The difference between home inspections and home appraisals often are confused by home buyers, especially if the homebuyers are first-timers. In some cases the distinction is unclear to sellers as well.
A home inspection looks at the physical condition of the property and can expose hidden flaws. This inspection includes not only cosmetic appearance, but also systems such as A/C, electrical, and plumbing. The inspection report will outline what works and what doesn't and may include repair or replacement recommendations. The inspection is performed by a licensed home inspector. Here in Texas they are licensed by TREC (Texas Real Estate Commission). Inspections are strongly suggested, yet not mandatory and are done for the benefit of the buyers. The inspection should be performed in the first few days of a purchase contract, preferably within an option period, giving the buyers the option to move forward, cancel, or negotiate repairs with the seller. It is usually paid for by the buyers at the time of inspection directly to the inspector. The inspection fee is separate from and in addition to the typical closing costs paid later at closing.
A home appraisal focuses on the value of the property. There are several methods used to estimate value, but the most common for residential properties is the comparison method... finding recent comparable sold property values (comps) nearby. Since no two properties are exactly the same, the comparable values are adjusted up or down to arrive at the value of the subject property. The appraisal is done for the benefit of the lender because the appraisal must support the loan amount as well as the type of loan. The appraisal is also beneficial to the buyer, giving peace of mind knowing that the sales price is not out of line. The cost of the appraisal is usually paid for as part of the closing costs at the time of closing, although sometimes they are pre-paid or paid at the time of the appraisal. If a buyer is paying cash for a property, an appraisal is not required, however can be ordered if the buy so chooses.
If you're serious about selling your house, it's important to know how to successfully sell in today's market. To get the best results, you must avoid the mistakes that other sellers will make. You will sell faster and get the best possible price in your market. Here are the 7 most common mistakes other sellers make:
1.) Wrong Price - There are several factors that help result in a sale, but the right price sells a house faster than any other factor. You certainly don't want to underprice your property and leave your hard earned equity on the table. Conversely, a price that is higher than most in any given area will discourage potential buyers, and if they aren't aware that it is overpriced, then I guarantee their agent will know. Even if you end up getting a contract on an overpriced house, the buyers' lender will order an appraisal. When that appraisal comes in too low... you've got a real problem. The contract and financing is contingent upon an appraisal that supports them. But what if I get a buyer paying cash, you ask? First of all, that is very rare and when it does happen it is usually a much lower offer in exchange for the quick, solid cash deal. If you are holding out hope for an inflated full-price cash offer then you are looking for a double-bag buyer... a buyer with one bag full of cash and another bag full of stupid. In my estimation, if their first bag is full of cash, then their second bag is probably not full of stupid.
2.) No Curb Appeal - This is one of the most important selling points. The first thing a buyers see is the outside of your house. That alone can make the difference between them driving off or wanting to see more. Make sure the lawn & shrubs are manicured and the front door, windows and shutters are clean and inviting. Quick inexpensive punch-ups include new light fixtures, mailbox, a brass kick-plate on the door, and maybe a planter with some flowers. Help your house say "buy me".
3.) As-is Condition - Chances are if you don't want to fix it, neither do the buyers. In today's market, most buyers don't want fixer-uppers. They have enough time and money constraints without adding repairs to the list. Selling in as-is condition is always an option if you are ready for a longer time on market and a lower selling price. There are creative ways to complete repairs prior to selling without the out of pocket expense. Contact me for more info regarding repair solutions.
4.) Dark, Cluttered Spaces - A clean, bright interior is what buyers want. A little effort can go a long way to improve the appearance of your house. Replace burned-out light bulbs, clean & open blinds for natural lighting. Make sure items are arranged to allow an easy traffic flow from room to room. Clean out those closets and get rid of some of the "stuff" that you've accumulated. It will be less to move anyway. Donate items for a tax write-off or have garage sale and invest the proceeds into something the house needs... like fresh neutral color paint. Paint, if needed, is usually the best dollar-for-dollar investment. The next best investment is carpet. If it is worn or can't be cleaned, the best bet is to replace it.
5.) Over Improving - Spending too much on upgrades or remodeling drains money out of your pocket you may never get back. If your improvements entice you to raise the price over that of neighboring house values, don't expect to recoup the entire cost. Pricey upgrades will help your house sell quicker for sure, and may bring a higher selling price, but just don't count on it. The average selling prices in an average neighborhood will pull up the value of the worst house on the block, and can pull down the best house, so be careful! It doesn't always work out the way it does on these real estate "reality" shows.
