Category: Home Selling

Rethinking Home

5/25/2020

The last two months of the new normal stay at home has led many homeowners to rethink the way they live in their home.  It has now become an office for working at home; a school for children; a gym to stay in shape; and a place for recreation.

The repurposing has people evaluating whether their home still meets their needs or if some changes are necessary.  In some cases, adult children have moved back home, and, in others, there are parents who have moved in for the first time.

Staying at home and sheltering in place is necessary but how much togetherness can one family take and how long is it going to last?  Temporary is stretching into longer than expected and even when vaccines and treatments are discovered, will things really go back to the way they were?

A home is a place to call your own; to raise your family, share with your friends and to feel safe and secure.  Covid-19 has changed the scope of feeling safe and secure at home and may now be considered a sanctuary of safety more than ever before.

Many of the chief economists in the country feel that real estate will likely lead the country out of this recession.  The housing market is experiencing low inventory and has for almost a decade.  Building has not kept up with demand and prices of existing homes have continued to go up; 8% over last year.

With 30-year mortgage rates at close to 3.25% and prices expected to continue to rise, an investment in a home can fit your needs and show returns in satisfaction, comfort, enjoyment, and monetary value.

If you are going to be spending more time in your home for all the reasons mentioned, maybe now is the time to consider finding a home that better suits your needs. It can be done in a responsible and safe manner using an online meeting with your real estate professional.  Find out what is available and what the process entails to protect you and your family.

Convenience at a Cost

5/11/2020

The convenience of selling your home without the hassle of getting it ready, putting it on the market, showings, open houses, negotiations and repairs comes at a cost ... a significant part of your equity.

The companies, referred to as iBuyers, that buy homes from sellers are for-profit organizations.  They expect to make a profit from sellers who are willing to discount the proceeds they'll realize as an alternative to the conventional method of selling a home for people who need a quick sale.

The promotions for these companies generally state that you can receive a cash offer in a few minutes after putting your address online.  The discount can be between 10 to 18% compared to normal selling costs from 6 to 9%.   The cost to a person with a $100,000 equity could be as much as ten thousand dollars.

Even after you have accepted an offer, there can be contingencies in the contract that allow the company to inspect the home to discover the condition and reassess the offer to possibly make even more deductions.  If the seller isn't willing to accept them, the buyer can withdraw from the sale without penalty.

This appears on the surface to be a friendly, accommodating service but it can be an adversarial situation.  The seller wants to maximize their proceeds and the buyer wants to buy it as cheap as possible.

Compare this to working directly with a real estate professional acting as your agent.  They have to put your interests above their own.  They have a fiduciary duty of care, integrity, honesty and loyalty in their dealings with you.  Other duties include confidentiality, disclosure, obedience and accounting to the seller.

In this traditional model, your agent will provide you with the facts of what homes have sold for in the area and their opinion and recommendations on what the most likely sales price will be.  Your agent will provide you an estimate of the sales expenses based on different sales possibilities.

They can advise you on work to be done prior to putting the home on the market, staging so your home will show at its best and estimate the time it will be on the market.  Based on low inventories in some price ranges, it could be surprisingly short.

As an owner, you made an investment in your home in cash and maintenance.  You are entitled to maximize your proceeds based on the risk taken to purchase a home instead of renting.  The convenience of a quick offer has a cost to it.  You need to compare the two alternatives to see which one benefits you the most based on your individual situation.

For more information, download the Sellers Guide.

Who Earns the Commission?

1/27/2020

What do you think the motivating reason would be for the 5% of all homebuyers who chose not to work with an agent but instead conducted their own home search, contacted the seller, negotiated the contract, located their financing, arranged their inspections and all of the other services provided by REALTORS®?  Most people would probably guess the buyers were wanting to do the work themselves and earn the commission in the form a lower purchase price.

Looking at it from the seller's perspective, what would be the reason for the 8% of all home sellers who chose not to work with an agent but instead did their own research to determine the value of their home, coordinated all of the marketing efforts necessary to have sufficient exposure to the market, negotiate directly with the buyer, and investigate all of the other steps necessary to close the sale?  Is it possible and even probable, that they too were trying to earn the commission and net more proceeds from the sale?

