Often, there are two camps of people when it comes to wrangling financial documents: Some keep everything, every ATM receipt, every bank statement, sometimes in a drawer or box with little to no organizing principle. Others throw away (hopefully after shredding) just about everything that arrives in the mail.
The best approach is likely somewhere in between. There is a happy medium. Here, you’ll learn how to keep just what you need, organize it well, and dispose of financial documents properly when they no longer serve a purpose.
The Importance of Financial Statements
“Out of sight, out of mind” is a cliche for a reason. Once taxes are filed, paychecks are deposited, and the rent or mortgage is paid, we tend to forget about these transactions, dumping the receipts in a deep file cabinet or throwing them away altogether.
However, the consequences of financial documents and bank statements stick around long after they’ve been settled. For example, the IRS can come calling years after a person files taxes if the organization suspects that income was misreported. Or, in the event of loss or damage, having a record of purchase for big-ticket items like electronics or jewelry can make it easier to file a claim.
Keeping track of financial statements can help serve as protection or proof if a transaction is challenged or misreported. Without the statement, people might spend days trying to obtain duplicate records, when they could have just had them neatly filed in the first place.
Not everything needs to be saved forever, but some things should be safely filed away for a rainy day.
Recommended: Do I Need a Personal Accountant?
What to Keep and For How Long
Like items in a grocery store, each type of financial document has its own expiration date. Some will be relevant years after they’ve been filed; others can be tossed within months. Here’s the general rule of thumb of how long a person should keep each statement:
Tax Documents: 6-7 Years
Keep tax documents — anything related to filing taxes — around for seven years. Why so long? The IRS can audit anyone up to three years after they file if the agency suspects that an error was made in “good faith,” aka an accident.
income tax return up to three years after the fact for a refund.
Additionally, the IRS has six years to follow up on returns if it thinks the filer underreported income substantially, meaning by 25% or more.
It’s not a bad idea to keep the tax return, in addition to supporting documents. That could include evidence of:
• Retirement plan contributions
• Charitable contributions
• Interest payments on a mortgage
• Alimony or child support payments
Record of Sales: 3 Years
From selling stock to selling a home, and every large sale in between, it could be smart to keep these records of sale for at least three years after the transaction takes place. These documents can be called up in tax-related issues.
Paycheck Stubs, Bills, Bank Statements, Investment Statements: 1 Year
If someone isn’t using direct deposit for payday, they should keep their physical paychecks for a year. Once they receive their W-2 and confirm that the amounts match, the stubs can go.
Utility bills, bank statements, and other bills should stick around for a year , just to be safe. Budgeters can use them to compare balances month over month. It also can be a helpful habit to check over bank and credit card statements each month. It’s a chance to catch and dispute fraudulent or incorrect charges. In addition, bills for services like medical treatment and auto repair should be kept for at least for a year for reference.
Investment statements that are distributed quarterly should be kept on hand until the annual statement is revealed and the numbers are lined up.
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Receipts, Resolved Credit Card Statements: Toss It
Unless purchases are logged manually, a person should feel comfortable tossing receipts almost as soon as they acquire them. As long as they don’t plan to return the item, all they should do is confirm the amount against the debit or credit card charge, then send that little slip to the trash.
credit card is paid in full each month, there’s not much reason to keep the statement lying around. Again, it can be used to check charged amounts and spot mistakes or fraud, but once statements are resolved against transactions, it should be okay to ditch the statement.
Although there are suggestions for how long people should keep a statement, at the end of the day, they should trust their gut. If there’s an urge to hold on to something not listed above, keep it.
Three Ways to Store Sensitive Documents
It won’t matter what a person saves and shreds if they don’t know where to find records in the long run. Safely storing sensitive financial documents doesn’t really mean tucking them away and forgetting about them. Here are a few ways to store and organize financial records:
• Use an old-school filing system. Finding an affordable, fire-safe file box to keep statements in is already a massive step up from the bottom of a junk drawer. Everyone will have their own approach to logical filing, but it could be done by year, type of record, or institution the record comes from.
Some might be tempted to go extra safe and take this paperwork to a safety deposit box at the bank. However, if the documentation is needed, it won’t do a person much good sitting miles away in a bank vault. Keeping it close and safe is probably preferable.
• Scan and save online. Many smartphones come with the capability to scan documents, and there are other well-reviewed scanning apps on the market. Those who tend to lose paper might choose to scan everything and save it online. The only hitch is keeping up with the scanning, and saving all documents to the cloud instead of just on the phone.
• Go paperless. Many institutions offer paper-free transactions, meaning customers don’t get statements in the mail. Online banks vs. traditional banks have made this a priority. Going paperless does not mean having to log on to each site to get financial information, but it does mean a person is less likely to lose papers.
Going paperless with financial statements may require a little more work to access records — people can’t just wait for documents to arrive in the mail. But if done correctly, they can find the papers they need with the click of a few buttons.
Recommended: Are Online Bank Accounts Safe?
The Takeaway
Going paperless with records doesn’t have to be tricky or time-consuming. That’s one of the benefits of opening an online bank account like SoFi Checking and Savings. It’s easy to find the information you are looking for online, as well as to track your spending and saving in one convenient place. What’s more, SoFi offers a competitive annual percentage yield (APY) and charges no account fees, which could help your money grow faster.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOBK0523022U
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As the old saying goes, “In real estate, location is everything.”
You may not know much about REITs, but you might want to consider one of them as a career. They’re great for people who like real estate, enjoy making money, and need consistent work hours.
Real estate investment trusts (REITs) are companies that were formed to make it easier for individuals to invest in real estate.
Want to know what the top paying jobs in Real Estate Investment Trusts are in 2022?
Well, take a look at this list of 25 best paying jobs for real estate investment trusts and see if you can find one that sounds perfect for you. In addition, each job features information about how much each job pays, what you can expect on the job, any job training needed, and other fun facts!
If you are looking for your next career, this article will give you plenty to think about as well as potential opportunities that may be available to you.
What are real estate investment trusts?
Real estate investment trusts, or REITs, have become an increasingly popular way for investors to get involved in the real estate market. REITs allow people to invest in large-scale real estate projects without having to purchase and manage the properties themselves.
In addition, REITs offer shareholders a wide range of benefits, making them a great choice for those looking to invest in this growing market.
How do real estate investment trusts work?
A REIT is a type of company that owns and operates various types of real estate, and because they are exempt from corporation tax on profits generated through rental income and the sale of rental properties; They are a very attractive option for high-earners.
They pile investors’ money together and invest in various commercial real estate, which increases returns over time. In addition, REITs are generally owned by the general public, and they invest in real estate assets.
Lastly, they make a profit through investments or leasing; a return on investment is typically received as a dividend. Real estate investment trusts are similar to mutual funds in that they hold investments, distribute dividends, and pay taxes.
Is a real estate investment career good?
Real estate investment companies are a great place to start a career in real estate.
Real estate investment trusts (REITs) are one of the most productive industries today. They provide steady and consistent growth, as well as good job opportunities with high salaries. Careers in real estate that can lead to better-paying jobs include appraisers and investment bankers.
