Are Home Improvement Projects Important For Selling a Home?

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One of the questions that I get asked the most is what kind of home improvements should a potential home seller make prior to listing their property for sale? The answer is different for everyone, of course, so I wanted to chat for a moment today about the topic of improving your property the right way.

What Should I Improve?

One of the best resources for home improvement information is Remodeling magazine's 2010-11 Cost vs. Value edition. This list gives you a great amount of information on potential home remodeling projects and how much value you will get back for doing them.

Some home sellers make the big mistake of doing remodeling projects that they think are important. For instance, they might add a swimming pool. The problem with a pool is that about half of buyers love them and half hate them! You never know which buyers might be walking through your home.

Instead of guessing at the projects that will give you the best return on your investment, why not go with proven winners? Here are some ideas to get you started:

- Replace your front door: The front door is an important part of your home as everyone sees it when they drive by or stroll up your walkway. This inexpensive project can pay back huge dividends later.

- Replace your garage door: I bet you never considered replacing your garage door, but it has been found to be a great way to update the look of your home and get a monetary return when you sell it.

- Kitchens and bathrooms: These are two of the most important rooms in the house as far as buyers are concerned. Walk through your kitchen and bathrooms to look for remodeling ideas. You might want to add trim to your cabinets, put new knobs on, change your countertops or even add new appliances. (Did you know that granite countertops are more popular and less expensive than Corian?)

- Consider new flooring such as hardwood: You might be surprised at the deals you can get on new flooring!

With the real estate market being the way that it is, buyers want a home that is move-in ready. They don't want a home that “needs work” or “needs updating”. Remember that you are competing with hundreds or thousands of other home sellers. You have to make your home look shiny and ready for its new owners.

As your personal real estate consultant, I can come into your home before you list it (even a couple of years before) to give you ideas on what you can improve to give your home the best resale value in the future. That way, you don't waste money on unnecessary projects. Call me today to schedule!

Did You Know Paying Cash Can Have Big Financial Consequences Later?

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When most people hear that someone is paying cash for a property, it seems like they are in the lucky minority.  Paying cash would appear to be the simplest option on the surface, but did you know that it can have some major financial consequences later on?

Some people pay cash for a property with the idea that they will later put a home-equity line or second mortgage on the home.  About 9% of people paid cash for their properties in 2010, and 2011 is showing that the percentage will be even higher.

When Is Paying Cash a Potential Pitfall?

So what is the problem with paying cash if you plan to take out financing later?  The main issue is that you may eliminate any chance you have of deducting the major portion of your interest on the mortgage.  How does this happen?

Let's take an example such as this one: Let's say that you purchase a home for $300,000.  Your plan is to take out a $200,000 mortgage later.  Currently, you can deduct interest on $1 million of acquisition debt.  Acquisition debt simply means the amount of debt you have taken on as a result of acquiring the property.

If you opt to pay cash and take out a mortgage after the fact, this establishes your acquisition debt at zero.  Later, if you decide to take out a home equity line or second mortgage, your debt will be limited to $100,000 over your acquisition debt.  In this case, the acquisition debt was zero which means that it's limited to $100,000.

As you can see, there is quite a difference in being able to deduct the interest on $1 million worth of debt rather than $100,000. If you don't know this in advance, it can be quite a nasty surprise later on. Of course, it's very important to speak with your accountant about the situation before it happens.  They can advise you on the best course of action for your specific situation.  You can also refer to IRS publication 936 for more details.

Although paying cash seems like the simplest option and would probably put you at in a better situation when it comes to negotiations, there can be consequences later.  As a Residential Finance Consultant, part of my job is to point out when you need to speak with your accountant or when you might be making a negative financial decision.  Sometimes, you can do more harm than good even when you think you are making the best decision.

For more information or to chat more about paying cash for a home, contact me today.  I would love to discuss your unique situation so that I can give you the benefit of my experience in the real estate industry.