If the home sold for fair market value, it would be reasonable to assume that the seller won out over the buyer.  If it sold for less than market value, it seems that the seller didn't realize his full equity in the home.  In either case, both buyer and seller engaged in activities that they were less experienced and capable than the real estate professional.

The Profile of Home Buyers and Sellers (Exhibit 8-1) reports that 14% of sales were For-Sale-by-Owners in 2004 compared to just 8% in 2019.  The trend shows that agent-assisted sales rose to 89% in 2019 from 82% in 2004.

The three most difficult tasks identified by for-sale-by-owners is getting the price right, preparing or fixing up the home for sale, and selling within the length of time planned.

The time on the market for sale by owners experienced was less than that of agent assisted homes; two weeks compared to three weeks.  This could indicate that the home didn't maximize its potential sales price.  According to the previous mentioned survey, for sale by owners typically sell for less than the selling price of other homes.

The reality is that both parties cannot earn the commission.  It is earned by providing specific services that are essential to the transaction.  The capital asset of a home represents the largest investment most people make.  An investment of that importance certainly deserves the consideration of a professional trained and experienced to handle the complexities involved. There is value to having a third-party advocate helping each party to the transaction.

The tasks involved in buying and selling a home exist and must be done.  Since nine out of ten transactions involve an agent and therefore, a commission.  It comes down to deciding which is more important: time or money.  If a buyer or seller values their time more than the commission, they'll usually work with an agent.  If money is more valuable to a buyer or seller, they may try purchasing or selling without an agent.  One thing is for sure: there are two parties to the transaction and only one commission.

Downsizing in 2020

1/6/2020

Approximately 52 million or 16% of Americans are age 65 and over.  It is easy to understand that some of them are thinking of downsizing their home because they don't need the same space they did in the past.

It can be liberating to divest yourself of "things" that have been accumulated over the years but are no longer needed.  Moving to a less expensive home, could provide savings for unanticipated expenditures or cash that could be invested for additional income.

Savings can be realized in the lower premiums for insurance and lower property taxes, as well as, the lower utility costs associated with a smaller home.

Typically, owners downsize to a home to 2/3 to 50% of their current home's size.  In some situations, it is not only economically beneficial, but their interests may have changed so that a different style of home, area or city might fit their lifestyle better.

The sale of a home with a lot of profit will not necessarily trigger a tax liability.  Homeowners are eligible for an exclusion of $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers who have owned and used their home two out of the last five years and haven't taken the exclusion in the previous 24 months.

Homeowners should consult their tax professionals to see how this may apply to their individual situation.  For more information, you can download the Homeowners Tax Guide.

Call me at 208.946.7816 to find out what your home is worth and what it would take to make the move to another home.

Buy Your Retirement Home Now

11/4/2019

Maybe you're not ready to move into it but that doesn't mean that you shouldn't take advantage of the present opportunities to acquire the home you want to live in during retirement. The combination of the low mortgage rates, high rental rates, positive cash flows and tax advantages can help you get it paid for by the time you're ready to move into it.

Your tenant could literally buy your retirement home for you. One idea would be to finance it with a 15-year loan that will have a lower rate than a 30-year loan and it will obviously be paid for in half the time. With every monthly rental check from your tenant, you make the payment on the mortgage which includes a portion that reduces debt and builds equity. Even if you don't have the home paid for by the time you retire, your equity will be larger.

Consider you sell your current home which could be paid for by then when you are ready to move into this retirement home . Taxpayers can exclude up to $500,000 of tax-free gain for a married couple. That profit could be used to fund your retirement.

Even if you don't retire to this home, it could be a placeholder to control the costs of the home you do move into. For example, you could buy a home in a destination location now, rent it out and build equity in it until you're ready to use it as your principal residence. That home would have kept pace with other homes in the area so that you would not be priced out of the market you want to retire to.

With home prices and mortgage rates certain to rise, this may be one of the best decisions you can make. We want to be your personal source of real estate information and we're committed to helping from purchase to sale and all the years in between.

Contact us if you'd like to talk about the idea or if you need a recommendation of real estate professional in another city.

Price It Right the First Time

9/30/2019

The Internet has empowered all buyers with information and home buyers are no exception.    The amount of information available to public includes details on size, condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.