Best paying jobs in real estate investment trusts
The market for REITs has grown rapidly in recent years, with the total value of REITs reaching almost $3.5 trillion by the end of 2021 (source).
There are many different jobs in the real estate investment trust industry that come with a variety of salaries. The best paying jobs are reserved for the C-level executives:
Chief Executive Officer: The CEO is the highest-ranking executive officer in a company and is responsible for making major decisions that affect the business. CEOs in the REIT industry earn an average salary of $468,000 per year.
Chief Financial Officer: The CFO is responsible for financial planning and reporting, as well as managing relationships with banks and other lenders. CFOs in the REIT industry earn an average salary of $341,000 per year.
Chief Operating Officer: The COO is responsible for overseeing all day-to-day operations of a company. COOs in the REIT industry earn an average salary of $325,000 per year.
Followed by the attorney, which is one of the highest-paying professionals in real estate investment trusts.
Now, we are going to list the most lucrative jobs in REITs. Then, you can decide… is real estate investment trusts a good career path for me.
The higher paid jobs will come with more education needed and years of experience.
1. Real Estate Attorney Jobs
Real estate attorneys are in high demand for their knowledge of transactional law and contractual issues. They work on a variety of deals involving the purchase, sale, or leasing of real estate. As such, they provide critical legal support to the real estate investment trust (REIT) industry.
Real estate attorneys license in their state to practice law. They can prepare contracts, advise clients on purchases and investments, review documents, represent mortgage lenders at closing, or simply provide legal counsel without the requirement of an attorney’s license.
Consequently, real estate attorney jobs are an excellent opportunity for those looking to work in the REIT industry.
Real Estate Attorney: well over 6 figures (average)
2. Real Estate Developer
Real estate developers are typically involved in the design, construction, and marketing of properties. They are also involved in land assembly and subdivision, zoning regulation, and the establishment of building codes.
Builders are involved in all aspects of the development process, from acquiring land to constructing buildings. Promoters are responsible for finding investors and marketing completed projects. In both cases, real estate developers may work either on their own or with a team of partners.
A developer obtains land and constructs assets for sale, while also selling them off when they become old enough to be sold again.
Real Estate Developer Salary: over 6 figures (average)
3. Director of Real Estate and Facilities
The Director of Real Estate and Facilities is responsible for a variety of tasks within the department. These tasks include, but are not limited to, the following:
Acquiring new properties
Negotiating leases
Overseeing property management
Maintaining the company’s physical infrastructure
Developing and implementing strategic plans
A director of real estate and facilities is a key role in any company that deals with real estate investment trusts (REITs). Therefore, this position often leads to advancement opportunities, making it an excellent career choice for those interested in this growing field.
Director of Real Estate and Facilities Salary: $130,000 a year (average)
4. Director of Acquisition
Directors of acquisitions in real estate investment trusts are responsible for finding new properties to invest in for the company.
Typically, they work with their analysts to conduct due diligence on potential investments and analyze the risks and rewards involved in order to provide a recommendation to their superiors.
The acquisition team is responsible for finding investment opportunities for the company, which can be traditional real estate assets or creative ideas that can become a business. They are constantly on the lookout for new and innovative opportunities that can help bolster the company’s growth.
Director of Acquisition Salary: $125,000 a year (average)
5. Real Estate Agent
As a licensed real estate agent, you would help clients buy, sell, and rent properties. In order to become a real estate agent, you must pass an exam that covers topics such as contracts, ethics, and state laws. You would be responsible for understanding the real estate market and helping your clients make informed decisions about their property transactions.
In the case of REITs, you must be a commercial real estate agent who are in charge of dealing with important financial data. They need to know about the internal rates of return, gross rent multipliers, and capitalization rates in order to do their job effectively. In order to become a commercial real estate agent, you will need some background in business and finance. This knowledge will help you understand your client’s needs and better serve them.
Unlike most professions, the more business deals you close as a real estate agent, the better your pay is. Furthermore, many agents work on commission-based pay, so it’s important to be knowledgeable about the market and have a strong sales skill set.
Agents who are successful can make much more than this amount; however, those who are just starting out may make less until they gain experience and build a client base.
Real Estate Agent Yearly Commission: $100,000 a year (average)
6. Investor Relations Manager
An Investor Relations Manager is responsible for managing the relationship between a company and its investors. They must be able to quickly understand complex financial information and communicate it in a clear and concise way. Additionally, they are responsible for communicating the company’s financial performance and strategy to investors.
They are also responsible for updating quarterly reports on the investor’s online dashboard. This can be a high-stress job because you must keep your investors happy especially during a market downtrend.
Investor Relations Manager Salary: $100,000 a year (average)
7. Project Manager
Project managers are responsible for ensuring that a project is completed on time and within budget.
They work in teams to make sure that all aspects of the project are completed. Thus, they must have strong organizational skills. They also typically have experience in leading and coordinating teams.
This is a highly lucrative job for those building new assets for a REIT. The highest-paid 10 percent earned more than $187,000, while the lowest-paid 10 percent earned less than $59,000.
Project Manager Salary: $90,000 a year (average)
8. Accounting Manager
They do this by preparing financial statements, maintaining accounting records, and overseeing the work of accountants and bookkeepers. In order to qualify for this position, you will need at least a bachelor’s degree in accounting or a related field, as well as several years of experience in accounting or bookkeeping.
However, with experience and expertise in the field, it is possible to earn much more than that. Those who work for real estate investment trusts (REITs) can expect to make even more money.
Accounting Manager Salary: $90,000 a year (average)
9. Asset Managers
Asset Management is a process that oversees the operational and financial work of a portfolio of assets. This includes tasks such as budgeting, forecasting, reporting, and analyzing data to make sure the asset is performing well.
As they are responsible for managing the portfolio assets in the real estate investment trust (REIT), they must expect a higher stress job. In addition, their job entails working with other departments in the company, such as accounting, acquisitions, development, and finance.
Asset Managers Salary: $89,000 a year (average)
10. Construction Supervisor
A construction supervisor oversees all aspects of a construction project, ensuring that it is completed on time, within budget, and to the required standard. This position requires a great deal of experience and knowledge in the field, as well as strong leadership skills.
They make sure that everything runs smoothly! Speficially, all the necessary equipment, materials, and supplies are ordered and on-site when they are needed. They also check the quality of the work as it is being done; making sure projects are constructed in accordance with contract documents, standards, codes, and policy.
In order to become a construction supervisor, you need only a high school diploma or GED. However, five years of experience in yard operations or equivalent education and experience is preferred.
Construction Supervisor Salary: $89,000 a year (average)
11. Investment Due Diligence Analyst
An investment due diligence analyst is responsible for conducting an extensive analysis of potential investments for a real estate investment trust. They work with the team to identify opportunities, underwrite deals, and make recommendations. The role is essential in helping the team make sound investment decisions that will benefit the company in the long run.
This job is a key player in the real estate investment trust (REIT) industry.
To be successful in this role, you’ll need experience with REITs or a national brokerage, as well as excellent quantitative skills including the ability to build real estate valuation models and distribution waterfalls.
