Considering home improvments?

I often get asked about home improvements. The conversation starts with someone asking if a specific improvement will increase the value of a house. Most major improvements will increase the value of a house but they don’t all have the same return on the dollar.

Some small improvements like a new backsplash in the kitchen or new exterior doors can have a big impact.  Homeowners who plan to sell in the next five years should consider making improvements today that they will enjoy the most.

Any home can be sold as is with no improvements and that is an attractive option for people who don’t want the hassle of renovations.

Home improvement
Recovery on remodeling costs

The end of an era

Coins, moneyThis week marks the end of an era. The multiple listing service, MLS is a database for Realtors of homes for sale. We must add homes to the database when we list them for sale. The MLS is the source of homes for sale fed to real estate websites.

As of August 17th payment for buyer’s agents will no longer be listed in the MLS, yet buyer’s agents will still expect to be paid. Which ends an era of guaranteed compensation for buyer’s agents.

This new system has never been tried before or tested. It is part of a settlement for some lawsuits against the National Association of Realtors and others.

Generally, the home buyer did not have to pay his or her Realtor.  The seller paid a commission to the listing broker who shared it with the buyer’s broker. That practice can continue and probably will but buyer agent compensation can not be listed in the MLS.

This change and lack of transparency is certain to have unintended consequences. We won’t know how well it will work until we see how consumers respond.

Other changes go into effect at the end of the week as well. Real estate is local and several of the new rules have been in place in Minnesota for many years.

If you are a home buyer you can expect to sign a contract with a buyer’s agent before touring any houses. In Minnesota. buyer representation contracts have been required for decades but we could show houses without a contract.

It is uncertain how the new rules will help or how they will hinder consumers as they buy and sell real estate. Fewer Realtors may be willing to work with home buyers.

I’ll revisit this topic in a month.

The typical home seller this year

I was surprised to learn that the national average age of home sellers in 2023 was 60. I would have guessed younger. Here are some numbers from the National Association of Realtors seller profile for the last year:

  • The typical home seller was 60 years old, unchanged from last year.
  • For all sellers, the most commonly cited reason for selling their home was the desire to move closer to friends and family (23%), because the home is too small (13%), or a change in the family situation such as marriage, divorce, or new child (10%).
  • Sellers typically lived in their home for 10 years before selling. Among seven of the last 10 years, the typical tenure has been 10 years.
  • 39% of sellers traded up to a larger home and 33% purchased a smaller home.
  • 89% of home sellers worked with a real estate agent to sell their home, 7% sold via FSBO, and less than 1% sold via iBuyer.
  • For recently sold homes, the final sales price was a median of 100% of the final listing price, maintaining last year’s highest recorded since 2002.
  • Recently sold homes were on the market for a median of two weeks, unchanged from last year.
  • 92% of sellers were at least somewhat satisfied with the selling process.
blue house
small house

Home buyers love to ask why the house is on the market and why the owners are moving. The answer is almost always about some kind of a change in their circumstances rather than some big problem with the house.

What happens to that earnest money?

coinsI get asked questions about earnest money all the time. Recently I encountered a situation where the home buyer was worried that the earnest money would be stolen. Your earnest money is safe.

Earnest money is a deposit made by the buyer. It is held in a real estate broker’s trust account until the sale closes. The purchase agreement spells out who will get to keep the earnest money if the buyer fails to close.

A home can be purchased without earnest money if both parties agree.

Earnest money does not go to the seller. The most common practice is earnest money held by the seller’s broker. The money is usually electronically sent directly to that trust account and there are all kinds of rules and laws governing trust accounts.

Ultimately the money goes toward the purchase price. It will show up on the settlement statement as a credit.

The amount of earnest money depends upon the price of the house.  A larger earnest money deposit can make a buyer’s offer look better to a seller. It shows that the buyer is committed to the purchase.

Words matter in purchase agreements

kitchen
Stainless steel appliances – granite countertop

Remembering way back to one of my first clients. I sold their house and when we got to the closing the buyers were most upset that the sellers took the microwave with them when they moved out.

Microwave ovens that are not built-in are considered personal property. Unless the buyers ask for them specifically and unless the sellers agree to include them in the sale they can be packed up and moved away.

The buyers refused to close unless the sellers paid for a new microwave and the sellers refused to do so. At the time a new portable microwave oven cost around $100.

Anything built-in is included in the purchase of real estate in Minnesota. That included the kitchen sink, light fixtures, built-in appliances, cabinets and shelving.  If a microwave is built-in then it is included when the house is sold. Light fixtures are included as are curtain rods.

Perennial plants, bushes, and trees also run with the property and are included in the purchase.

If it is a portable model that sits on a table it is considered personal property. It can be included in the sale if specified in writing. Sellers can specify in writing items they do not want to include in the sale.

When asking for personal property the buyer should be specific.  Ask for the ______(model) microwave oven, as seen in the kitchen on this day______.

Sellers who do not wish to sell a light fixture with the house should remove it and put in a new light fixture before putting the house on the market.

Over the years I have seen more misunderstandings and disagreements over property that is worth less than $100 than over anything else. There are gray areas as to what is personal property and what isn’t. When in doubt spell it out and get signatures from both parties.

Experienced real estate agents know the difference between personal property and part of the property.

What is staging?

Staging is so misunderstood. It isn’t always about filling the house with rented furniture. It is about removing clutter, including excess furniture.  I often suggest removing throw rugs in small rooms such as bathrooms and kitchens.  The rooms look larger and cleaner without rugs.

Kitchen counters should be mostly bare as should the top of the refrigerator and stove.

I often recommend removing ottomans and coffee tables.  They take up space and can make a room look smaller, yet some stagers will add a large ottoman.

I like to set the dining room table and add fresh flowers.

A few green plants can help make a home look more inviting, however, if I were to put my own house on the market, I would need to remove some of the plants because there are too many. Having too much or too many of anything is clutter.

The exact placement of the couch isn’t going to make or break a sale. Staging is more of an art than a science. Having an empty room won’t make a house unsaleable. in fact, a room looks better empty than over-furnished. Buyers have the opportunity to imagine what the room would look like with their furnishings in it.

For a time it seemed like every home I saw had a sign that said: “Eat, Pray, Love”. I can’t think of any situation where signage improves the look of a room or adds to the value of a house, yet the signs were brought in for staging.

Houses can also be virtually staged. Pictures of vacant rooms are populated with furniture.

Speaking of pictures, staging is much more effective with professional photos.

Each home is unique and so is each homeowner and each home buyer. Staging can and should be tailored to fit the situation. Currently, there are more home buyers than sellers. Your home will sell but it may sell faster and for more money if it is staged.

Kitchen
Kitchen