What Is Your Home Worth?
As a homeowner, you probably think you know all about what your home is worth, what your interest rate really means, what you are paying out every month, and how to access your equity if you needed to.
But do you really? If your home is worth $20,000 more today that it was when you purchased it, does that mean you are entitled to all 20,000 of those dollars? Does having equity in your home automatically mean you can sell for a profit? Would you know what your best option was if you needed some equity in a pinch? Check out the scenarios below for a quick equity tune-up.
Your neighbors just sold their home for a pretty decent amount. That must mean your house is worth at least as much as theirs. I mean, your kitchen hasn’t been redone like theirs, but your exterior is prettier, so that’s probably a wash. Score! Honey, call the bank and get us some cash. We’re going on vacation!
Not so fast. Your neighbor’s home sale might give you an idea of what your house is worth, but there’s a lot more to it. Your home’s age and condition, the square footage, the location on the street—all of this factors in to determining your sales price. And don’t forget to add in closing costs and Realtor fees and the price of moving. You also have to take into account your credit and payment history. Straight equity is only one part of a more complicated equation. Before you book that African safari, you might want to check your credit and talk to your lender.
And, by the way, your “prettier” exterior will probably not wipe away the memory of your ugly kitchen if you do go to sell. The old adage about kitchens and bathrooms selling home: still true.
You’ve been living in your house and paying the mortgage for 15 years without refinancing. You must be sitting on a goldmine! Time for a cash-out refinance. First you’ll pay off your credit card bills and then you’ll buy all-new living room furniture. Then there’s this yacht you’ve had your eye on…
A cash-out refinance, which allows you to “refinance your mortgage for more than you currently owe, then pocket the difference,” said Bankrate, can be a great option, depending on your financial condition and what you plan to do with the money. “Remember the Mother Goose rhyme about the old woman who lived in a shoe? That is so 18th century. Today, she would live in a piggy bank, and so would her neighbors. Homeowners today treat their houses like piggy banks, readily transforming their equity into cash and credit.”
Different from a home equity loan, a cash-out refinance replaces your existing first mortgage. You may have lower rates than with a home equity loan but you pay closing costs, just like you would on any refinance, and you’ll have to pay private mortgage insurance “if you end up borrowing more than 80 percent of your home’s value.” If your interest rate is much higher than going rates and you know you have a good amount of equity, it might make sense to go for it. But if you have terrible credit, your rate might not get much better. And, you’ll have to determine whether refinancing and going back to square one with a mortgage is worth it.
“If you’re going to make payments for 15 or 30 years, it makes sense to spend the money on something enduring: an addition to the house that will increase its value, potentially lifesaving experimental medical treatment that your health insurance won’t pay for or to start a business,” said Bankrate. “Do you want to spend 15 years paying for your month-long dream vacation? Do you want to spend 30 years paying for that Porsche? The car might be on the junk heap by the time it’s paid for.”
It’s hot outside. And it’s hot in the real estate market. It’s time to take advantage of both and build that pool you’ve always wanted. You’ll just get a home equity loan or a line of credit. What’s another couple bucks a month?
A home equity loan is a separate loan on top of your first mortgage that’s paid out in a lump-sum and is paid back in fixed monthly installments. An equity line of credit is a specific amount you can borrow against your home. Both will require you to have sufficient equity in the home, which will be determined by the bank.
The home equity loan is a fixed rate, while a home equity line of credit “typically fluctuates with the prime rate,” said US News. “Remember that with a home equity loan, you are paying interest on the entire amount of the loan, whether or not you are using the proceeds. With a home equity line of credit, you only pay interest on the amount you borrow.”
The loan usually has higher rates than a cash-out refinance, but interest is a tax write off and may be a good option for someone whose “current mortgage is at a lower interest rate than you could get now by refinancing,” said Bankrate.
And if the money loaned is being used to improve the home and not improve your wardrobe, your passport stamps, and your close personal knowledge of caviars of the world, all the better. “The best use for home equity is to buy things that will contribute to your home’s value, like a needed remodel, or your family’s future income, like a college education,” said Houselogic. “Consider carefully before you cash in home equity to spend on consumer goods like clothing, furniture, or vacations.
You check Zillow and see that houses in your area have appreciated by 20 percent in the past year. You are ROLLIN’ IN IT! Time to take that money and go buy a house to flip. You’re gonna be a mogul!
Before you quit your job and start researching property auctions in your area, take a beat. In many states, home sales are not reported. That means online real estate sites may be using limited listing info and sometimes even outdated tax records to determine home values. The only way to get a true picture of your home’s value is to have an agent prepare a competitive market analysis or hire an appraiser. Armed with this information, you can act on those real estate mogul dreams if you still want, Mr. Trump.
As the real estate market is making its comeback, now is a good time to take a look at your strategy for selling your home.
In some markets there are multiple offers on the table and even signs of bidding wars beginning. However, that doesn’t mean that selling your home is easy and doesn’t require marketing efforts. Here are four tips to help you strategize to sell your home faster and for top dollar.
Home selling strategy
Hire a good match for you and your home. The first thing to consider is hiring the best real estate agent for the job. Selling your home can be a long process and, even if it’s quick, it’s important to have a good relationship with your agent. With that in mind, make sure you allow ample time to meet with several agents to discuss your home, your expectations, and your timing for getting your home sold. The more details you discuss, the smoother things will go. Of course, there will always be bumps along the way but if you’re working with an experienced real estate agent, these issues can be smoothed out usually relatively quickly.
Do some research. Even though you may have lived in your neighborhood for a long time, it’s time to get out and cruise the streets and walk the neighborhood. This will give you the opportunity to see what your neighbors are up to with their properties. You’ll find out about new developments and see other homes in the area that are on the market. Viewing these homes allows you to do your own comparison. You’ll be able to note the pros and cons of other homes as compared to your own. You’ll also determine which aspects of your home that you should highlight. Maybe homes in your area have pools but yours has a solar heating system. That can be a huge plus and a money-saver for the new homeowners. Or, perhaps, kitchen remodels in your area are common but maybe yours includes a pleasant view from the kitchen sink. All of these types of upgrades are very important to prospective buyers.
Capture your home with still and video images. In the not-too-distant future this will no longer be a tip and instead it will be common practice for every home listed on the market.
Photographs and videos help tell a story about your home. They can capture the essence of the home and entice buyers to come see it in person. However, the opposite is also true. Poor quality images and video can turn an interested buyer into an uninterested one long before ever reaching your home.
Ask for advice. Invite input from experts. Your agent can offer some great advice about things that should be repaired or changed to help sell your home faster. Don’t create your own marketing flyers, leave that to the pros. They can put together professional marketing brochures that highlight the key features of your home. Be sure to have digital copies as well as hard copies for your social media distribution.
Consider value range pricing. This can attract more potential buyers because it offers a window of pricing rather than an exact price point. Sellers using this method list their homes by using a high-end price as the offer they’d like to receive for their home and the low-end price of the value range is a price that would be considered a starting point for negotiations.
Most of all be prepared to act swiftly and make any necessary changes including, if necessary, reducing your listing price or value range. Keep in mind that an over-priced home can cause your home to sit on the market for a very long time without even attracting any in-person viewings. It’s better to be realistic and price your home to sell.
The Goodspeed Group is right here ready to assist you and help you to process to step by step in selling your home. Give us a call!