6.) Going it Alone - Selling you house yourself is an option... however, real estate is a numbers game not only in price, but in probability. Without a professional advisor and marketer, it is likely you won't sell, and if you do, the facts are that self-sellers will net less from their sale than those who utilize the services of a professional. Agents will bring more potential buyers, and do more than most people realize such as marketing, negotiating, writing solid contracts, and monitoring the steps in a transaction all the way up to closing. They also provide pre-screened buyers. If buyers aren't really qualified, they are a waste of time and very risky. Also, if you go it alone, the vast majority of buyers will have an agent (it's free for buyers), and you will have to negotiate with and pay an agent anyway.
7.) Always Be Home - You and your family can make buyers feel like they are intruding. The goal is to allow buyers to imagine themselves living in the house. Having children and pets under foot can keep buyers from focusing on the business at hand. Buyers almost always feel uncomfortable expressing their thoughts and discussing details of their largest purchase with the very people they will be negotiating with.
FSBO - This can be a tempting choice for some property sellers and I
understand that temptation. You have the right to sell your house...
after all, you own it. In fact, I have helped many metroplex FSBO's
and if you choose to go FSBO, I'll help you for free. I will provide a
market analysis of area homes and documents you will need... contract
forms & addenda, mandatory disclosures, affidavits and etc. Also, will
you be buying another home? My buyer services are free, so why in the
world would you not get free professional property search, analysis and
representation? Which brings me to my next point... If you market your
house for sale by owner your advantage is saving the listing fee. Now
flip the perspective to the buyer's side: What is the advantage for a
buyer to come directly to you instead of all the other homes on the
market? Give this some thought. Any buyer at any time can get help
and representation from a real estate agent for free. If they have an
agent, you will never see that buyer unless you agree to a 3 or 4% fee
for procuring that buyer and closing the deal. Oh, and you will be
negotiating with a professional. If the buyer does not have an agent,
the only advantage a buyer has for coming directly to you is to get a
good deal on price. Doesn't that negate your only FSBO advantage of
trying to save that same money? Here's some more food for thought...
Often times buyers won't go directly to a seller. They are scared &
sometimes confused. They may not ever find your house and if they find
it, they may not know what to do. (write an offer on a napkin?) Buyers
are making the largest purchase of their lives and are emotionally
involved, so they usually don't want to negotiate directly with the
very person that owns the house. I have found that about 8 out of 10
times, buyers want to go see houses before they are ever pre-approved
for a mortgage. That is crazy but true. The number one reason for
deals crashing & burning is due to lack of financing. Be careful! If
they really can't buy, they have no business being in your home.
Speaking of being careful... are they pre-screened? Who are you
letting in your home? I have compiled a checklist of 32 actions that
must be taken in order to close on a house. To play it safe, most of
them must be done in order (with some contingencies involved). Of
course real estate is done on a case by case basis, and some
transactions require more. Whatever you decide to do, I want you to
know that I am here to answer questions for you. Consultation and
information is free.
Shopping for a home? Confused yet? There is a plentiful supply of good deals on the market right now... so how do you decide which one is right for you? It is not uncommon for buyers to experience "analysis paralysis", especially with so much to choose from in today's real estate market.
First, let's point out that there are so many variables involved when choosing a home, that it is unlikely that you'll find the "perfect" home. The solution is to compromise on the less important features and things you can change, while focusing your attention to the more important factors, and things you can't change.
Your goal here is to choose the items from the first list (below) that are the most important to you. These are the things you can't change (or would be very difficult to change):
Location, Location, Location
Neighborhood
Schools
Floorplan
Brick vs. siding
Style of house
Age of house
1 story or 2 story
View
Lot size
Pool or no Pool
The following items are less important and can be changed or added. In fact, most of these can be customized to your taste, making your home uniquely yours.
Paint Color
Faucets & Hardware
Lighting & Fixtures
Carpet
Tile
Ceiling Fans
Curtains-Window Dressings
Lack of Trees
Lack of Storage
Fencing
Appliances
You will notice that most of the items in the second list are cosmetic, some of which can be easily changed. You can always paint, remove a ceiling fan, or plant a tree. But if you have sore knees, then discard the 2 story houses... if you want to cut down on exterior maintenance, get a brick home... if you want a nice view from the kitchen window... NOW is the time to think about it.
