August 2006
Selling your home in a down market
Some simple home improvements can make your house stand out without breaking the bank
More homes are on the market and fewer are being sold, sending a chill through what has until recently been a white-hot housing
market--2004 and 2005 were record years for home sales. Consider this news:
DOES IT PAY TO REMODEL?
When the housing market was hot, many homeowners believed that pouring money into their homes would pay off big when they eventually sold. But remodeling and upgrading are generally mediocre investments--few projects pay for themselves. Even kitchens and bathrooms remodels, long considered the most profitable improvements to undertake, may return only 50 percent to 75 percent at sale--and only if you sell a year after the project is completed. Five or 10 years later, your state-of-the-art kitchen could be a relic. Here are some other tips to consider when preparing your home for the market:
Undertake the right projects. The ones that should take priority are those that will protect your home from deterioration and damage, like roof replacement and plumbing and electrical upgrades. Although such improvements don't do much to beautify your home, they will help preserve its value.
Consider curb appeal. Be sure your home isn't an eyesore on the outside. At the very least, buyers visiting your home will expect a decent paint job. If the body of your house is in good shape, you may just need to touch up the trim. This work will make your house stand out. "A gallon of paint and a paint brush don't cost much, but they can really make a difference," says National Association of Realtors president Tom Stevens.
Keep this thought in mind. Exterior paint isn't just for show. A quality paint job--we recommend two topcoats--provides an important layer of protection against moisture, mildew, and the effects of the sun. (See our exterior paint Ratings, available to subscribers.)
Further, keep your yard tidy--it's one of the first thing potential buyers see before entering your home. If your lawn is in pretty good shape, there's no need to hire a landscaper. The NAR recommends that you spend no more than 1 or 2 percent of your home's value on sprucing up landscaping before you sell. Stevens recommends spreading mulch on beds around trees, mowing grass, and trimming shrubs and walkways. And if the season is right for blooms, place flowerpots around the entry and in the patio.
Don't forget your driveway. If it hasn't been resurfaced in a while and doesn't have major cracks, head down to the hardware store and pick up some asphalt resealer and a spreader. According to Stevens, it's a great way to kick up without spending a lot of money.
Avoid overimprovement. Making too many changes is a game of diminishing returns. So don't add a third story on your house if your home will be the only one on the block to have one. Think twice about adding a swimming pool, too. In some areas, a pool can decrease resale value--it costs a lot to insure and maintain a pool, and many buyers don't want to be hassled with these added expenses.
Fit in with the neighborhood. Before you make changes to your home, take a hard look at houses in your neighborhood. You'll get the biggest bang for your buck by keeping up with the Joneses, not by going them one better. If most houses have three baths and yours has only one and a half, adding a new bathroom will boost the value of your home. The same goes for bedrooms.
Remember this: Projects that merely update styles might make the house sell more quickly, but only if you sell when the style is still, well, in style. Elaborate and expensive window treatments featuring this season's favorite colors and tones may appear out of date next year. Kitchen appliances can also go out of style--remember avocado and burnt orange refrigerators of the 1970s? Stick with the basics and avoid being too trendy.
Don't overdecorate. Gold-plated faucets or a bathroom tiled in puce won't add to the value of your home. If your interior features splashy colors, or paint appears dirty or worn, repaint with neutral colors that won't feel dated. Further, simple white or beige walls provide potential homeowners with a clean slate on which they can envision their own personal touches.
Clear clutter. Too much stuff makes rooms look smaller and less appealing. Keep tables and countertops clean and clear, and remove extra furniture. But don't relocate your possessions to a garage, attic, or basement. All you're doing then is cluttering another space and turning off potential buyers. If you plan to hold on to Grandpa Lou's armchair and your collection of beer cans, consider renting a storage space. A 10' x 10' storage space ranges from about $40 to several hundred dollars a month, depending on the region.
Make it homey. Set the stage for comfortable living. A bright, tidy home will sell a lot faster than a dingy one, Stevens says. Hang your guest towels in the bathroom, set your dinner table with your best china, and place fresh flowers in an attractive vase. Appeal to the potential buyer's sense of smell as well. Clean carpets and drapes. Empty the trash and freshen cat-litter boxes.
PRICE TO SELL
Setting the right price is also key to selling your house quickly and maximizing your profit. Research has found that houses whose prices had been changed sell for less than homes whose prices had never been revised. The longer a house sits on the market, the more it becomes stigmatized in the minds of buyers--and the harder it is to sell.
So before you set the asking price of your home, research prices on comparable properties in your market. Scour newspaper and Web listings, attend open houses, and consult several real-estate brokers for sales information on comparable properties.
For more information on buying, selling, and maintaining your home, see Making your house pay off (available to subscribers).
- According to the National Association of Realtors (NAR), total sales of existing homes fell 1.3 percent in June 2006 from the prior month--and were 8.9 percent below the annual rate of 7.27 million units in June 2005. At the same time, the number of houses on the market rose 3.8 percent during June, a seven-month supply at the current sales pace. The year before at that time, only a four-month supply was available.
