Tag: home selling

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The challenges of selling a home while divorcing

Of the many challenges you might face while going through divorce, having to leave your home is not only emotionally disruptive, but has the potential to create short term havoc as well. Imagine not only having to pack and move your personal possessions, but also having to cater to strangers traipsing through your home on a regular basis.

Because selling a home during divorce can sometimes offers additional pitfalls, choosing the correct Realtor® as well as arranging a thorough home sale agreement with your ex-spouse may minimize the emotional stress and grief, as well as possibly avoiding additional conflict. As always, I need to remind you that I am not an attorney, and if you’re going through or thinking of separation/divorce, consult your attorney for legal counsel.

Of course you want to choose a listing agent with sharp real estate acumen. However, consider additional agent attributes such as facilitator, active listener, as well as being discreet. Most top real estate agents are good facilitators, being able to move a transaction from an offer to close; but in a divorce situation, the listing agent should not only address the buyers side in negotiation, the agent needs to be able to facilitate the transaction by bringing both ex-spouses together.

In what may seem to be a skill that is scarce these days, active listening is not only hearing what you may have to say but is demonstrating you are understood. Not unlike a counselor, the agent with active listening skills is able to recap a conversation and be able to actively address your concerns during the home sale.

To thwart unwanted lowball offers, the listing agent must be also be discreet. Home buyers may sometimes mistakenly equate a divorce related home sale with a distressed property, and subsequently present an offer that is below market pricing. Additionally, the listing agent must remember that they have a fiduciary responsibility when representing all the sellers of the property and not should not favor one side or attempt to cram offers through.

Having a thorough home sale agreement prior to listing is not always realistic, it’s not unusual for an agreement to be reached after the sale. However, giving consideration to other sale related issues in addition to disbursing the sale proceeds can facilitate a sale. To assist in making your transaction and transition smoother, consider the disbursement of escrow accounts, payment of left over bills, property damage and removal of your spouse’s possessions.

The mortgage and water bill escrows are sometimes forgotten during a divorce sale. When your mortgage is paid off, the mortgage company will refund any remainder of the escrow account that was used to pay your insurance and property tax. Additionally, the remainder of the escrow that is collected at settlement to pay the final water bill must be disbursed as well.

An ex-spouse’s personal property can sometimes linger, making the home appear cluttered and creating challenges to staging. Arranging to remove personal property prior to listing may assist in showing the home at its best. Additionally, agreements as how to handle escrow shortages and any property damage that occurs prior to settlement may also prevent potential closing issues and delays.

Although proactively arranging for all pitfalls in the divorce sale is not always realistic, consulting with your attorney can help you navigate through the obstacles.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Preparing an open house for welcome and unwelcome visitors

In a time when home buyers and their agents are increasingly using online services to search for homes, some question the value of holding an open house. However, holding an open house provides the opportunity for both welcome and unwelcome visitors to experience what your home has to offer.

Of course, the wanted visitors include home buyers and their real estate agents. The National Association of Realtors® Profile of Home Buyers and Sellers 2010 (NAR, Washington, DC; Realtor.org) indicates that about 10% of home buyers in 2010 reported finding their home via an open house visit. And although the number of home buyers finding their home by means of visiting open houses has decreased from the 16% that reported in 2004, many home buyers reported that they use open houses as a means of information gathering. Of those home buyers who used the internet for their home search, 47% also visited open houses as an additional source of information.

Although preparing for an open house should not be too much work, since most of your preparation should have been completed prior to listing your home, time should be taken to offer your visitors a memorable home. No matter how much de-cluttering you have undertaken prior to listing your home, getting ready for an open house offers the opportunity to focus on the details.

Attention to the home’s curb appeal can make the difference between having home buyers driving by and having them stop to come inside. No amount of advertising can overcome a home with poor curb appeal; remember that your home’s exterior and yard is like the opening chapter of a story that should be engaging to home buyers.

When cleaning your home, look for trip hazards. Trip hazards can turn the promise of an open house into a potential disaster. Of course, visitors should be informed of home features that present trip hazards, such as irregular stairs and uneven floors. However, other trip hazards are sometimes created by the virtue of an open house: think twice before asking visitors to remove their shoes, as walking around in socks can be quite slippery on bare floors and stairs; new rugs should be secured so they do not slip from under your visitors’ feet.