When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth.

If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price.  It is a natural reaction from people, personally or professionally, to assume that something must be wrong with a home that doesn't sell in a reasonable time for that market.

The seller is entitled to maximize the equity in their home and pricing it properly in the beginning is the best way to achieve that.  Overpricing can reduce buyers activity because they assume that the best homes are purchased soon after they are offered for sale and if one has been on the market longer than normal, there must be a problem with it.  Similarly, sales associates may come to the same conclusion.

After buyers have seen a few homes in a certain price range, they begin to expect similar amenities in each home they look at.  If a home is overpriced, it will not compare favorably with the other homes that are being viewed.  Sometimes, the buyer may even think that another home could be a bargain because it offers much more for the same price as the overpriced listing.

Shopping the market means looking at the homes that meet a buyers' wants and needs and selecting the one that gives them the most, whether it is in price or amenities.  The overpriced listing doesn't compete well, and it extends the market time.  There is a documented study that shows that the longer a home stays on the market, the lower the price will be.

It is essential that a seller receive factual information to price their home to compete favorably in the current market.  Some of the obstacles can include:

Failure to objectively compare the current and sold homes with theirs
Neighbors who mislead the seller as to how much they got for their home
Fear of making a mistake and thinking they can start high and always lower the price
Loss of perspective because the seller is emotionally involved
Expecting the home to sell for more than fair market value because they need the money
Agents who will accept a listing at any price in order to tie up the property until the seller realizes the price is too high

What a seller paid for the home or the cost to rebuild it today do not affect market value. Neither does the amount spent by sellers on certain improvements that were made for their own pleasure and enjoyment.

It is unrealistic to expect a buyer to pay more than market value for a home. The seller sets the price of a home but the buyer determines the value. If the home is priced properly in the beginning, it is more likely to sell for a higher price, in a shorter period and with less problems.

Downsizing is an Alternative

9/2/2019

It is estimated that over 15% of the population in the U.S. are over 65 years of age. With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.

Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their "big" home like they did before. In other situations, their lifestyle might have changed, and the house just doesn't "fit" anymore.

The benefits of a smaller home can include the following:

Easier to maintain
Lower utilities
Lower property taxes
Lower insurance
More convenient location
Single level
Possibly more energy efficient
Possibly lower maintenance

Like any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes.  Are they going to stay in the same area?  What type of property would suit their needs for the future?

The tax-free exclusion allows a homeowner to take up to $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers.  Part or all of this could be used to generate income for retirement.  Other uses for the equity could include paying off other debt, taking the trip of a lifetime or making a special gift.

There will be expenses involved in selling a home as well as the purchase of a new home.  These will lower the amount of net proceeds you'll have to invest in the new home.

Homeowners should consult their tax professionals to see how this applies to their situation.  Please contact me at  or Jennifer.Ivey@SothebysRealty.com if you have any questions about what your home is worth or how long it might take to sell it.  Other things that could be of value are our Homeowners Tax Guide or Sellers Guide.

Show Them You're Serious

6/17/2019

June and July are the busiest home sale months of the year. When inventory is in short supply and you may be competing with other offers, it is important to show the seller you're serious. Make your offer look as good as possible because you may not get the chance to make or accept a counter-offer.

Put yourself in the seller's shoes. Your home has just gone on the market. There is lots of activity and suddenly, there is more than one offer to purchase. The seller's first consideration may be to accept the highest offer but there are many other things to consider like closing dates, closing costs, possible repairs, contingencies and of course, the ability of the borrower to get a loan.

Offer a fair price for the property in your initial purchase agreement. It shows sincerity and good faith that you're actually trying to purchase the home and not trying to take advantage of the seller. The old adage that you can always go up later may never happen if there are multiple offers on the property in the beginning.