- In July, mortgage applications sank to a four-year low, even as rates for 30-year fixed mortgages decreased slightly to 6.6 percent from a four-year high of 6.7 percent in June.
- The Pending Home Sales Index, based on contracts signed in June, increased 0.4 percent, but it's still 9.6 percent below June 2005's index, according to the NAR. "Pending homes sales probably give us the best measure for the overall direction of the housing market, which is falling from historical highs," David Lereah, NAR's chief economist, told Reuters in June.
DOES IT PAY TO REMODEL?
When the housing market was hot, many homeowners believed that pouring money into their homes would pay off big when they eventually sold. But remodeling and upgrading are generally mediocre investments--few projects pay for themselves. Even kitchens and bathrooms remodels, long considered the most profitable improvements to undertake, may return only 50 percent to 75 percent at sale--and only if you sell a year after the project is completed. Five or 10 years later, your state-of-the-art kitchen could be a relic. Here are some other tips to consider when preparing your home for the market:
Undertake the right projects. The ones that should take priority are those that will protect your home from deterioration and damage, like roof replacement and plumbing and electrical upgrades. Although such improvements don't do much to beautify your home, they will help preserve its value.
Consider curb appeal. Be sure your home isn't an eyesore on the outside. At the very least, buyers visiting your home will expect a decent paint job. If the body of your house is in good shape, you may just need to touch up the trim. This work will make your house stand out. "A gallon of paint and a paint brush don't cost much, but they can really make a difference," says National Association of Realtors president Tom Stevens.
Keep this thought in mind. Exterior paint isn't just for show. A quality paint job--we recommend two topcoats--provides an important layer of protection against moisture, mildew, and the effects of the sun. (See our exterior paint Ratings, available to subscribers.)
Further, keep your yard tidy--it's one of the first thing potential buyers see before entering your home. If your lawn is in pretty good shape, there's no need to hire a landscaper. The NAR recommends that you spend no more than 1 or 2 percent of your home's value on sprucing up landscaping before you sell. Stevens recommends spreading mulch on beds around trees, mowing grass, and trimming shrubs and walkways. And if the season is right for blooms, place flowerpots around the entry and in the patio.
Don't forget your driveway. If it hasn't been resurfaced in a while and doesn't have major cracks, head down to the hardware store and pick up some asphalt resealer and a spreader. According to Stevens, it's a great way to kick up without spending a lot of money.
Avoid overimprovement. Making too many changes is a game of diminishing returns. So don't add a third story on your house if your home will be the only one on the block to have one. Think twice about adding a swimming pool, too. In some areas, a pool can decrease resale value--it costs a lot to insure and maintain a pool, and many buyers don't want to be hassled with these added expenses.
Fit in with the neighborhood. Before you make changes to your home, take a hard look at houses in your neighborhood. You'll get the biggest bang for your buck by keeping up with the Joneses, not by going them one better. If most houses have three baths and yours has only one and a half, adding a new bathroom will boost the value of your home. The same goes for bedrooms.
Remember this: Projects that merely update styles might make the house sell more quickly, but only if you sell when the style is still, well, in style. Elaborate and expensive window treatments featuring this season's favorite colors and tones may appear out of date next year. Kitchen appliances can also go out of style--remember avocado and burnt orange refrigerators of the 1970s? Stick with the basics and avoid being too trendy.
Don't overdecorate. Gold-plated faucets or a bathroom tiled in puce won't add to the value of your home. If your interior features splashy colors, or paint appears dirty or worn, repaint with neutral colors that won't feel dated. Further, simple white or beige walls provide potential homeowners with a clean slate on which they can envision their own personal touches.
Clear clutter. Too much stuff makes rooms look smaller and less appealing. Keep tables and countertops clean and clear, and remove extra furniture. But don't relocate your possessions to a garage, attic, or basement. All you're doing then is cluttering another space and turning off potential buyers. If you plan to hold on to Grandpa Lou's armchair and your collection of beer cans, consider renting a storage space. A 10' x 10' storage space ranges from about $40 to several hundred dollars a month, depending on the region.
Make it homey. Set the stage for comfortable living. A bright, tidy home will sell a lot faster than a dingy one, Stevens says. Hang your guest towels in the bathroom, set your dinner table with your best china, and place fresh flowers in an attractive vase. Appeal to the potential buyer's sense of smell as well. Clean carpets and drapes. Empty the trash and freshen cat-litter boxes.
PRICE TO SELL
Setting the right price is also key to selling your house quickly and maximizing your profit. Research has found that houses whose prices had been changed sell for less than homes whose prices had never been revised. The longer a house sits on the market, the more it becomes stigmatized in the minds of buyers--and the harder it is to sell.
So before you set the asking price of your home, research prices on comparable properties in your market. Scour newspaper and Web listings, attend open houses, and consult several real-estate brokers for sales information on comparable properties.
For more information on buying, selling, and maintaining your home, see Making your house pay off (available to subscribers).