On a personal note, years ago my wife & I wanted a house in a quiet, established neighborhood, with wide streets and no front-facing garages, and generous lots. Oh yes... and it had to be brick. These are the things we couldn't change. The house we found is in a desirable neighborhood and when we found it, it took us about 10 minutes to decide to pull the trigger and buy it. I'm so glad we did. Sure there are some changes we made to the interior, and others we plan on changing over time... but those items are just personal touches. Long story, short...decide on the things that really matter. If you choose a location with a lengthy commute, or nearby railroad tracks, well... you get my point.
Just my two cents. Spend it wisely.
Allen Robison
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If you have lived in your house for a year or so, it's already happening to you. You are becoming houseblind . Oh, you can see alright, but you no longer are able to see your house through a fresh set of eyes. You no longer have that initial gut reaction or emotional response that a potential buyer will have when touring your house for the first time. You have become de-sensitized to your environment... not only in sight, but also smell and sound. This is just one more reason why an objective third party such as a Realtor (or a brutally honest friend) is a valuable asset to a seller. Lets take a look at some of the more frequent offenders.
1.) Smell - When a buyer walks into your house for the first time, the first thing (and I mean the very first thing) they'll notice is the smell. Negative comments include smoke, pet odors, an old musty smell, cooking odors (exotic spices, fish, etc.), and garbage can odors. I've even had buyers say that the house smelled like feet. Yes, feet. Not good. It is very hard to detect a smell you are used to, so get a third party to help you with this.
2.) The Lived-in Look - This happens to almost everyone's house, and it gets away from you quickly. It's all about staging to present your house in the best possible way. Get rid of, or at least hide the following: stacks of mail, newspapers & magazines, half-empty beverages, 5 different remotes, video games, accessories & extension cords, half-finished projects, dishes, and bathroom bottles & containers. Less is more. You are getting ready for the most important visitor to your house... a buyer!
3.) The Yikes Factor - These are the things you are used to that hit buyers right between the eyes. Remember that loud wallpaper you didn't like to begin with? It's still there, and will be a problem. That dark blue carpet will be a problem. That neon purple bedroom will be a problem. That old, dirty lime green recliner with the duct tape will be a problem. Any questions?
4.) Family Ties - One issue that is often overlooked is family photos. Sometimes we see a huge number of them displayed all over the house. Your goal here is allowing a buyer to envision the home being theirs. We know you love your kids (& your grandkids, friends & vacations), but please don't make buyers feel like they are invading someone else's space. Oh yes, and box up all of that stuff stuck to the refrigerator.
5.) Personal Themes - Is your house heavily adorned with sports memorabilia, pictures of pets, racecars, or super heroes? If you are compelled to display your themed collection, you may want to limit it to one room. You may also want to talk to your teen about the heavy metal posters & pin-up models. I'm not judging, I'm just sayin'.
6.) Forgotten repairs - I remember having a seller of a very nice home with a very obvious, large broken window. When I pointed it out, they realized that they let that defect go for so long, that they didn't even notice it any more. Nuff said.
AllenRobison
allen@allenshomesite.com
I can't even count how many times I've heard this statement. Foreclosures can be a great deal, no argument there. I have closed numerous deals for clients on undervalued properties that were foreclosures. But not so fast...
Don't get caught up in the hype surrounding foreclosures! Some buyers get stars in their eyes when reading articles and watching documentaries about the steals to be had in regard to foreclosures. They are drawn into orbit by some magical gravitational pull... or are they just circling the drain? Peel back the foreclosure label and look at the facts. 2 factors that are very important to consider are 1.) Condition & 2.) Price per square foot.
For instance, if I find 2 very similar homes for sale in the same area and one is a foreclosure at $68 per sq. ft. and the other is owned by an idividual and offered at $61 per sq. ft., with all other factors being the same, I would lean toward the individually owned house every time. I don't care about the foreclosure label on the other one. Ultimately, ALL properties are priced by people. Sometimes they miss the mark, are fishing for a higher price, or are controlled by a bank's operating procedures and/or financial position in a property.
Here's another scenario... 2 similar homes, both priced at $70 per sq. foot. The foreclosure has been neglected and needs a lot of work. The individual's house is move-in ready and has a newly remodeled kitchen. Again, I would lean toward the individual's house. But let's dig a little deeper...
