues to improve, there is a certain segment of the population that seems to be somewhat left out. Those who reached early adulthood around the year 2000, or millennials, are that segment and they are facing quite a few road blocks when it comes to buying a home.

Unfortunately, there seems to be a one-two punch working against this younger generation. The combination of a weakened job market and higher levels of debt has prevented many of this generation from achieving the American dream.

The hardest hit are college graduates. Many of them have substantial student loan debt which works against these young buyers when lenders are calculating their debt to income ratio. Additionally, exorbitant student loans create an opportunity for missed payments or late payments which negatively impact a buyer’s credit score.

It feels counterintuitive to me. Shouldn’t we be rewarding a generation of Americans who have accomplished a certain level of higher learning?

I have noticed a certain trend with my own clients and recently it was confirmed when I read an article in CNN Money that more college graduates are moving back home to live with their parents. According to CNN, the result is a decline in the percentage of 18-32 year olds who own their own home.

That same article said that the New York Federal Reserve recently reported that for the first time the homeownership rate of non-grads has surpassed that of college graduates.

I don’t want to wrap up my column on that somber note. That just seems wrong. So…what can millennials do to remove some of these obstacles?

First and foremost, parents and college students, please realize that the banking world continues to be more and more focused on two things: your credit score and how much debt you have. For some, student loans are unavoidable. But other debt is not. Revolving credit lines like credit cards do help establish a buyer’s credit history, so there is a good side.

A good rule of thumb is not to allow your credit card balances to exceed 50 percent of the available credit. A “best practice” would be not to exceed 33 percent. This strategy will help protect your credit score. Additionally, your debt to income ratio is calculated based on the sum of all of the minimum payments required for your revolving credit lines plus car payments and the like. By keeping credit card balances to a minimum you are also minimizing your DTI ratio.

Lastly, if you are a college grad at home with your parents, please establish credit when you can. The disadvantage of living with the “‘rents” is that it prevents you from building as much credit history as you would on your own. Although cash is still “king,” good credit is certainly the “queen” in today’s financial world.

Photo credit: House of Joy Photos on Flickr.com

Your home: How much equity do you have in your home?

Well, the books are closed for 2013 and the projected numbers look really good when it comes to homeowners reclaiming some equity. NAR Research is forecasting that home values will finish 11.3 percent stronger than the previous year. Those are great numbers! As 2014 continues on a similar trend, home equity should be back in positive territory for most homeowners. Even for those who purchased in 2006 and 2007.

Going in to 2013, most homeowners who purchased in 2006 and 2007 were in a negative equity position. That is, unless they had made a sizable down payment when they purchased. Negative equity has been something that the real estate market has just had to get used to coming out of the real estate crash. However, there is a counter-intuitive side to it. In a healthy market, time equals equity. The longer you own a home, the more equity you build up through a combination of paying off your principal balance and the appreciation of home values.

This is not the case coming out of a housing crash. For example, a homeowner who purchased in 2010 will (on average) be in a better equity position than someone who purchased in 2006. In this case, three years of ownership will prove to bring more equity than seven. Pretty funky, huh?

My hope for 2014 is that through continued improvement in home values, these 2006 and 2007 buyers will not only be back into a positive equity position but they will also enter the market. I personally have clients that will be selling this year due to the improvement in values that we saw in 2013. And trust me… we need the inventory. Just ask any buyer out there actively looking for a home. There is not a lot to choose from. These new sellers will also create a new wave of buyers when their current home sells. And the wave begins!

One thing to keep in mind, and I think that it is a big one: For most homeowners (and investors), real estate is still one of the best ways to earn money through equity improvement and to eventually grow long-term wealth.

Hello potential buyers! If equity growth is important to you, get in the market now. As values continue to improve, you are missing out on equity each and every day. The old adage of “buy low and sell high” certainly holds true in real estate. Just look at the chart below.

Compare the equity position of those who purchased at the peak of the market (2006) to those who purchased after the crash (2010-2012). Affordability is still very high. Don’t hesitate and allow the rising interest rates and increasing home values to take away your fair share of the market.