Michelle Singletary has some answers to some common investment questions regarding tax rules on real estate gains.
Tax Rules on Real Estate Gains
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Tag Archives: Seller-Information
Buyers and Sellers: Help is on the way…
I’m pretty sure that many real estate agents wouldn’t want to hear this, but the real estate industry has been very effective at protecting their own self-interest at the expense of home buyers and sellers. There are so many useful tools that could be built, but valuable real estate data is hidden behind thick walls! But rather than focus on the problems of the industry, I’d like to spend a few minutes talking about the future…
If you’ve been reading Rain City Guide long enough, you probably know that last May I put together the first home search (“gHomes
Some tips on selecting a listing agent
[photopress:View_of_Patio_1.JPG,thumb,alignright]Today’s topic is inspired by a woman I ran into at an open house. The woman was going through a divorce and wanted to sell her home quickly. A nearby home had recently been sold quickly, so she contacted that real estate agent (who sent her a helpful postcard!) and she quickly listed her home with this agent. So far, so good… right? Wrong!
What’s wrong with this story? Well, first off, the home owner only talked with one agent and didn’t really interview him to find out what type of service he would provide. It turns out that this particular agent does a horrible job marketing everything but the “after sale” postcards where he announces to all the neighbors that he just sold a nearby home! The photos he took of the home were unflattering (and it was a beautiful home!). The brochures he created were very generic and photocopied (to save money!). And this was for a $400K home! No wonder some people are frustrated with the commissions of real estate agents!
Anyway, this wasn’t meant to be a rant on any particular agent, the idea behind this post was to give some concrete ideas on how you should go about selecting an agent. First off, yesterday I ranted about how home buyers should ALWAYS get more than one quote from a mortgage broker. (I’m sure my broker friends hate me for giving out advice like that!). Today, I’m going to turn the tables on myself. Home owners should ALWAYS interview more than one real estate agent before listing their home!
What difference does it make? Well, there are about as many styles of agents as there are agents. And at the end of the day, you really want to find an agent who is going to meet your goals. What might your goals be? One goal might be to maximize the amount of money you can sell your home for. Another goal might be to ensure that the new home owners are decent people. A third goal might be that you want a really fast transaction. Ideally, you’ll find an agent who will help you define your goals and then go out and beat them.
So, now that we’ve all agreed that it is worthwhile to interview more than one agent (everyone’s on board right?), what types of questions should you ask? In a previous post, I listed 10 good questions for sellers to ask a real estate agent along with some background on why the questions were important. The questions are summarized here:
- 1. How long have you worked full time in real estate?
- 2. Do you have a personal assistant, team, or staff to handle different parts of the sales transaction?
- 3. Do you and/or your company each have a website that will provide me with useful information for research, services, and how you work with buyers?
- 4. How will you keep in contact with me during the buying process, and how often?
- 5. Can you explain one thing that you do that other agents don’t do that ensures I’m getting top dollar for my property?
- 6. Will you give me names of past clients who will give references for you?
- 7. Do you have a performance guarantee?
- 8. How are your fees structured? May I have that in writing?
- 9. How would you develop pricing and marketing strategies for our home? Will you commit to the marketing strategy in writing?
- 10. What will you do to sell my home?
[photopress:shilshole_boats.jpg,thumb,alignright]Rather than go through each question with a blow by blow with my answers, I thought I would outline my basic strategy that I give to each and every home owner. For my own benefit, I’ve broken the process into three categories. When I’m successful, all three of these steps come together to form a cohesive whole:
- Preparing Your Home. Advice can range from “you need to bring a U-Haul truck here and remove the clutter” to “I think this room would look much better with new drapes, to “Wow! Your home looks amazing!”
- Marketing Your Home. This is where I bring in photographers and have my design team put together color brochures, fliers, ads, webpages, and other home-specific marketing techniques. Of course, I also list the home on the MLS and open houses until the home is sold.
- Selling Your Home. This is where we strategize on pricing the home to meet the sellers goals and maximize the price. This is also where my team performs numerous quality control checks to ensure that all the legal issues are settles.
So, to answer a more fundamental question… Why am I (as a real estate agent) advising you to interview more than one agent? I’m confident enough in my own ability to say that there is not another agent in North Seattle who can offer the market insight and quality of service that I provide. My experience has proven that when I’m given the opportunity to present my ideas for preparing, marketing and selling their home, many home owners choose to work with me!
Preapproval financing letter may not be worth much
The Seattle Times ran an interesting article on how on-line preapproval letters. It should serve as a warning to sellers to make sure that you are getting a pre-approval letter that is actually worth the paper it is printed on.