Investment Due Diligence Analyst Salary: $80,000 a year (average)
12. Financial Analyst
The most common role of a financial analyst is assessing a company’s current and future financial health, which may include issuing stock recommendations, forecasting earnings, and providing risk analysis. Financial analysts may also work with investment bankers to identify new investment opportunities.
However, salaries can vary significantly depending on the size of the company, the city in which you work, and your level of experience.
Financial Analyst Salary: $80,000 a year (average)
13. Business Acquisition Analyst
An acquisitions analyst is responsible for reviewing potential investments and determining the risks and rewards associated with commercial property.
The analysis will include both macro-level information, such as the political and economic environment, as well as more fine-tuned data that is specific to the investment itself.
Many in this role have found a business degree to be well worth the cost.
Director of Acquisition Salary: $78,000 a year (average)
14. Commercial Property Manager
Property management is a growing field, as the demand for individuals who can manage both residential and commercial properties increases. The goal of property managers is to ensure assets are kept in good condition and are appealing to owners and tenants alike.
Real estate investment managers have a very important job, as they are responsible for meeting the needs of property owners, tenants, and investors.
Primarily, they oversee maintenance and repairs, collect rent, screen tenants and enforce lease agreements. They also may negotiate leases, recommend improvements to the property, and coordinate with contractors.
Commercial Property Manager Salary: $75,000 a year (average)
15. Real Estate Photography
Real Estate photography is a specialized field within the photography industry. As such, many photographers start their own businesses in this area.
In order to be successful, it’s important to have strong marketing and business skills. Your portfolio should showcase your best work and be tailored to the types of properties you will be photographing. Additionally, you may choose to offer additional services such as virtual tours or video production.
A real estate photographer would work closely with the marketing team.
Real Estate Photographer: $70,000 a year (average)
16. Marketing Coordinator
Marketing coordinators are responsible for developing and executing marketing campaigns.
They work with the advertising department to come up with ideas. Then, working with the rest of the company to make sure that those campaigns are executed properly. They create all marketing materials, track campaign results, liaise with outside vendors, and organize events.
Given the regulations around REITs, it is highly important that the marketing communications follow the investment directives from the SEC.
Marketing Coordinator Salary: $67,000 a year (average)
17. Maintenance Supervisor
A maintenance Supervisor is a position that requires managing and overseeing the work of others. Thus, ensuring work is completed in a timely, efficient and safe manner.
They are responsible for making sure all company policies and procedures are followed, as well as any legal requirements or safety regulations. Additionally, they manage budgets and expenses, as well as staff.
The ideal candidate will have experience in the property management or construction industries, as well as supervisory experience. A degree in engineering, architecture, or a related field may be beneficial.
Maintenance Supervisor Salary: $65,000 a year (average)
18. Property Appraiser
Appraisers are typically called in when there is a need to settle a dispute about the value of a piece of property, or when someone is buying or selling a home and needs to know how much it is worth.
Most states require that you be licensed in order to practice as an appraiser. The job outlook for appraisers is good; the Bureau of Labor Statistics predicts that employment will grow by 4% from 2020-2030 (source).
Property Appraiser Salary: $60,000 a year (average)
19. Leasing Consultants
Leasing consultants are responsible for meeting and greeting clients, touring potential tenants through a property, and helping them decide whether or not to lease it. They must be knowledgeable about the property they are showing, as well as about the local rental market.
Consequential, this is a good job for someone who is able to close deals, so being persuasive is important.
They should also be outgoing and comfortable working with people from all walks of life. A high level of professionalism is essential, as is attention to detail. Leasing consultants typically earn commissions based on the number of leases they sign, making this a commission-based job.
Leasing Consultant Salary: $50,000 a year (average)
20. Commerical Real Estate Intern
Commercial real estate internships are a great way to get started in the commercial real estate industry. Many internships will give you the opportunity to work with the CEO/COO and learn about all aspects of the business.
In most internships, you will gain vast knowledge while working with every department within the company.
Consequently, interns often have the chance to work with different teams and learn about all aspects of commercial real estate. This is a great way to gain experience in the field. Plus you will get a well-rounded working experience and the opportunity to build your network.
You must be a college student who is detail-oriented, self-starter, creative and strategic thinker in order to be considered for any real estate internship.
Commercial Real Estate Intern Salary: unpaid to $20 an hour
(Source for All Salary Information: Glassdoor.com)
Bonus = Real Estate Investors
Real estate investors use a variety of strategies to make money in the real estate market. Some invest a minimal amount of money, while others take on high-risk ventures.
In order to be successful, investors must be well-versed in real estate investment strategy and have extensive knowledge of the market.
This is why REITs are so popular with most investors. It allows a hands-off approach to real estate investing. Yet, still profit in the real estate appreciation and rental income.
Real Estate Investors Salary: varies on the amount of money invested but most want at least a 6-10% return
What real estate investment jobs are entry level?
Real estate investment is one of the best paying jobs in the world. The job offers a lot of opportunities for growth and allows you to work with different types of people.
It also has a relatively low barrier to entry, making it a great option for those who are starting their careers.
Most people in real estate started at the bottom and worked their way up the corporate ladder with hard work and persistence.
What are the minimum requirements for entry level real estate jobs?
The industry is growing rapidly and there are many different opportunities for those looking to enter the field. However, it’s important to note that entry-level jobs in this field come with specific skill sets and education requirements.
Most require at least a college degree if not at least 5 years of hands-on experience. One of the best places to start without any qualifications and education is as a leasing consultant
If you want to progress quickly in your career in real estate, consider taking a chance on one of the best paying jobs in REITs listed here. In fact, there are many jobs available in real estate investment trusts.
REITs – Which real estate investing job looks appealing to you?
The REIT industry is constantly growing, and with that comes new opportunities for a lucrative career path.
Many of the roles in a REIT are highly challenging, pay well, and are respected by investors. Many people work together as a team to build new projects, manage existing projects as well as work to finance them.
There are plenty of benefits of spending time researching this industry and finding the job for you.
In fact, it is an exciting and rewarding career!
Know someone else that needs this, too? Then, please share!!
Studies show that landscaping can add 12 to 15 percent to the value of your home. All you need is a green thumb to put some extra green in your pocket.
Landscaping is more than flowers and shrubs. Upgrades can involve things like patios and decks, flowerbeds, barbecue pits, watering systems, and plants of all sorts. As you enter into a landscaping project, you have plenty of choices about what kinds of upgrades to make.
The trick is to make improvements that prospective buyers want. If you do, then your property value will rise.
What Do the Experts Say?
Though experts agree that landscaping improvements usually raise a property’s value, it can be difficult to predict exactly what kind of gains you’ll see in individual circumstances. Estimates vary by home and note that the lasting effect of landscaping requires ongoing maintenance.
Virginia Tech horticulturist Alex Niemiera concluded that landscaping can add 12.7 percent to the value of a home — in his research six years ago. That translates into an extra $16,500 to $38,100 in value on a $300,000 home. In extreme cases, property values can more than double, and conversely, they can actually decrease if the landscaping contains undesired features that the local market doesn’t support.