Certainly cleaning and dusting the home is a given; but since home buyers often find strong odors a turn-off, consideration should be given to odors and their sources. Odors that emanate from such sources as pets, cooking, and even your cologne and perfumes can often linger throughout the day- and sometimes trigger an allergic reaction from a home buyer.

Now to the unwanted traffic: Besides cleaning your home, take precautions to protect your valuables and prescription medications. Every year there seems to be an outbreak of open house thievery somewhere in the country. Think twice before showing off your new flat screen or computer, or laying out the fine china for staging. Thieves can easily visit an open house to not only see what they can fit into their pockets, but to “take inventory” of your valuables for a later score when no one is home. And it’s not always jewelry and cash- some thieves look for prescription drugs that are easily pocketed during their visit.

Your Realtor® can assist you in making your open house successful; prepare equally for the welcome and unwelcomed guests.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Planning to de-clutter

De-cluttering your home is not just reserved for a home sale. It’s also a bit more than just a thorough cleaning and putting away items that are not in use. You may already be overwhelmed by the thought of cleaning, but remember that if you prepare a realistic plan and stick to it, you will be finished before you know it.

When going through each room, decide which items are necessities and which items need to go. There are many items that you may decide are not necessary to keep, yet they are personal or sentimental. Professional home stagers talk about the idea of “depersonalization” when discussing de-cluttering. This means that the home should be “neutralized” so, rather than view your life and personalization, home buyers can have a vision of the home as their own. Keeping depersonalization in mind, decide which items need to go.

Remember that de-cluttering doesn’t necessarily mean that you dispose of everything you don’t need or want in your home. Many of your personal and sentimental items you wish to keep can be stored temporarily or for long periods of time. You can rent storage units of various sizes on a monthly basis, or you may decide to have a portable storage container delivered to your home. The portable storage container is a practical solution if many of the items that you’re pulling from your home will be used in your new home. Additionally, if you’re move is not immediate, the portable storage container can be transported by the company to storage until you’re ready to unload the container in your new home.

The items you decide that you no longer need or want can be donated, disposed of, or you might even decide to have a yard sale! If you have many items that need to be removed from your home, consider donating the items to a charity before throwing it all away. Since many charities vary on what is acceptable for donation, it’s a good idea to check with them before scheduling a pick up or dropping items off to their collection site.

Be careful when throwing items away; you may need to take precautions or make separate disposal plans for certain materials. Some items that cannot be picked up by the regular trash collection can be scheduled for pick up by the county or local municipality; or can be hauled to the local processing facility. If you’re unsure how to dispose of certain items, you can check with the Montgomery County Division of Solid Waste Services for facility hours and disposal/recycle procedures.

If you don’t have the time to haul your unwanted items on your own, you may decide to hire a hauling company. Charges to haul items away can vary depending on the company, as well as how they dispose of the items. Some haulers may drop everything to a county processing center, while some may sort your items either for donation or sale.

De-cluttering is the keystone to your home’s presentation. De-cluttering a home may sound laborious, but it doesn’t have to be if you have a realistic plan. If you’re unsure how to begin de-cluttering your home, you can check with your Realtor® or you can hire a Professional Organizer. The National Association of Professional Organizers (napo.net) maintains a national directory of Professional Organizers.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Short sale is an option

by Dan Krell
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Simply put, a short sale is asking your lender to take a lower payoff and “forgive” the difference. In today’s market, where home values have depreciated significantly in some areas, the short sale is a viable option for many home owners who need to sell their homes but find themselves “upside down.”

Although the concept is simple, the process can be lengthy and full of surprises. You should consult an attorney about your options (which may include and is not limited to a loan workout or modification, forbearance, deed-in-lieu, or bankruptcy), because the process is not a guaranteed sale and your lender may still foreclose if you have not paid your mortgage.

If you decide to go through the short sale process, you should know that your sale will be subject to your lender’s approval. The lender will decide what they will accept to pay off your loan based on the home’s “fair market value.” They will review a proposed settlement sheet that will include all liens to be paid as well as any unpaid taxes and Realtor commissions. If the net is acceptable, then they will issue an approval. If the net is not acceptable, they will most likely counter the home buyer’s offer to increase their net proceeds.

Additionally, if you enter into the short sale process, you can expect your lender to pry into your personal life by asking for your income and financial documents, a hardship letter outlining your need for a short sale, and any supporting documents.