The agents said 39 percent of preapprovals issued by Internet-based lenders are faulty or invalid. Nearly 30 percent of mortgage broker-issued preapprovals are in the same category, along with one out of every five preapprovals from national lenders.”
A faulty preapproval letter may say something to the effect that “We have preapproved Mr. and Mrs. Flanagan for a 30-year fixed-rate mortgage at 5.5 percent in an amount not to exceed $500,000.” That allows the Flanagans to look at — and bid on — homes without anybody seeing proof of their actual qualifications.But what happens when the lender simply relies on Mr. and Mrs. Flanagan’s statements about their income, assets and credit, and issues a preapproval without verifying the information?
“That’s where you can get into deep trouble,” says John Marcell Jr., a real-estate broker who is the incoming president of the California Association of Mortgage Brokers. He runs Compass Realty and Better Mortgage Brokers, both based in Upland, Calif.
Marcell’s loan brokerage does not issue preapprovals for buyers whose credit files, assets and income have not been verified, and his realty firm won’t accept preapproval letters if the information has not been confirmed by the lender or broker issuing the letter.
“In those cases [functioning as Realtor] we go to the [mortgage] broker and say, ‘Look, we’ve got to see the credit reports. We’ve got to see the W-2s. We’ve got to see the bank statements.’ ”
Compass Realty also warns the seller on homes it lists whenever preapprovals look dubious.
Starbucks on Anna?
[photopress:luke_hurley_and_bird_patterson.jpg,thumb,alignright]I’m always interested in new marketing approaches and I recently read about two ideas that seem worthy of more consideration. The first comes from Rosa where she describes an investment banker that buys everyone coffee at the local Starbucks once a week. Here’s how Rosa describes it:
This morning Kerwin and I walked into a Prescott Starbucks and both ordered their strong-brew coffee of the day to then find it was free. The barista at the cash register motioned over to a gentleman sitting in an animated discussion with a group of about six others, and said, “Your coffee is on Mr. Perez this morning.
Tips for home sale preparation.
The Seattle Times just listed some home preparation ideas worth reading:
Don’t make radical changes without careful consideration…
Talk with a real-estate agent to find out whether major changes should be considered. If it’s something your home desperately needs — a new roof or new exterior paint job, for example — it might be worthwhile…
Maximize curb appeal.This is the impression made by your home when a potential buyer arrives to see it for the first time. That initial impression is worth a great deal. If a home is even halfway decent inside, a good curb-appeal impression will help it sell itself.
Here are some ways to generate better curb appeal:
- Repair any cracks in the driveway or walkway and resurface if necessary.
- Keep the landscaping clean and neat.
- Make sure the home looks freshly painted.
- Keep the garage doors closed when potential buyers visit.
- Make sure garbage cans and other paraphernalia are out of sight.
…
Clear the clutter to make the inside of your home look as big as possible…
Speaking of smells, use them to your advantage. Have a small bowl of vanilla warming in the oven or a slow cooker of apple cider brewing and a fresh batch of chocolate-chip cookies baking.
Where are the sellers?
The Seattle Times highlights the fact that there are fewer sellers in the Seattle Market than last year:
According to May statistics released yesterday by the Northwest Multiple Listing Service, the number of available King County houses and condominiums was off by 31 percent compared with a year ago.
The reason?
I’d tend to agree with Judy Hay’s assessment from the article that:
The lack of inventory is at least partially the result of a shift in homeowners’ thinking. A year and a half ago, she says, they were trading homes simply because they wanted something else. Not now.
Unless there is some reason to move, they’re not doing it. They’ve refinanced and they’re saying, ‘Let’s remodel and stay where we’re at.’
The lack of sellers is all the more surprising considering the median home price in Seattle has risen 17% in the past year.
It seems to me that trying to time the market (whether real estate or stocks) is a game that should be left to the professionals! However, it is just common sense that Seattle home owners even remotely considering selling their home should talk to a real estate agent to find out how much their home would probably fetch on the open market. If you’re interested, I’d be happy to provide a free home valuation report.
Home Data Overload
In organizing the data for gHomes, I’ve inadvertently created a treasure chest full of home sale (and sold) information. For example, with only a few minutes of extra coding I put two tables together. The first list the average list price of homes by zip code, while the second lists the average list price by year built and number of bedrooms for the same set of cities.
The hardest part of putting tables like this together is information overload. There is so much information available that simplifying the data down to digestible amounts can be tough. Is data like this of any interest to you? Is there some other housing characteristic you’d like to see? If there is ANY interest in tables like this, I will happily output them on a regular basis.