The American Society of Landscape Architects (ASLA) recommends that homeowners invest 10 percent of the home’s value in landscaping. Landscape architecture goes beyond plantings, or softscaping, to include structural features like lighting, fences, garden paths, fire pits, swimming pools, and ponds.
Outdoor rooms, terraces, and decks are also high-yield structural or hardscaping investments. A landscape architect can work with the client to generate a detailed plan. Typically, the homeowner then hires a general contractor, landscape contractor, or subcontractor to perform the installation.
Landscaping on the Cheap
Of course, it’s quite easy to spend more on installation and ongoing maintenance than the landscaping benefits the value of your home.
A professional landscaper might seem like an extravagance, but they can help you gain equity in your home and save money by recommending features and plantings that will appeal to buyers and are cheap to maintain.
For example, perennials and bulbs can add color and style to your property all year long. Other cost-effective improvements include aesthetically pleasing architectural improvements, such as stone walkways and terracing that require little or no maintenance.
Another important factor to consider is the contractors who do your landscaping upgrades. Many companies vie for this kind of business, and choosing the right contractor can make a lot of difference.
Find a contractor with whom you are comfortable, who is honest and patient, and who can show you a good track record. Lastly, pay attention to the details. A subtle, small change, such as curving the edges of your flowerbeds, can by itself increase your home value by 1 percent.
How Does Curb Appeal Impacts Home Value?
Appealing landscaping can measurably increase the appraised value of your property.
“If a landscaping change is positive, it can often enhance price and reduce a home’s time on the market,” says Appraisal Institute President Richard L. Borges.
“But if the change is negative, it can lower the price and lengthen the time a home remains for sale.”
Curb appeal is essential when selling a home, Borges says, noting it’s the homeowner’s opportunity to make a great first impression. A home with lackluster landscaping or an exterior in desperate need of a fresh coat of paint will likely be unappealing to prospective buyers and ultimately could affect the home’s potential resale value, he said.
Borges says homeowners should ask themselves the following questions when it comes to the quality of their home’s green space:
Is the landscaping attractive enough to make the prospective buyer walk through the front door? Keep the design contemporary and in line with comparable properties in the area.
Could the landscaping provide cost savings? Landscaping that requires little or no water to maintain could be desirable depending on the geographic area.
Is the landscaping energy-efficient for the home overall? For example, it’s a good idea to plant trees in a place where they block the sun in locations with year-round hot climates.
Are the trees planted at a safe distance from the home and are they healthy and well maintained? Weak, old or damaged trees planted too close to a home or building could pose dangers to the home’s structure and will need to be removed. Consumers should also be sure that mulching or beds don’t get too close to wood around foundations to avoid wood-destroying organisms.
Home renovation guru Bob Vila counsels that perhaps the biggest mistake homeowners make is a piecemeal approach to landscaping.
“Homeowners begin projects, start to clear areas, put in a mix of plants, and proceed without a plan. The result is a hodgepodge of plantings and gardens that give the property a disorganized feel. An implemented professional landscape design provides a polished look. Following a professionally prepared plan will lead the homeowner to a beautiful property while remaining within a pre-established budget.”
Vila cautions homeowners to remember that everything doesn’t have to happen at once. Consider a five-year plan that has plantings maturing at varying rates and adds various features each year.
This way you can remain within your budget—time-wise and cost-wise—while still progressing toward a complete landscape renovation.
What is your home worth? What should you pay for your new home? While you can check your estimated value on a bunch of different websites for free, we recommend you tap the expertise of someone who can give you a more definitive answer of your home’s value based on similar properties in the market. That person is called an appraiser. Now let’s learn more about the appraisal process!
Who is an Appraiser?
An appraiser is someone who is certified in doing research and determining the fair value of homes. They determine a home’s value based on square footage, lot size, features, finishes, and other unique things about it. In addition to what makes up the home, the appraiser looks at the surrounding area. That includes school districts, the city, and other outside influences. An appraiser is a key player in the purchase or sale of a home.
A buyer’s lender typically requires that an appraiser comes to confirm the contract value of the home. This is all done to make sure that the buyer isn’t overpaying for the property and the lender has adequate value to cover the loan amount.
Sellers sometimes bring in appraisers to help them price their home right, but it is not necessary and many real estate agents help seller’s price their home. Some brokers even have dedicated pricing specialists to do the important work of determining the right list price.
What Happens During an Appraisal?
The appraiser evaluates the home in question by reviewing all the important stuff, as listed above. If housing prices were stable over time, the job would be done at that.
The reality is, the housing market fluctuates. To assess the strength of the housing market in the home’s specific area, the appraiser will research the prices of homes sold recently in nearby neighborhoods. They will look at the homes comparatively based on what they had to offer buyers.
How Much Does an Appraisal Cost?
Home appraisals typically cost between $400 and $500.
Appraisals are usually requested by the lender after the home is under contract. However, if you’re selling and are not sure where to price your home, you can purchase one early. A good option for this is the economical desktop appraisal.
Sellers who use Homie are provided with a value report, which is like a desktop appraisal. This service is performed by a dedicated pricing specialist who uses comparable home sales and local market knowledge to determine the value of your home. Unlike a full appraisal, a value report does not include a visit to your home and does not replace a full appraisal for a buyer who is planning on taking out a home loan.
Do I Need to Get a Home Appraisal?
Federal regulations require lenders to hire an independent appraiser for each new loan, which means that buyers must have the home appraised even if the seller has already had it appraised.
Home inspections are often confused with appraisals, but they are separate and performed by different licensed companies. A home inspection is conducted by an inspector who checks the build of the home to make sure everything is in good working order. They look over everything from roofing to plumbing and door jams to light switches.
They don’t assess the value of the home. An appraiser for example, may use the condition of the home to determine the value but the inspector will tell you exactly what’s broken and needs repair.
What to Do for an Appraisal
If you’re selling your home, you want to sell for the highest amount possible. This means when it’s time for the lender appraisal, you want to show the home at its best.
On the day of the home appraisal, be your home’s best advocate. Jot down a list of any improvements you’ve made to the home, like upgraded counters or a new water softener. Leave this list for the appraiser.
Make sure the lawn is mowed, the house smells sweet, the blinds are open and the surfaces aren’t cluttered. Theoretically, little details like this shouldn’t affect the price of a home, but you want to make a good impression. Don’t worry about a large renovation like finishing a basement but if you were going to repair something anyway now would be the perfect time. Most often large renovations or repairs don’t increase the value of your home by as much as they cost to complete. Instead, focus on showing off what’s already there and making sure that every part of your home is clean and in good repair.
What Happens After I Get an Appraisal?
Good question. Once the appraisal is complete, it is sent to the buyer’s lender or bank. In cases where the buyer is putting a relatively small down payment on the home (less than 20%), banks will approve loans only when the estimated appraisal value is the same or greater than the sale price of the home.
Sound confusing? Let’s talk about it.
Imagine a house gets an offer of $300,000 but only appraises for only $250,000 and the buyer is only putting 10% down (in this case $30,000)The bank may not fund a loan for the home at the higher asking price. It will not lend $300,000 for a house that, in the case of a default, might only sell for $250,000 because that would leave the bank short on its investment.
If you are in the process of purchasing a home and the home appraisal comes back lower than the negotiated sale price, you have some options.
