How To Sell Your Home Profitably In a Down Economy!
Selling Your Home? Step Outside of the Box!
Selling a home in today's economy can be a challenge even in the best of locations. Selling your home profitably can be very difficult. Many home owners are faced with homes that are declining in value, with outstanding mortgages exceeding the current value of the property. Personal hardship resulting from unemployment, illness, or other lifestyle changes, make the sale of the home seem to be the only option.
As options for many appear to be limited, with not many ways out; dare to step outside of the box. Face those giants you will encounter outside the box and beyond. A challenge for most sellers in today's down economy is the fact that this is a buyer's market. Creatively reconsidering options may help balance the seller/ buyer scales.
Turning Home Selling Challenges Into Upfront Profits
Restructuring Goals For Sale of Home
A homeowner desiring or needing to sell their home in this down economy will face various obstacles. Most sellers are aware that this is a buyer's market, so the scales are not tipping in their favor. Seller's have watched the decline in value of their dream and most costly asset. Many are burdened with a mortgage balance that exceeds the value of the home. Properties for sale are tending to stay on the market for longer periods of time.
There are parts of the nation that have seen an increase in home sales and in home values. For many parts of the nation the decline has slowed, but property values are not expected to rebound for a few years.
A seller may be able to creatively reconsider options, by restructuring goals for the sale of their home. For example, a seller's goal could be to sell their home within 6 months. They could have an existing mortgage that exceeds the current market value of the property. The property value could be down at least 30% depending on the location. This seller could limit their losses, and even realize profits by reconsidering options and restructuring their goals.
The selling of the home could be considered a mid-range (1-2 years) to long-range (3 years or more) goal. Specific options or strategies to address the selling challenge areas could be considered short range (1 month - 11 months) goals. The main focus of the selected options should be to reverse the effects of the down market, by creating a cash flow from the property that is being sold. The seller could establish a competitive interest account to channel all net profits realized during the selling process. In this way, they could convert their selling challenges into upfront profits, before the actual sale of the home.
We will be considering various options or strategies that can be implemented by a home seller, wanting to sell their home within 2 years, without sacrificing a profit.
Creative Options For Home Selling Challenges
Seller Option I : Delay the Sale of Your Home
Time Can Balance The Seller/Buyer Scales
Delaying the sale of your home is not a passive activity, idly standing about, hoping to sell your home. This delay or pause is an active process, allowing the home owner to fully assess their particular selling challenges. The seller challenge mentioned of declining property value is an issue impacting many families across the nation. The declines have slowed in some areas; and some areas are seeing upswings in sales; but property values are not expected to rebound for a couple of years for many parts of the nation.
Compounding the challenge of declining property values, are properties with mortgages that exceed the value of the property. Pausing to explore creative options at this stage can result in significant cash flow from the property. The strategy of delaying the sale of your home provides the benefit of time. The seller/buyer scales are expected to become more balanced over the next few years.
The seller challenge of having a property with a mortgage that exceeds the value of the home will be addressed in the next section.
Seller Option II - Place Your Mortgage Into A Bi-Weekly Mortgage Payment Program
Pay Mortgage Off Faster & Save Tens of Thousands of Dollars in Payments
Placing your home into a bi-weekly mortgage payment program, is one of the most powerful ways to tame an out of control mortgage. This option or strategy can be implemented in a matter of days to less than one month. This is a short range goal.
Before setting this program up, contact your mortgage company, bank or financial institution that is holding your mortgage. Try to negotiate a reduction in your interest rate, a reduction in the principle amount owed, or any type of favorable changes to the terms of the mortgage. Ask them if there are any pre-payment penalties, and if you are allowed to pay on a bi-weekly basis. If they say yes for pre-payment penalties, and no to bi-weekly payments, ask if they would be willing to add these to your mortgage terms. There are non-profit and governmental agencies that can assist with this process. This is where most of your time will be spent.
If your mortgage company allows early pay-off of the loan with no pre-payment penalty; and allows the mortgage to be paid on a bi-weekly basis; you are ready to set up your bi-weekly mortgage payment program. Identify a reputable company that can efficiently administrate the accelerated pay-off of your mortgage.
