All Financial Matters

Determining a Home’s Market Value

What is your home worth? That is the million dollar question. When you’re selling a home, there is a fine line between asking too little and asking too much. It can make the difference in a home that sells in two weeks and one that takes several months. Learn how to determine the value of your home.

A home value can depreciate. It is necessary to understand that first. We see it in neighborhoods where the neighbors aren’t as diligent about keeping up the value of their property. No one will pay top dollar to live next to a house with an unkempt yard or a car propped up on cinderblocks. Your home may be worth $150,000 according to the size and style, but you won’t get that much for it with messy neighbors.

Fixing up your home can return it to the proper value. Over time, our home goes through many changes. When we have kids we expect to have juice stains on the carpet and crayon marks on the walls. It’s okay to have those things while we are living in the home. You can place a throw rug over that stain and no one will know. When it comes time to sell your home, things change.

Fix the things that will make a difference to potential buyers. I wouldn’t want to have to change the carpet as soon as I move in. I also wouldn’t want to have the hot water heater go kaput after a month or two in the house. Save yourself and your buyer the headache and make repairs before putting the home up for sale.

Additions to the house increase value. Over the years, families make changes to the home. Adding a swimming pool, an office, or turning the garage into another bedroom all add to the value of the home. These things increase square footage and living space.

A real estate appraiser can give you an idea of what the home is worth in relation to other homes in that size. We pay a certain amount for our home and over time it appreciates. The market value can be much more than this if the home is in a good neighborhood, near schools, close to shopping centers and banks, and governed by a neighborhood association. I mention the last point because a neighborhood association keeps owners accountable for the appearance of their property. No one is allowed to bring down the property value of another.

The number the appraiser puts on your home is not the final value of your home. There are several things that feed into the market value. This is just a place to start.

A real estate agent can help determine the fair market value of your home. This takes into account the things above and the climate in the market. A buyer’s market makes it harder to sell homes at a good price, but it can be done.

Advantages to Auctioning your Home

So your home isn’t selling right now. The market may be saturated with the type of property you want to sell. There are other options to get that home sold. One such option is to auction your home.

When we think of auctions we think of either Sotheby’s or an estate sale. One is a prestigious way to get a large sum for your product and the other is an attempt to get whatever you can. Selling a home at an auction is actually neither of these things. You can get a good price for your home if you have been unsuccessful using the conventional method.

One advantage to using a home auction is the turnaround time. Auctions use a specific timeline to advertise and market the property before holding the auction. The time is typically six weeks from the time you sign the contract with the auction house.

During that six weeks they are doing all they can to advertise your home along several avenues. They get the word out in direct mailings, ads, brochures, newspapers and television. Some use radio and/or television if the property is a high profile one.

Before you sign the contract, be aware that a seller has the right to dictate the minimum price of the sale. If you have already been through the price dropping process with the conventional method, you may be firmly set on a price for the home. You have that right. Selling that is subject to reserve means that they price will go no lower than the minimum price set by you.

Auctions also offer the option of an “absolute” auction. This means that the house will be sold regardless of the dollar amount of the winning bid. It could be your requested price or it could be much lower. Owners who want to sell the house quickly may use this option.

Auction bidders have the money to back up their bids. Traditionally, financing may fall through at the last minute and a deal stalls. That is not the case with auctions. There is no financing or other negotiation. A bidder must have their financing in place before being allowed to bid. Auctioning is a cash only transaction. Whoever wins the bid is guaranteed to pay up.

Auctions are also subject to fluctuations in the real estate markets. Bidders are not going to pay more than the market value if there is an inventory of property. The more they have to choose from, the lower the price will be for the seller. Sellers are also required to pay the marketing costs out of the sale price receive for the home.

There are many advantages to selling a home at auction. If you need to sell your property and it hasn’t moved with your real estate agent, give auctioning a try.

Advantages of Renting over Selling

Sometimes a home doesn’t sell. You may have done everything correctly but the market was not favorable to you at that time. Don’t give up on the property altogether. When you need to leave a home, consider renting out the property as opposed to further efforts to sell.

Being a landlord is a scary proposition for many people. They think of a greasy individual who won’t fix anything but bangs on your door incessantly for the rent. Not all landlords are like that. Many are friendly, responsible people who respect their tenants. You can also become a landlord when you rent out your former residence.

Rental property creates cash flow. We want the cash to flow in to us and not out to the bank, but that is determined by the amount of the rent. Monthly rent prices should ideally cover the mortgage payment and any incidentals. If it doesn’t fully cover, try to get it as close as possible. Being responsible for $100 a month as opposed to the total mortgage cost is a better situation for you even if you start in a negative cash flow situation.

As a landlord, you could be receiving payments from a tenant without having to deal with a single leaky toilet. Landlords are responsible for repairs on the property, but you can hire a property management company to do that for you. The management company would screen tenants, execute repair orders, and collect the monthly rent. If you are moving to another state this is a great option.