What happens if you really want the house? Many buyers will try to renegotiate the sale price if the appraisal comes in low. If the seller is unwilling to lower the price, buyers can walk away. If the buyer is still absolutely in love with a home they can choose to increase the down payment amount so the lender approves the mortgage. Adding to the down payment decreases the amount the bank has to fund for the home.
If the appraisal comes in low, you should consult with your real estate agent about your options.
Got a Home You Want to Sell?
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Ready? Set? The time to prepare for your home sale is NOW!
Start now and you’ll be set to list during the peak home-selling season, ensuring you get top-dollar for your house.
Spring is almost here. Bears leave hibernation and people get moving. Literally.
That’s right. Spring and summer consistently see a greater volume of home sales than fall and winter. Why? Are you kidding? Who needs more reason than a simple aversion to moving in cold, dark weather? Besides that, moving in the winter interrupts the school year for those folks who have kids. Plus, homes show better when flowers are blooming and grass is green. You and the rest of the nation are probably dreaming of flowers this very February minute. It’s not a secret. Spring and summer pretty much rock for home sales.
Not only do houses typically move faster during the on-season, they sell for more money. This is probably due to the high demand for houses and a sense of “time running out” as autumn, and the school year, approach. An influx of buyers can create a situation called a bidding war, when more than one buyer offers on a house. This sometimes causes the house to sell for higher than the asking price as buyers compete.
How do you get in on this fast-selling, high-price season?
Imagine it. You wait until the weather is nice and buyers are already shopping. You start thinking about how you want to sell. Then you trip on the broken grate of your fireplace which you didn’t see because of the missing lightbulb overhead. You realize that fixing up the flaws in your home is 1) the only way to get the best price for it, and 2) a time-consuming process. Buyers are already touring the homes they will buy and you’re not on the race track. You’re not ready to list and you won’t be anytime soon, potentially for months.
Now imagine instead that you look February in the eye and declare that it’s no match for you. That’s right.
You prep your home now.
Start with these six steps and come back to our blog often. Over the weeks, we will dish out tips on what you can do to get your home sold at a good price.
Shop Homie and other websites as if you are a buyer looking for a home in your neighborhood. Learning a market is best done over time, not in a cram-session. For the next month, search new listings daily to get a sense of what sells quickly and where prices are at. This will help you know how to price and show your home.
List problem areas of your home. Walk the home and property. This might require a jacket, but it’s worth it. Write down everything that doesn’t function properly or is unsightly.
Prioritize your repairs and upgrades. Organize your list of problem areas from the most to the least important. Think small-to-large and front-to-back. In other words, now is not the time to tackle large renovations, which do not always give a full return on investment. List first the small things that will repair quickly and inexpensively, with an extra focus on items that will be seen first by potential buyers. So, the front of the house, the front rooms, and the kitchen. You may not get to all items.
Get estimates for the repairs you hope to make and set aside money for them. Putting money into the house during this phase of home-selling is a wise investment, as serious buyers often walk away from homes that need too much work. Other buyers will give low-ball offers because they sense that the seller is not truly prepared to show the home well.
Set a deadline for when you hope to put your house up for sale. You can always bump it back, but having a goal helps to organize your repair personnel and your own time. There will be bumps along the way. Don’t lose hope! The housing market is strong and by starting early, you have more time on your hands than most.
Contact Homie. When it comes to selling homes, Homie’s got your back. Homie quickly and painlessly walks you through the first steps to the last without the traditional 6% commission fees. Some of the steps to selling a home can even be done with the touch of a button on your phone! So relax. Selling a home has never been cheaper—or easier. Sign up to sell with Homie today.
Note: This post is the first of our Home-Sellers’ Journey series, where we walk you through every step of selling a home during peak season. For more details on selling your home, visit our post How Homie Helps You Sell Your Home and be sure to check back soon for our next post in the series, Tips for Staging Your Home.
Note: This post is part of our Home Sellers’ Journey series, where we walk you through every step of selling a home during peak season. For the first post on how to get started once you’ve decided to sell, please go to Six Steps to Take Now to Get Your Home Ready to Sell.
It may be well-known that a picture is worth a thousand words, but consider that a handful of keywords may be what gets folks into a car and into your home as potential buyers. Yes, buyers look at pictures before anything else, but to truly know what a home offers, buyers read the description of the home. Finding ways to describe your home – coming up with catchy headlines and intriguing details – is pretty challenging. Here are some tips to get you started.
Focus on your customer. In advertising, you want to avoid dry descriptions of a product, in this case a home. Instead, you want to tell your buyer how the product will make his or her life better, easier, cooler, or generally more desirable. So when it comes to a house, start with what a buyer would want and work from there. What sells a home? Amenities, yes. But also short commute-times, a close-knit neighborhood, a good school, the space to have a vegetable garden, etc. Brainstorm what your property offers and get it on the list of what could be highlighted in the description. Include upgrades and special features of your home.
See what your competitors are saying. Go ahead and do some online stalking; it’s okay. What kinds of things do home-sellers mention? If they brag about having a single parking spot in your downtown area, you might realize that your three-car driveway is pretty sweet even if the home doesn’t come with a garage.
Describe your home in ways that are appealing to many different kinds of buyers. You never meant to say you wouldn’t sell to a downsizing elderly couple, but when you describe your home as “family friendly,” you may signal to buyers who don’t have large families that they’re not wanted. It’s best to say, “four bedrooms” and “plenty of backyard space.” In fact, avoid using any descriptors that define your ideal buyer. Rather, let buyers come as they are.
Watch out for code words. “Charming,” “cozy,” “delightful”—these are the words your grandmother uses when she hands you a yellowed needle-point made by her sister’s friend’s late cousin. Use these words and your house will advertise as being small, cramped and, well, old. Also be aware that a “motivated seller” might read as “a person whose life is a wreck and probably doesn’t vacuum.” You don’t need written details about how you’re willing to sell. To communicate you’re ready to go, you need a price that’s comparable to similar homes and you need to accept reasonable offers.
Be specific about brand names and materials. Vocabulary is everything in writing! The more specific and image-provoking the words, the more the potential buyer will feel intrigued. Granted, you have to know what people want: don’t talk about your plywood closet. But in general, you can’t go wrong with phrases like “natural-wood countertops,” “ventless fireplace,” or “ceramic tile flooring.” These advertise better than their more vocabulary-plain partners: “wood counters,” “fireplace,” or “tile floors.”
On that note, we will end this post with a list of keywords from Zillow, which found that home descriptions featuring them sold for higher than the expected values. Use them if you can—but don’t forget the number one rule: be truthful about what your home has to offer!
Barn door: 13.4% (the percent of homes that sell for above expected values)
Shaker cabinet: 9.6%
Farmhouse sink: 7.9%
Subway tile: 6.9%
Quartz: 6%
Craftsman: 5.4%
Exposed brick: 4.9%
Pendant light: 4.6%
Frameless shower: 4.6%
Heated floors: 4.3%
Stainless steel: 4.2%
Granite: 4.1%
Backsplash: 4.1%
Tankless water heater: 4%
Outdoor kitchen: 3.7%
Check back here on the Homie Blog for the next installment of the Home-Sellers Journey. Coming soon: Insider Secrets to Pricing Your Home for Sale. To get started selling your home, contact Homie today. Homie has already saved users over $500,000 in agent commissions in just 6 months since launch, with each seller saving over $10,000 on average.