The pros and cons of going through a short sale include forgiveness of debt, credit reporting, and tax liability. By going through the short sale process, your lender essentially accepts a lower payoff for your mortgage. This differs from a foreclosure, when your lender may serve you with a deficiency judgment to repay any shortage they incur when they sell your home in a foreclosure sale.

Additionally, your credit will most certainly be affected by foreclosure as well as a short sale. However, experts have debated that having a short sale may be the lesser of the credit evils, as there may not be late mortgage payments nor reported judgments or other foreclosure related credit damage.

You also need to know that your lender will most likely issue you a 1099 whether your home is sold at foreclosure or short sale. What an awful surprise for you during your hardship to find out you have a tax liability! If you decide to go through the short sale process, consult with your accountant about your tax liability and if you qualify to file the little known IRS hardship form.

Finally, once you begin the short sale process, you should keep records of documentation of your correspondence with your lender, which includes phone calls, emails, financial packages you complete, and all supporting documentation.

If you owe more on your mortgage than your home’s value and you need to sell your home, the short sale process will allow you to sell your home for less than what you owe your lender without having to pay the difference at settlement. A short sale is a “win-win” for all involved, but there are many considerations. Before you enter in such an arrangement, you should consult with an attorney to understand your options.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 27, 2008. Copyright © 2008 Dan Krell.

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Irrational home sellers and buyers

Irrational Home Sellers and Buyers
Irrational Home Sellers and Buyers (infographic from keepingcurrentmatters.com)

Have you wondered why so many people rushed to purchase homes in the recent historic seller’s market? Why have home buyers been scarce, even in a buyer’s market? The man with the answers is Ori Brafman. Ori Brafman has an extensive background that includes organizational speaker and consultant, professor, and writer. His new book, co-written with psychologist Dr. Rom Brafman (his brother), is called Sway: The Irresistible Pull of Irrational Behavior (Doubleday, June 2008). The book is a culmination of research that explains what compels us to act irrationally. And may explain irrational home sellers and buyers.

In a recent personal correspondence about irrational behavior in real estate, Ori offers these concepts to explain such seemingly overt irrational behaviors: loss aversion, “getting stuck in the past,” and value attribution.

Loss aversion, a concept described in Prospect Theory, describes why people focus on limiting their losses as opposed to seeking gains. Ori explains that loss aversion explains why home sellers have a hard time selling for less than their original purchase price, even when it means they could potentially lose more by waiting for the downward market to end. He explains that it is not only psychologically painful, but a shot to our ego.  This may explain irrational home sellers who wait for an unrealistic sale price.

This would explain why many irrational home sellers have had a difficult time adjusting list prices in the downward market. Even when a home seller will not realize a loss, they perceive a loss based on home values from a year ago. Based on this perceived loss, home sellers will list their homes for sale at higher than market prices. This fact was validated in a research study conducted David Genesove and Christopher Mayer entitled “Loss Aversion And Seller Behavior: Evidence From The Housing Market” (published in The Quarterly Journal of Economics, 11/2001). This research used data from the Boston real estate market in the 1990’s and serendipitously found that home sellers are unwilling to list and sell for a loss.

Irrational home sellers and buyers can “get stuck in the past,” looking to buy or sell a home for a price they missed some time ago. Rather than pricing their home at a realistic price, many home sellers look to sell for a price they would have sold for a year or two ago. Additionally, this could explain why some home buyers constantly offer low ball prices for homes that have obvious higher values.

Value attribution plays a large role in how home buyers view homes they may purchase. Ori explains that a home buyer might place less value on a home that is priced less than other neighborhood homes, “even when the home meets all of their criteria.” When a home is priced “rationally,” a home buyer might wonder, “What’s wrong with this house?” Home buyers will go through the home and arbitrarily decide which features devalue the home.

Together, these concepts might explain why home buyers have been scarce in this buyer’s market. Many home buyers have placed less value in owning a home in a declining market, worrying about further market declines. Additionally, home buyers irrationally worry about unrealized losses, even when buying a home may be the rational thing to do.

By Dan Krell
© 2008

Original is published at https://dankrell.com/blog/2008/08/29/why-do-people-act-irrationally-when-buying-and-selling-real-estate/
This article is not intended to provide nor should it be relied upon for legal and financial advice. Copyright © 2008 Dan Krell.

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