This strategy has the same effect as refinancing a mortgage, but is a fraction of the cost. It lowers your interest rate automatically, through interest saved. The bi-weekly program can cut the number of years owed on the loan, and save you tens of thousands of dollars in actual mortgage payments over the life of the loan.
The mortgage amount is split and paid every two weeks instead of monthly. To pay the loan down much faster, you can add as little as $25 or less per payment. This is not required. The program is transferable to a new owner for a small fee. As the mortgage payments are excelerated during the extended selling process, the seller's losses will be decreased and profits will increased.
Selling Your Home Profitably
Seller Option III - Lease Your Home With An Option To Buy
Bring On Board Motivated and Qualified Renters
Residential rentals are one of the fastest growing real estate niches in the current economy. Many people are not comfortable taking on the expense of home ownership. However, they need a place to live, and rental properties will continue to be in demand. There are people desiring to buy a home, and would welcome leasing with the opportunity to buy. The renter responding to a lease with option to buy, will often be a more motivated tenant, and can be qualified during the screening process.
The opt in time frame should be designated in the lease. Familiarize yourself with tenant and lease regulations and guidelines for your area. Any lease stipulations indicating a particular fund credit, that will be applied to down payment if lease option is exercized, should be clearly spelled out in the lease. Have a real estate attorney review lease to assure it meets all state and local requirements.
A seller who does not want to deal directly with tenants may wish to use the services of a property manager. For a fee that can be included in the rent, these companies can find and screen tenants. They can also collect rents, do repairs, and manage problems up to and including eviction.
This is an effective strategy to generate cash flow from your home, as the property is being positioned to be sold.
Seller Option IV - Rent Out Rooms
Tap The Cash Potential of Unoccupied Rooms
A home owner seeking to sell their property, may not be in a position to lease the property. Funds may be tight, and the seller may need to remain on the property until it is sold. If the seller has extra rooms available, that are not regularly occupied, these rooms could be rented. Rental rooms could include guest room(s), any unused bedrooms, inside porches, attics, and basements. Any unused portion of the home could be considered for rental purposes.
The advertising and screening process will need to be more targeted, as renters of rooms will be sharing living space with the owner. Personal preferences and qualifiers need to be specific, but in line with tenant regulations. Become familiar with rental regulations for boarders/tenants in your local area. Personal preferences could include smoker/non-smoker; pets allowed/not allowed; or children allowed /not allowed.
Renting a room (s) in your home can be an uncomfortable situation for an owner. This is particularly true if you are a private person. The property owner needs to consider ways to maintain their privacy and security within the shared living spaces of the home. Prior to renting the rooms, an owner can secure their living quarters, and the rooms to be rented with locked doors. Clear written guidelines can indicate commonly shared areas such as kitchen, bathroom, or use of washer and dryer. If areas of the home are restricted, this needs to be clearly indicated. Maintaining proper boundaries will go a long way in keeping all parties more comfortable.
As the home owner is identifying and qualifying renters or boarders for their rooms, interest in lease/option to buy could also be explored. The question could be listed on the application form in simple yes/no format, or included in the original advertisement.
Renting out unoccupied rooms in your home, is another effective strategy to tap the cash potential of a property being sold.
DIY Home Repairs
Seller Option V - Renovate Your Home For Profit
Home Renovation Projects That Pay the Seller Back
Home owners selling their property in the current economy must be selective in their home renovation plans. The goal is to effectively renovate the property for sale, in a cost-effective manner, that will maximize the value of the home and seller profits. This goal will not be accomplished if large sums of money are spent on renovations, that do not maximize an effective return on expenditures.
Many properties have declined in value, irregardless to location or condition. Many home buyers are having difficulty securing funds through traditional lenders. Buyers are attracted to certain amenities, and particular attention should be paid to these areas during renovating. A seller needs to be aware of these issues when making plans to renovate their home for a profitable sale.
Renovation projects can cost little or nothing, besides time and energy of the seller. Decluttering and complete cleaning of the property would be a project costing the seller little or nothing. The decluttering process could also add revenue (cash flow) from the property. Unwanted or unneeded items could be sold in yard sales, flea markets, and online. A seller could also donate these items to a non-profit charity of their choice. The donation can be taken as a tax benefit.