Note: This post is part of our Home Sellers’ Journey series, where we walk you through every step of selling a home during peak season. For the first post on how to get started once you’ve decided to sell, please go to Six Steps to Take Now to Get Your Home Ready to Sell.
For those of you returning from our last post, you already know to get started on repairs to the home and contact Homie so that your home can be listed, 1) without a real estate agent, and 2) without paying thousands of dollars in real estate agent fees. Once you enter your information, you’ll be contacted about all of the details before the listing is live. Booyah. You’re already saving money.
Before making your listing live, one of the first things we will do is send a professional photographer to take pictures of your home at no extra cost. We told you. We’ve got your back. But there is a step you are in charge of.
You prep the house visually, a process called staging.
Staging is arranging your home to show it off best, both during photo-shoots and during walk-throughs by potential buyers.
They say that in sales, appearance is everything. Yes, buyers know that your belongings will leave the home after the sale is final, but that doesn’t mean they’re capable of envisioning the house without your things. Clean lines, plenty of light, a lack of clutter—attention to details like this can affect your home’s sale price and how quickly it sells. Do yourself a favor and spend the effort to stage.
De-clutter and de-personalize
Model homes don’t have piles of only-kind-of-broken power tools or an elk-themed calendar with penned-in appointments for the month. Guess what? Neither should your home.
Now, before you get offended, let me state right off that I get it. You own your belongings for a reason—you like them. Well, calm down, because you still get to own them. You’re just moving them so they won’t be a distraction from the item you want getting all of the focus: the home you are selling.
Put your home on a pedestal so buyers can’t miss it!
Clear away items, stashing them in semi-permanent storage at a neighbor’s house or inside boxes in a non-conspicuous area. While you’re at it, empty out some closet space. That way, when you have a home showing, you can tuck away last-minute clutter items like Jill’s homework and Avery’s jar of pet ladybugs. You’ll likely need these items soon—though you may not want them—and having them in a closet is more handy than having to search through boxes.
Next, take down all decorations that you believe an interior designer would nix. That means that a good portion of your posters, refrigerator magnets, and mantle-top pieces need to go. Actually, who are we kidding? Take down all of the refrigerator magnets. Remove religious items and family photos. You want the house to view like a template, on which potential new owners can envision how their personal stamp would look.
Trim, but don’t clear, furniture
Buyers often have a parent, friend, or agent with them during a home tour, not to mention every member of their family; and they often stick together. This means a lot of bodies inside each room. Take a minute and inspect a bedroom inside your house. Can eight people gather inside it? If visitors don’t fit comfortably during the majority of the excursion, your home will be remembered as cramped and small. Give people space to walk around by getting rid of furniture. Professional home-stagers may remove up to half of the furniture in a house to improve its feel. If you think you’ll need it at your new place, consider getting a storage unit to house your things until your home is sold.
Trim, yes, but don’t get rid of everything. Empty homes feel small—sometimes as small as cluttered homes.
The trick is to allow enough room for visitors to roam and feel like they’ve explored the home, while giving a sense of how furniture fits in each space. Think of it like laying a maze with broad walkways. Leaving a bed inside a room is like inviting interested buyers to walk around and explore the other side of it. Once the area has been explored, the brain perceives the space as more “known.” Visitors have an intuitive awareness of how many strides were required to cover each section of the house—many more strides for a furnished home than an unfurnished one. If you have already moved out, you may consider renting a few staple pieces to place throughout the home.
Focus on your bathroom
Bathrooms have a stinky reputation. The last thing you want is a potential buyer wondering how long your moldy-smelling towels have been in there. Buy white towels, white rugs, some fancy soap and a new, plain shower curtain. Add a hint of color with a simple vase or other decoration. You might love these new additions to your arsenal of bathroom décor anyway!
Kitchens sell homes
You’ve already de-cluttered. Now go to your kitchen and give it an even more critical eye. Is there any item on the counter besides a decorative coffee maker or attractive toaster? If there is, remove it. Consider painting the backsplash or even upgrading to tile. Wipe down the outside of the cabinets. Wash and dry the sink so it’s free of water stains. Refrigerators should be blank on the outside. Leave out a plate of cookies for extra points!
Bust out, buy or borrow key items
Mirrors. They make space look bigger and show off how the buyers will literally look inside the home should they purchase it.
Lamps. Lighting is your friend. The more lighting options in a room, the merrier.
Landscape or abstract art with bold colors. One or two pieces per room are plenty.
Don’t forget curb-appeal
The front of your home is the first thing potential buyers will see. Sweep, mow the lawn, and plant flowers if the season is right. Spray the house free of dirt and fix anything that’s broken. De-clutter the yard. Often, our homes have bikes, garbage cans, and scooters piled around them. Move everything besides decorations to the back of the home.
Last minute to-do’s
You’ve done the hard part and now your home is ready to show. Great job! Now, try not to stress. No house will be perfect. You’ve come a long way in showing your home well and buyers will sense and appreciate that. Here are the last few to-do items. Get to what you can and pat yourself on the back.
De-clutter
Set the thermostat to a comfortable temperature
Turn on all lights to make the home look bigger and more inviting
Clean the mirrors and most conspicuous windows
Set the table with nice plates and silverware for that extra wow reaction
Bake cookies or light fragrant candles
Walk the path of your visitors, from the curb to the front room and beyond, making minor fixes as you go
I keep talking about not stressing, but seriously? Don’t forget to clean the toilets. Deal. Breaker.
Check back here on the Homie Blog for the next installment of the Home-Sellers Journey. Coming soon: Got a Home for Sale? Don’t Call it Cozy. To get started selling your home, contact Homie today.
Buying and selling real estate used to be really hard
And very time consuming
I remember driving around with a real estate agent
It felt like a grueling process back then and hasn’t really changed a whole lot
Back in the 1980s, I vividly remember a day when my father took me along with him to a real estate agent’s office. He was looking to buy a new home and this was how the process began – by getting into a vehicle.
We showed up to an office replete with ornate furniture and classic paintings (probably of old timey ships) to meet with an English expat wearing a smart suit and tie. It made sense that he had an accent because back then a real estate agent was meant to exude style and sophistication.
After a brief chat, he grabbed some paperwork, we climbed in his car (probably a diesel Mercedes), and proceeded to drive around a neighborhood to look at potential properties to buy.
This was how you purchased a home back then. The agent compiled a list of homes in a target neighborhood yet to be seen and invited the client to do a ride-along.
Assuming you found one you liked, you’d make an offer and eventually the seller would counter or accept your offer. A few weeks after that you’d get your mortgage from a local thrift or savings and loan (while putting at least 20% down) and the home would be yours.
Oh, the bank would actually hold onto your mortgage, instead of turning around and selling it on the secondary market. And you could make your mortgage payments in person at the local bank while taking care of your other banking needs.
Has the Process Really Changed?