Remove the uncertainty that you may not be approved for a mortgage by having a pre-approval letter from your mortgage company.
Show your sincerity by increasing the normal amount of earnest money customary for the area and price of the home. The earnest money will be applied toward your down payment and closing costs. Consider placing even more money in escrow when the contingencies have been met.
Specify a closing date in the contract but acknowledge that you can be flexible to accommodate the sellers' moving date. If it becomes an issue, it still must be mutually agreed upon.
Make the contingency periods shorter if possible to make the seller feel that they'll know sooner that the offer is solid.
If the contingency really isn't important to you, leave it out of the offer. The more contingencies included in a contract, the more the seller will wonder what might happen to keep it from closing.
Write a personal note to the seller explaining why you like and want their home. Consider including a picture of your family and pets.
If you're not using a digital contract, physically sign the offer with a felt tip pen of contrasting color. You'd be surprised how this adds a personal touch to the offer.

One way to eliminate the competition of multiple offers is by not procrastinating. When you have decided to write a contract, don't wait; do it immediately and ask your agent to deliver it quickly. Your agent will be able to help you craft a solid offer that makes you look serious and can give you advice that may be unique to your situation.

Temporarily Renting a Home

6/3/2019

IRS has provisions for homeowners regarding the sale of a principal residence that allows for temporarily renting the home without losing the ability to exclude the gain if the home is sold under the correct conditions.

The rules for the exclusion of gain on the sale of a principal residence are:

Up to $250,000 of gain may be excluded for single taxpayers and up to $500,000 for married taxpayers filing jointly.
Ownership and Use must have been a principal residence for two of the five years preceding the date of sale (closing date). This allows for a temporary rental for up to three years maximum.
Either spouse may meet the ownership test.
Both spouses must meet the use test.
No exclusion has been used in the previous 24-month period.

Let's pretend that a person had owned a home from more than two years.  This person married and moved into their new spouse's home two years, six months ago.  That person decided to sell the home and would have approximately $200,000 of gain in the sale.

If the property is put on the market, sold and closed prior to the three-years that they moved out, the home would still be eligible for the section 121 exclusion on the sale of a principal residence.  If the sales closes after that three-year period, the owner would owe tax on the gain.  If the long-term capital gains rate for the owner was 15%, they would owe approximately $30,000 in taxes.

If you or a person you know is in a situation like this, they should certainly seek professional tax advice as well as discussing the marketing and value of the property with their real estate professional.  This is something that I have experience with; call me at 208.946.7816.  The timing is very important and critical to a favorable outcome.

iBuyers - Convenient at a Price

4/29/2019

There are an increasing number of real estate companies, termed iBuyers, like Open Door, Offerpad, Zillow, Knock and others that market a service that has an appeal to homeowners.  The pitch for these quick cash offer companies will include some variation of "let us buy your home in days without the normal hassles of listing."

This approach attempts to provide an alternative to selling a home in a normal manner at the expense of not realizing the full equity a homeowner is entitled. There is no fiduciary relationship requiring the broker to put a seller's best interest above their own interest.  An iBuyer does not represent a seller and does not owe client-level services like loyalty, obedience disclosure among other things required by most state license laws.

The offer is based on an automated valuation model, many times, without a physical inspection of the home.  In some cases, a contract is written but there are provisions that allow iBuyers time to possibly "flip" the property to an investor or use an "out" in the contract to void the sale.

The reality is that a company cannot stay in business if they pay too much for the property.  The iBuyer becomes the Seller who now must be concerned with pricing the home properly to cover the normal selling expenses as well as repairs, improvements, and holding costs that will be incurred until the property sells.

There could be circumstances that make it necessary for a homeowner to sell their home at a discount.  The seller could be in a distressed situation needing immediate cash.  They might need a quick sale and don't want to be bothered with repairs or marketing efforts.  Or possibly, they may have found their next home and need to act quickly. The instant liquidity comes at a cost to the seller in lower proceeds from the sale.

To realize the maximum possible equity, a real estate professional in your area can advise you about the fair market value of your home, a reasonably expected sales price, the costs involved and how long it will take.  Before accepting a price to sell your home to a wholesaler, you owe it to yourself and your family to find out what you can expect if you take a conventional sales route.

221 E Sherman Ave
Coeur d' Alene, Idaho 83814

200 Main St
Sandpoint, Idaho 83864

Tomlinson Sotheby's International Realty

Josh Ivey (208) 946-7355
josh.ivey@sothebysrealty.com

Jennifer Ivey (208) 946-7816
jennifer.ivey@sothebysrealty.com

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Photo used under Creative Commons from Mary P Madigan