Rental property is considered to be a real estate investment. As an investor, the government extends several tax breaks to you. For one, you can subtract a certain amount of money for depreciation of your home. This is a paper deduction since homes actually appreciate over time. The deduction is for the wear and tear on a home.

Landlords can claim depreciation for appliances in the home. This can be done in a lump sum or taken out over a number of years. Any depreciation amount lowers the taxable income. It is possible to claim enough deductions to claim a net loss on the property even though you are getting money every month from your tenants.

Renting out one home could be the beginning of a new opportunity for you. As a real estate investor, your properties make you money. Tax laws say that you can use money made from one property to invest in another and defer paying taxes on that profit.

When you sell, the deal is done and you are subject to capital gains taxes. Renting allows you to put off capital gains until you sell, if you ever do. Renting is not a bad proposition for someone who needs to move away and hasn’t been able to sell their home.

Thrifty versus Scrooge

Which one of those words describes you? Does your family look to see if you are around before picking up a penny off the floor? Or, do they embrace your ideas for ways to save a buck? There is a fine line between being frugal and being a miser when it comes to saving money.

Money matters can make us crazy. Counting every penny is not how most of us want to live. Well, that’s the next step for an overzealous spendthrift who takes money matters to the extreme. The term “thrifty” used to pertain to old ladies who shopped at the five and dime for their clothes or visited the flea market. Nowadays, it is chic to shop for the least expensive clothing. It is even acceptable to go to thrift and consignment shops to find wonderful bargains.

Despite what’s in fashion, being thrifty can save your family money. Learning to save is a valuable lesson for the younger members of the household. A family environment is the best place to learn to handle money responsibly.

Do you have loose change around the house? Put it into a jar. Each person can have their own jar. Change can add up quickly. My father empties his pockets each night and places the change into a jar. When one is filled up he starts another one. When the money was taken to one of those change counters in the grocery store he had over $600! I’m not saying that everyone will have that much, but there is the potential for a little pocket change when you need it most.

Saving money doesn’t have to be a depressing thing. Kids don’t have to wear hand-me-downs and you don’t have to eat leftovers for a week unless you want to. As long as you observe the basics, there is no need to be a miser about money.

Resist the urge to think about money every minute of the day. What usually happens when you first encounter the idea of saving money and creating a budget is that you get penny-pinching fever. It starts in your brain and quickly spreads to every part of your body. Around every corner is a dollar waiting to be squeezed to the last breath. The family is afraid to ask for anything because they’ll get “the speech” or “the scowl”.

To save money, start by changing one thing at a time. You could cook dinner each night instead of going out. Save outings for special occasions or as a reward for saving money all month. Just be sure to budget in for that meal!

Don’t let money hold you prisoner. It is okay to spend it. Following a budget teaches you to spend it more wisely than you did before. You can live comfortably while saving for the future.

Sticking to a Personal Budget

You have taken the time to create a budget. It has been a trying task, but you did it. Now, you must stick to it. That budget looks good on paper, but it won’t help if we don’t change our spending habits. Here are a few ways that even the biggest budget hater can stick to one.

1. Think before you spend. Having plastic in our pocket stops us from thinking sometimes. We see something we want and we act like Betty and Wilma in The Flintstones: “Charge it!” Before we know it, we have dipped into the bill money. Once it’s gone, there’s no way to get it back until next month.

2. Put your credit cards away. Once they are paid off, hide them. If you carry them in your purse you will use them. It is okay to keep them since you never know when an emergency will come up, but out of sight will lead to out of mind.

3. Forget about that raise. We are all guilty of planning on our next purchase as soon as the ink dries on the paper. Instead of using that money, put it away in a savings account. It is an added bonus for doing a good job at work. Let it grow a little away from greedy fingers.

4. Put away that tax refund. Each year I used to count on the tax refund to get myself out of debt once again. The problem was that I got right back into debt and needed to be bailed out again. Treat tax money like a raise or a bonus — keep it hidden.

5. Withdraw money from the ATM once a week. If you know that you will need cash in your pocket, go to the bank once and get enough to last. When it is gone, that’s it. Resist the urge to go back again for more.

6. Learn how to grocery shop. This seems like an easy task but there really is an art to getting enough food to last, especially with children. Cut coupons out of the Sunday paper. Stock up on essentials like toilet paper, laundry detergent, soap, and the like when there is a sale. Buy common food staples in bulk. Buy meat from the butcher and have it cut up for free.

7. Re-negotiate insurance rates and utility plans. Every three years or so it is good to see which gets you lower rates - your current insurance carriers or another.

Sticking to a personal budget takes time and we all slide back into old habits now and again. The point is to get right back in the saddle and keep on going. You will reach your debt-free future.