Assume the same scenario, but this time they are the same per sq. ft. AND the same overall condition. The foreclosing bank has announced it will not pay for the survey, the title policy, will not allow any seller contribution towards buyer closing costs, an it is sold as-is with no repairs after the inspection on their property. The individual on the other hand, is willing to pay for, or at the very least, negotiate on these items. The difference will easily add up to thousands of dollars. Remind me again why the foreclosure is the better deal?? Don't get me wrong here, foreclosures CAN be a great deal, but they've got to show me more than just the foreclosure label.
So... you're wanting to sell your house, but you want to do it right. Should I sell now, or wait? Let's look at some of the key factors to consider that will cut through the confusion.
1. It's a buyer's market right now - shouldn't I wait to sell?
OK, so it's a buyer's real estate market. Let's ask a more relevant question... Will you also be a buyer? If you will be buying another home, will you be moving up or downsizing? First, if you won't be buying another home for whatever reason, then you may want to wait for real estate prices to recover, thus increasing your equity cash-out. The same may be true if you are downsizing. Your goal here is to maximize your equity capture on the most valuable property in your transaction. Now let's take a look at moving up in a down market: For illustration purposes, let's say real estate prices are down by 20% right now. Let's also assume in a balanced market you would be selling a $100K house and buying a $200K house. In a 20% down market you would take a hit and sell for $80K... however, you may be able to get that $200K house for $160K. Which one is more.. $20K or $40K? If you wait for prices to recover and sell that $80K for $100K, then most likely that $160K bargain will now be $200K. It's only a matter of time until prices heat back up. Let's assume then that the balanced market then appreciates by another 20%. The $100K house is now worth $120K. The new house is now worth $240K. If you bought the new house in the down market at $160K, you now have an equity capture of $80K.
2. Do I have enough equity to sell?
Remember that it will cost 8% of selling price (more or less) to sell your house. Have a local agent run a market analysis AND a seller's net sheet to determine your "walk-away" amount of your sale. Your goal may be to put some of the proceeds toward your next house, or you may be in a position that you don't need a great deal of cash and you simply want or need to sell now.
3. I'm ready to sell, but is my house ready?
Have your real estate agent evaluate your property for marketability. Most buyers won't want to take on a project. A property in poor physical condition or poorly staged will simply help sell the house down the street that is more appealing. The only way to correct this situation is to make your property more appealing or take a hit on price. In most cases, your agent can go over a "punch list" of items needing attention that when resolved, will result in fewer days on market and a higher selling price.
4. The economy is bad right now.
OK, so the national economy could be better. What about your personal economy? If you want to sell and buy, your finances are in order, you have good credit, and have steady income, then do what you want to do, when you want to do it. Make your move! To borrow a quote from an old friend of mine... "I don't need the economy's permission to get my new house".
Allen Robison, Realtor, e-PRO
allen@allenshomesite.com
Country living near town!
• 2,696 sq. ft., 3 bath, 4 bdrm single story
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$137,500
- Custom Home - Huge value!
Wildwood Estates, Burleson
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This spacious custom home is a rare find!! Perfectly located between Burleson & Joshua, yet 2 minutes to either town. This desirable, quiet street is not in city limits and offers low taxes as well. Long-time owners have updated or upgraded almost everything including fixtures and brand new carpeting. The excellent kitchen features Corian solid-surfaces countertops, more cabinets than you'll need, a convection oven, smooth cooktop, built-in microwave, dishwasher & trash compactor in all black Maytag & Kenmore. Need space? There is 4 bedrooms including 2 masters... one is big and the other is huge (25x14). Need more space? The French doors open to an expansive 2nd living area (29x23!) with cherry wood floors and hand-troweled walls. Want more? There's also a detached 20x12 finished building with electric, phone & A/C for an office, workshop, or a 3rd garage complete with its own driveway! Behind that, there is an 11x8 storage building for your goodies. All 3 baths are updated with Moen & Delta faucets plus marble tile floors. The laundry/sewing room is fully equipped with a sink and built-in cabinetry. The first living area features a corner brick fireplace plus vaulted ceiling, all open to the dining room and kitchen for easy conversation. All of this sits on a generous lot over a third of an acre. This one just feels like home!
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