Here is some major caveats with the data:
1) The tables use the average list price (not sale price!!!) so don’t expect this data to give you an accurate value for your home. If you want an accurate comparative market analysis done for your home, ask me. I’ve got all the right data and I’ll happily give you one for free! (my free offer even extends to FSBOs!)
2) When you see bad data points (like zipcodes that are incomplete), that is a result of an agent (hopefully not myself) entering in the data wrong in the MLS system.
3) There are a bunch of anomalies where prices jump from one cell to another. Remember that the data is an average, and that sometimes, the average is only over a few (like one or two) data points.
Older Homes Appreciating Faster
The Seattle Times had an interesting article that describes how home values of older homes have increased at substantially faster rates than new homes:
New homes may have the latest of everything, but as an investment, a new house simply does not bring the returns that an older home does. Countywide over the past five years, new houses have posted 4.8 percent annual appreciation, while older homes saw about 7 percent. In the past year, new houses appreciated 7.5 percent compared with old houses’ 10.4 percent.
I don’t think many Seattle agents would find this information surprising as most homes as so many of the homes around here have increased in value substantially over the past few years. My experience has been that there is a large subset of home buyers that are looking for homes with character in established neighborhoods. In an area like Seattle with very few new homes being built each year, people are finding ways to fix up old homes in ways that make them shine beyond a typical “old” home.
Most importantly, assuming an old home is located in a nice neighborhood, it is relatively easy to add $100K to $200K through straightforward improvements (update kitchens, build out basements/attics, etc), whereas the opportunity to substantially increase the value of new homes is more limited.
This same report included data on the medium home values for Seattle/King County. If you drill down through their menus, you can find out how many homes were sold in your neighborhood, along with the percent that were new and median price.
Discount brokers…
[photopress:donald_playing_guitar.jpg,thumb,alignright]I had a long discussion with my grandfather this past weekend regarding the utility of full-service realtors. He’s been around quite a while, so I have no intention of dismissing his opinion on anything. Especially considering that he’s been an investor in real estate for most of his life.
He point blank asked me why anyone would use anything other than a discount broker to sell their home. He mentioned that on a typical home sale, they could easily save you a couple thousand dollars in commissions. He mentioned that if he had to sell a house, he would list with a discount broker, price it a little higher than he would be willing to accept and then negotiate to an appropriate price. For him, this strategy comes right out of a Capitalism 101 course that we all learn along the path of life… And then today, CNN mentions a related issue in one of their top stories:
The article discusses how some discount brokers are complaining that they are not getting access to the multiple listing service (MLS). I know nothing about the background of this story, but I do have an opinion on discount brokers.
My take on using a discount broker?
Discount brokers play an important role in keeping full-service real estate agents on their toes and are definitely here to stay. For some people, a discount brokerage makes a lot of sense, and will get them a fair price for their home. However, a typical discount brokerage is not going to provide the value added services that can potentially raise the value of a home substantially. What are you missing out on by using a discount firm?
- Preparation. Home preparation (including staging, painting, gardening, and other simple improvements) can make an otherwise ordinary house extraordinary. Owners sometimes have a hard time being objective about their belongings, and an experienced real estate agent will make sure that your house house really shines.
- Marketing. This is where a savvy real estate agent can really earn their commission. A really nice house can only sell itself if the people show up to look! A tech-savvy agent can create brochures, flyers, slideshows, websites, newspaper ads, CDs, etc, that are beyond the capability of the typical home owner.
- Pricing. My grandfather’s comment about pricing the home a little higher than he would have liked and then negotiating down might not be the best bet in the current market conditions. I’ve found that fast moving houses seem to be selling for the most money and the fastest moving houses are the ones with LOTS of interest. The best way to get a lot of interest is to price the house a little low and let a bidding war begin. While this doesn’t work for every house, and especially houses that are truly remarkable (and therefore only appropriate for a very small subset of buyers), it does seem to be a very successful strategy for most homes in a hot seller’s market as Seattle is currently experiencing.
- Presentation. Once again, many owners have trouble being objective about their home. When potential buyers visit, an owner is often tempted to tell stories about each room. While the stories might be great, they don’t allow potential buyers to “imagine” themselves in the home. A potential buyer is much more likely to begin imaging how things can be redecorated and personalized if an agent is showing the home.
- Time. A well prepared, marketed and presented home takes a lot of time, and many owners simply do not have the skill and/or time to do it as well as an agent.
In the end, if you are using an agent who is just rolling through the motions, then you may do just as well to use a discount broker and sell your home yourself. However, if you find an exceptional agent, you will inevitably find that the work that they are doing and their stored up knowledge about the local market conditions will allow your home to sell for substantially more money.