The seller could choose to complete the cleaning of the property themselves or hire a professional cleaning team. There are many effective products on the market to remove dirt, grease, grime, mold, mildew, and even rust from appliances and other areas. Consult with a local hardware store for assistance in choosing the right products.
Painting is an extremely cost effective renovation strategy. Painting of the interior and the exterior areas of your home, adds a fresh vibrancy to the property. Painting is a renovation project that many home owner's are comfortable doing either in part or completely. A general repair person or contractor can be hired to complete any or all of the needed painting.
Renovation projects that have some of the largest returns on expended funds are remodeled kitchens and bathrooms. If a seller is able to complete the renovations themselves in part or completely, they will profit maximally. A seller can also contract these renovations out to a specialist. When using contractors be certain that they are licensed and bonded. This will protect you in the event that something goes wrong with the project.
These are a few examples of home renovation projects that cost the seller little or nothing; or have moderate cost with great return for the invested dollars. Renovations to the property will enhance it's value, and increase profits of the seller at time of sale.
Seller Option VI - Obtain A Certified Appraisal of Your Home
Knowledge is Power For A Home Seller
The seller who is armed with the most accurate value of their home will be in the best position to negotiate. There are various ways of estimating the value of a property. A real estate agent would probably offer an estimation at no cost. A broker's opinion is a relatively inexpensive way to get an estimate of a property's value. A seller can also obtain current comparables online to estimate the value of their home.
To get the most accurate estimate of the value of your home, a seller should have the property formally appraised. A certified home appraisal cost approximately $400, depending on your location. Many lenders will only accept a certified appraisal of the value of a property. An appraisal will provide you with the as is value and the after repairs estimated value.
Having this information available can relieve a seller of the stress and aggravation of entertaining "the low ball offers". It may not stop these offers, but they will be more readily dispelled.
Music For Easy Listening
Seller Option VII - Sell Your Own Home (FSBO)
Yes You Can! Go FSBO Go!
A seller can save thousands of dollars by selling their own home. This may appear to go against conventional wisdom, but there are tools available, that will allow a seller to do just that. Many might argue that the seller without an agent will have limited access to potential buyers. This does not have to be the case. A property sold by the seller is called a "FSBO" (For Sale By Owner).
A real estate agent will charge a fee of approximately 5-6% to list your home. On a home worth $300,000 the listing agent will charge approximately $15,000. If a discount listing agent is used at a 2-3% fee, the cost would be about $7,500.
There are companies that will assist a seller to sell their own home for a fraction of the fees of a listing agent. The seller would be provided with support and advise on selling their home. They would be provided full access to buyers, yard signs and flyers, the ability to control the property listing, and even a selling guarantee. The seller would pay approximately $100 to $1,000 for this service, depending on the seller's package or company selected.
There are seller's who would feel confident to take on the adventure of selling their home for themselves. These sellers would save 100% of the real estate listing agent's fee. Any fees saved could enhance the seller's profit margin, and help to regain any losses on the property.
Seller Option VIII - Market Your FSBO Online - Save Money, Time, & Energy Online
A home seller can utilize the internet to effectively market and sell their home. Check out this delightful video on selling your FSBO online.
Seller Option IX - List Home Seller Auctions
Creative Auctions Designed To Help You Sell Your Home!
Designing creative auctions to help you position your home for sale should be fun. Start the bid low and offer free shipping and handling. Auctions could be listed for the down payment of the property; for the lease option to buy; or for a free month's rent.
Dutch Auctions could be listed for a free brunch open house. You could feature different cultural menus such as Mexican food, Cajun food, or pot luck dishes. Perhaps family and friends would be willing to prepare their specialty dishes or desserts. Try to keep things simple like interesting light treats, so that potential home buyers can help themselves. The Dutch auctions could be for credits, that are redeemable for entry and gift drawings. Gifts could be inexpensive, fun momentos.
List the property for sale online utilizing different formats. Offer at buy now (desired price); Best Offer (with minimum acceptable offer); Low start bid with reserve; No reserve with minimum acceptable offer as start bid. Try listing on sites with decent traffic and no or low fees, ie, craig's list.
Be creative, ideas for auctions are limited only by the imagination. Not only is this fun, but you could generate some serious pre-sale profits.
Thank you to all visitors endeavoring to sell their home, or visitors interested in this topic. Please feel free to leave a comment or post a question.