How to Play it Safe in Today’s Housing Market and Save Money
While the housing market has shown some signs of starting to recover and gain momentum, foreclosure signs are much more common and for sale signs that stay in yards for months are commonplace. While some homeowners may not have any choice but to sell, many homeowners may simply try to save a few dollars before facing foreclosure.
My husband and I certainly thought we could save a few dollars on our mortgage by selling our existing home and buying a house whose mortgage payments would be much more within our means of living. We were willing to sacrifice our relatively short commutes to work, shopping, our church and our doctors, as well as give up living in one of the best school districts in the Northern Columbus Ohio area. We focused on gaining a house with a better kitchen layout and a fenced in yard. We naively thought this process should be easy and should relatively take only a couple of months.
So, we spent weeks prepping our house for sale, applying what I learned from watching many Home and Garden TV shows and DIY programming. We painted nearly every room in our home and repainted our shutters and trim. We redid bathroom floors and cleared out landscaping that was dead. We planted new flowers and placed fresh mulch all around the house. We moved out furniture so the house would show better and felt confidant in the price we set with our realtor.
We put the house on the market at the end of May 2007. May turned into June; June turned into July; July turned into August; August turned into September; September turned into October. We pulled the house in November. We had put the house on the market just when things tanked, our realtor had apologized. We could still try to put the house back on the market the first of February if we were interested. With a baby due at the beginning of February 2008 and the prospect of having to lower our price to something below what we paid, we decided selling our home was not for us.
Since then, we have taken steps to keep us financially solvent in this state of economic affairs. Most of these steps we should have taken back in the winter and spring of 2007 and saved us a lot of money that we had otherwise spent on preparing to sell our home.
For those of you who are contemplating selling your home to save some money on your mortgage, think through some other options first:
Refinance. Especially with today’s programs available to many homeowners, you may be surprised as for what you qualify. We would also encourage anyone looking to refinance to work with your existing lenders before working with another broker and mortgage company. Just like in many areas, our home has not gone up in value that much. In fact, the latest appraisal estimate we have is that the value of our home has decreased below our buying price and in fact lowered in value within about a month’s time by about $8,000. This may drop in value may allow you to qualify for some programs through your current lender versus another company that insists your home value is of a certain price. When all is said and done, we hope to save about $200 a month on our mortgage payment as we refinance through our current lender.
Get rid of PMI. Either through refinancing or by requesting another appraisal, you may find that your ownership in your home qualifies you to no longer carry PMI.
Homeowners’ insurance. Make sure your coverage of your home truly reflects your home’s value. If you are being covered for way more than what your home is currently worth, you may be paying too much for home insurance, and lower insurance could mean lower monthly payments. Check with your homeowners’ insurance agent to find out more information. We are glad that we did because we are now saving a little on our homeowners’ insurance and every little bit helps!
Work with a financial planner. Find someone you trust to help you map out all of your expenses and revenue streams. This person will have a wealth of information about how you may be able to lower your mortgage payments or lower your other expenses so that it’s easier to ensure you have the cash to pay your mortgage each month. It may mean scrimping and saving and sacrificing expenses you currently have like satellite television services, gym memberships, and much more. It may mean putting away the credit cards and truly living on a budget. But you may surprise yourself how much money you really have to comfortably pay for your necessary living costs. This option has been key for us in keeping our financial stability.
If you still believe selling your home is the best option, then here are some lessons we learned:
Get a home inspection first. This will save you a lot of time and headaches and is worth the couple of hundred dollars. Knowing what would be found during a home inspection, alerts you to potential things that could handicap your negotiating ability, cause you to sell the home for a much lower price than you want, or risk blowing the deal all together. From the inspection, you will be able to determine what items are worth your time and money to repair in order to get the highest possible price for your home and what items you’ll be willing to negotiate once an offer is made. We did get a home inspection before we put the house on the market – we just wished we had gotten the inspection before starting all the repairs and upgrades. Having spent some of our budget already, it made it harder to address issues that came up during the inspection.
Spend as little as possible on home repairs, remodeling and upgrades. While there may be buyers who want a ready-to-move-in home, others are expecting the worse disarray as they step into foreclosed homes, hoping for a good deal. Your home may be able to give the impression of being somewhere in between. Paint is the cheapest way to redo your home and give it a new look. After our experience, we would recommend doing all the repairs and remodeling you can yourself to save costs. This includes touching up the trim around your home instead of shelling out thousands of dollars to have professionals do it for you. Don’t go out of your way to buy new accents for the home. If you feel like the kids’ artwork is inappropriate to display on your walls, then recycle some other artwork or photos from elsewhere in the house or borrow artwork from a friend or neighbor. You don’t have to have your home looking ornate – it’s hard to convince someone your home is worth $500,000 if the true value is more like $200,000. But you do want your home to present itself well by being clean and well-kept. A home that looks cared for and that doesn’t have immediate major repairs is better than an overly ornate home that needs a new roof and heating and air conditioning system right from the start, at least from our perspective.
Get a storage unit. Or find someone who is willing to store your items in their garage or basement while your house is on the market and you get ready to move into a new location. Many experts will tell you that you want your home uncluttered and to rid your home of excess furniture, knick knacks, etc. If these are items you intend to keep and move with you, don’t store them in your garage or basement. It gives potential buyers a difficult impression of how big your basement and/or garage is if you have filled it with all of your leftover furniture, realtors told us as we considered what could we do differently if we put the house back on the market.
Figure out a seller’s lifestyle. When our house was on the market we had two young children ages 2 ½ and one year old. Keeping the house immaculate was near impossible. Looking back, we should have looked into ways to keep our children’s mess to a minimum by eating out more or using disposable plates and cutlery. The endless rounds of sippy cups and bibs to wash seemed like a never-ending circus act in keeping the house clean for showings. If we had had the means and opportunity, I might have considered moving in with relatives while the house was on the market just so that we relieved the stress of having extremely young children in the home and keeping the home ready to show. With that said, you have to find some new lifestyle while the house is on the market that works for you. Maybe you look into the cost of having someone come and clean your house on a regular basis. Maybe you eat out for every meal. You have to decide what you’re willing to do and take that into consideration as part of your costs of selling your home.