Real estate is different to some degree
The fact that you can find your own listings and view properties online
Certainly makes things a lot easier
But the transaction itself is still mostly the same
Today, it’s different, but not too much different. You’ll probably still drive around with a real estate agent looking at homes. The only difference is that you can choose which homes you’d like to view beforehand online (or on your phone) thanks to websites like Zillow and Redfin.
Other than that, the process appears to be the same. You go and tour properties with your agent and make a bid. Once accepted, you apply for a mortgage with a lender, either locally, online, via a broker, or through some national chain.
Once the loan closes, there’s a very good chance your loan will be sold off to a different company. And you probably didn’t put down 20%. Instead, maybe just 3% down (or even less). In any case, it’s pretty much business as usual.
The only real difference is all those pretty pictures on websites, and the ability to check out homes before viewing them in person. Still, we all know pictures often fall short, and without seeing a property in person it’s nearly impossible to make a decision.
Real Estate Is on the Cusp of Disruption
All the tech players know real estate is ripe for disruption
And that’s why we’re beginning to see a ton of newcomers in the space
One major player that is emerging is Opendoor
Which buys, sells, and now even finances properties
So we know there’s a new way to search for real estate, but the process seems to be the quite the same otherwise.
However, it does appear as if we’re inching closer to a point where you you might be able to ditch your real estate agent, or forego the typical lengthy timeline to buy and sell a home.
Though the businesses attempting to effect change are facing some headwinds, it’s becoming increasingly common to find companies looking to challenge the status quo.
Late last year, a company called Faira launched with the promise of selling homes for free. Instead of paying a 6% commission, you pay nothing. But this company has yet to make waves.
Then there’s Skupit, which allows individuals to make an offer on a home online using a single agent to make their bid more competitive. Again, early goings here but the potential to disrupt is clear.
Opendoor Trade-in Program
While you could already buy/sell homes with Opendoor
They recently launched a home trade-in program
Where you can actually find a new home
Then simply sell them your old home to them, concurrently
That brings us to a new service from Opendoor, the folks who want to sell homes in three days, which now aims to transform the process of buying and selling a home concurrently.
Put simply, they want to make it easier to buy a new home without worrying about what you’ll do with your old one, an issue many Americans face, especially with inventory as light as it is.
Instead of fretting about your existing home, you can shop for a new home as you would a first-time home buyer, then make an offer without it being contingent on the old home being sold.
All you have to do is make an offer and tell Opendoor the closing date. From there they’ll buy your old home at “market price” and handle the funding of the new purchase so you can get both sales done in a single transaction.
You won’t have to worry about making two mortgage payments, or the complications involved with supporting two mortgages. Or the issue that arises when your offer isn’t competitive because it relies upon your old home selling.
Buy and Sell with Opendoor at the Same Time
While the trade-in program allows you to buy any home on the MLS
It’s also possible to sell your home to Opendoor
And buy an Opendoor home at the same time
Thereby making the entire transaction really fly
There’s also the opportunity to buy your new home from Opendoor to make the process super streamlined and fast.
For example, you can buy and sell in a matter of days (literally) if you find the new home in Opendoor’s for-sale inventory. I believe they provide a 2% discount if you do this.
This would really change the real estate process, though it should be noted that the standard 6% commission structure remains.
If you’re curious what Opendoor will offer for your old pad, you can get a trade-in price on their website so you can determine the amount you will have for a down payment and closing costs.
The clear downside here is that Opendoor may offer you significantly less than what you’d fetch on the open market, with the upside being one less roadblock to snagging a new home, and much less legwork.
There’s also a “market risk charge” of 0-6% that may come into play if values drop while they own your old home and attempt to resell it. And potential repair costs that Opendoor will split with you to make the home marketable.
This new service is available in the Phoenix and Dallas housing markets. At first glance, there were some 116 listings in Phoenix currently available for purchase. But I’m sure inventory will grow over time.
Whether this will finally change real estate as we know it remains to be seen, but pressure to evolve is clearly mounting. The question remains if it’s actually in the best interests of homeowners, or simply a play on convenience like many other new startups.
This is a guest post by Hank Coleman who writes about personal finance, investing, and retirement on his blog, Money Q&A. Hank shares his story about how he and his wife decided to become landlords.
I will tell you that I don’t know the first thing about this topic, so I would encourage anyone that is considering it, to read this first before becoming a landlord. I know there are pros and cons into becoming a landlord, so weigh all your options before diving in. Enter Hank…..
Many corporations in America require their employees to move every so often in order to give them with career progression, new opportunities, and challenges as they move up the ranks.
My employer is no different and recently told me of an impending move.
Like many Americans, I’m faced with a daunting choice.
Do I try and sell my home or become a reluctant landlord?
The anxiety of losing large sums of money or equity is one of the greatest fears for most homeowners with an impending move. I wanted to share with you some of my family’s thought process as to how we came to our decision to become landlords for the first time instead of selling.
It wasn’t an easy decision, and everyone’s situation is different. You have to look at it almost like a business and weigh the cost and benefits of your decision before taking the leap.
The Drawback Of Selling Our Home
There are several drawbacks to selling our home. Even though my wife and I live in an area of the country that has not seen the dramatic nosedive in real estate values, we have not seen any appreciation in our home’s value either. We could sell our house for pretty much the exact same price that we purchased it for four years earlier. The real problem with that scenario is that it is dramatically still a buyer’s market when it comes to buying and selling a home.
The buyers call all the shots, and they can make a lot of demands. Most sellers can expect to pay most if not all of the closing costs for both parties. They can also see demands for fixing up the home or even large price reductions. Trying to negotiate with a buyer will not do much good either because there are so many houses still currently on the market. A buyer can literally go down the street in most cases and find a more accommodating seller who needs to close in a hurry.
The Benefits Of Being A Landlord
Now, you may be thinking to yourself that you don’t want to be a landlord. I really don’t want to be one either and have to deal with finding tenants, evicting them when they don’t pay, checking credit reports, fixing broken toilets, showing my house to potential renters, and all of that other garbage. That’s why I hired a property management company to do all of that for me. But, I do want to increase my family’s net worth over the long-term, and owning real estate even if it is just adding one house every few years or so is one way to continue to build wealth.
There are other financial benefits of being a landlord too that many people may not immediately associate with the job. Like any homeowner, landlords enjoy many tax breaks.
In fact, there are more tax breaks for rental real estate owners than regular homeowners. Landlords are eligible to deduct their costs of operating their new rental business from their taxes.
You can deduct the cost of things like your property manager’s fee, maintenance costs, insurance, mortgage interest, home warranties, and a host of other expenses that start eating into your profit.
Renting Our Home At A Loss
Even renting out your home at a loss may be a better option than selling it outright. Of course, most of these calculations depend on your individual situation, your mortgage, how much down payment you used, and a host of other factors. For my wife and I, the comparables for renting a home like ours was $1,300 per month in rent. Currently, our mortgage, PMI, insurance, and property taxes cost $1,350 per month.
Additionally, we chose to use a property management company to help us rent our home, and they charge 10% of the monthly rent ($130 in our case). So, right off the bat, we have a negative cash flow of $180 that we are paying out of pocket every month. But, I’m very happy doing so, and I will tell you why.
Using a closing cost calculator, I can estimate that it will cost me about $14,000 or more in real estate brokerage commissions and fees to sell my $200,000 home. If I am losing $180 per month or $2,160 per year, it would take me about six and a half years to equal that $14,000 upfront cost. It is the difference between dying a thousand cuts or getting my head chopped off in one fell swoop. I’ll wait the market out. Eventually, home values in America will start to rebound…eventually.
Just like home values, rents will not stay low forever either. In fact, rents in American a rising year after year. There is nothing holding me back from raising the rent on my home in a few years and generating positive cash flow later. Almost anything is better in my book than losing $14,000 upfront and watching almost every penny of my equity disappear by selling.
According to the US Labor Department, rents across America have been rising 2.4% year over year, and that data is not even adjusted for inflation. At that rate alone, I could raise the rent on my to $1,500 over the next six years just to keep up with the times.
Eventually, your home could become a mini pension fund during retirement. At our current rate of repayment, my wife and I will have our home paid off thanks to the help of our renters at about the same time that we will be retiring to play golf and live on the beach. Even if I still charged $1,300 per month at that same house 26 years from now, the $1,170 after paying the property manager will be pure profit every month straight into our pockets.
A few more homes providing passive income like that would allow me to completely replace my pre-retirement income. While becoming a landlord is not a dream occupation that everyone aspires to, it is not something to be completely dismissed before you even consider it. There are great opportunities to choose something other than simply selling your home, taking a big financial hit, and moving on.
Pros Cons Becoming a Landlord
Everyone’s situation is different. Some people thrive being their own landlord, finding tenants, and are handy with a hammer. Some people want to get out of a house or an area at all costs and do not mind eating the closing costs in order to do so. Everyone has to make their own choices in the best interest of their family, but I wanted to let everyone know that they should not feel backed into a corner.
There are other options out there rather than simply succumbing to a realization that you have to lose money in order to move to a new home or a new city. All it may take in your situation is a little bit of cost benefit analysis on which course of action is right for you and your family’s well-being.
Hank Coleman is currently an officer in the US Army and also spends his free time as a finance writer who has written extensively for many financial websites and publications in addition to his own blog, Money Q&A. Hank has a Master’s Degree in Finance, a Graduate Certificate in Personal Financial Planning, and is currently studying and constantly putting off taking the Certified Financial Planner exam. His dream is to one day retire from the Army, open his own financial planning firm, and try to be just like his CFP® Idol, Jeff Rose.
It may seem ridicculous that real estate agents make so much money on the sale of a house. Selling a house is expensive and much of the cost is a real estate agent’s commission. Real estate commissions are usually paid entirely by the seller and are significant. I am a real estate agent in Colorado and even though agents are expensive they are still well worth it. Real estate agents do not charge as much as they do because of the time it takes to actually sell a house. They charge a lot because it takes work and money to market, it is hard to get licensed and become a real estate agent, they have to pay for dues and insurance and real estate agents usually have to split their commissions with their broker.
The biggest reason real estate agents make so much money is they are worth it! A real estate agent will usually sell your house for much more money than if you sold it yourself.
Why are real estate agents worth the commissions they charge?
A real estate agent’s main value is knowing the market value on a home. If a home is priced too low or too high, it can cost the seller thousands of dollars. Price a home too high and it will stigmatize the home. Buyers start to wonder what is wrong with the home if it sits on the market even if the price has been reduced. Price a home too low and you could be leaving thousands of dollars on the table.
I hear stories about people who say they saved thousands of dollars when they sold their house by not using an agent; they sold the house in one day with multiple offers! If you received multiple offers on the first day, there is a great chance you underpriced the home and left money on the table. Most likely more money than the real estate agent would have cost. A real estate agent is an expert at pricing homes and a website like Zillow cannot be used as a substitute. I wrote an article about how accurate Zillow is, and it shows you need a local expert to price your house correctly.
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How do real estate agents make money?
In most situations, a real estate agent represents the buyer and seller of a home and both commissions are paid by the seller. This may not seem fair, but there is a very good reason the system works this way. Having the seller pay both agents’ commissions allows there to be a larger buyer pool and higher house prices.
Why does the seller pay for the buyer’s real estate agent?
Buying a house is expensive and most buyers need all the cash they have to pay for the closing costs and down payments. If a buyer had to pay for their real estate agent as well, there would be much fewer buyers who could buy a home. With a bigger buyer pool, more houses sell and sellers can charge more for their homes. Even though the seller pays for the buyer’s agent, the seller makes more money in our current real estate system due to the higher house prices caused by more buyers.
How much is the real estate commission on a house?
This is a tricky question for me to answer because I am a real estate agent. There are no typical or set commissions; they are all negotiable. As a real estate agent, I legally can’t say the typical commission is such and such. Instead, I will link you to this article that explains commissions and tell you HUD pays a 6 percent commission to sell houses; 3 percent to the buyer’s agent and 3 percent to the seller’s agent. I have seen commissions on real estate both higher and lower, but remember there is no typical or set commission rate. Using HUD’s structure the seller would pay $12,000 to the real estate agents if their house sold for $200,000
Why do real estate agents make so much money on one sale?
On the surface, it may look like an agent makes a killing by making $6,000 on each side of the sale of one home. A real estate agent may work 10 hours or less on the listing side, which would equal $600 an hour for listing and selling a home. That is a lot of money, but a real estate agent does much more than work directly on the listing of a home. Most likely the listing agent has to pay part of that commission to their broker which may cut in half what they actually take home equaling $3,000.
There are many more reasons why that $6,000 is not as much as it may seem on the surface. A real estate agent must get licensed, must take continuing education, must pay for MLS, must pay for board dues, must pay for insurance and must market themselves. There is a lot of overhead involved in being an agent and a real estate agent is not just charging for the time it takes to list a home. The real estate agent is charging for their experience and market knowledge that allows a seller to make the most money selling their house.
Most real estate agents do not sell many houses
The truth is the average income for a real estate agent is only $39,000 a year, which I discuss much more here. The reason most agents don’t make much money is they have to pay a broker, many work part-time and many do not sell a lot of houses. The average real estate agent sold 12 houses in 2012, which would equal only $36,000 a year if an agent was making $3,000 per sale like in our example. If you want to be a real estate agent, don’t be discouraged.
Selling a house is not easy and real estate agents know how to do it best
Not only is it hard to determine the value of a house, but it also is not easy to complete the transaction. Many transactions are not completed even with the help of real estate agents. The state contract in Colorado is 17 pages long and there are at least five more disclosures that must be used. Most transactions involve financing which takes a knowledgeable lender and title company. A real estate agent can help a seller and buyer choose the best people to make sure everything goes smoothly and everyone does their job.
Conclusion
It is expensive to use a real estate agent, but well worth it. Real estate agents go through a lot to become licensed, pay a lot of fees, must work under a broker and bring specialized knowledge that helps sellers get the most for their home. If you are an investor and sell a lot of homes, it may be worth it to become an agent yourself. Otherwise, it will save you money to use a real estate agent.