Friday, August 29, 2014

Expert Home Staging Tips: Cast Out Evil Odors

Which smells can stop a home sale? Knowing the odors and aromas you should utilize or eliminate when staging your home for sale can help you turn a house hunter into a homebuyer. Darlene Parris, Interior Redesigner, Organizer and Home Stager with Los Angeles-based UPSTAGED!, guides you through how to cast out evil odors and entice buyers with pleasant fragrances.

No matter how well you have staged your home by cleaning, decluttering and depersonalizing it, if house hunters encounter unpleasant smells when they come to your showing it could all be for nothing.

Smell is the sense most tied to memory and emotions. The olfactory bulb, the part of the brain that transmits smell information from the nose, is closely linked to both the amygdala and hippocampus, which process emotion and control associative learning.

So, what does that have to do with selling your home? It means that potential buyers may react emotionally to unpleasant smells, forgetting about all the great features that your home has to offer and quickly putting an end to the viewing. By contrast, the right aromas can leave a potential buyer with a lasting positive memory and help them attach and connect to your home.

You may not be able to prepare for how a house hunter reacts to smells in your home, but you can prepare your home for a showing by following these instructions for eliminating objectionable odors and adding appealing aromas.

Objectionable Odors
Potential buyers will see and smell everything that you don’t. That’s simply because you are acclimated to your environment while it’s completely new to them. They will smell last night’s dinner, they will be able to detect the scent of your dog and they will know if you enjoyed a cigar after your meal.

Offensive smells that can linger in your home include:
  • Pet Odors
  • Smoke
  • Body Odors
  • Aromatic cooking (fish or heavy spices)
One way that you can isolate the unpleasant scents in your home is to invite your friends or family members over to tell you what they notice. In order to ensure that you neutralize any bad odors, work methodically and spend extra time on the rooms of your home that could prove the most difficult.

Bathroom
Thoroughly scrub all surfaces and dry them properly after cleaning to reduce the chance of mold and mildew. Avoid the overpowering scent of cleanser by using less abrasive cleaning products before utilizing bleach or other heavy chemicals. Get as much fresh air and sunlight into the bathroom as you can, especially if you have had to use strong disinfectants. If you have an exhaust fan use it for additional ventilation.

When it comes to plumbing, try cleaning your drains with an industrial cleaner. Have a plumber check your pipes for any cracks or leaks that may be causing a powerful smell. Replace all bathmats, rugs and towels with new linens before you begin showing your home.

Kitchen
The kitchen can be a breeding ground for unappetizing smells. From the refrigerator to the microwave, garbage can and garbage disposal, odd smells can emanate from any and all of these culprits. Luckily, there are usually a few simple fixes to eliminate these smells.

In addition to cleaning out your kitchen appliances you can also keep baking soda in your refrigerator in order to neutralize smells that may come from bits of food. Placing a bowl of vinegar on your kitchen counter can also help to absorb unpleasant smells that may come from the kitchen, although this should be removed in advance of the showing.

Bedroom
The bedroom can develop musty smells from sweat, body odor and old clothing that may be a turn-off for buyers. Make sure that you replace your bedding with a new set of linens and wash not only the clothes that you wear on a regular basis, but also those that have hung in the back of your closet gathering dust for the last several years.

Appealing Aromas
You shouldn’t just neutralize offensive odors, you should also find appealing aromas to fill your home. These pleasant smells can help endear house hunters to your home and help seal the deal on your home sale.

Top 5 Best Smells
A group of neurobiologists have actually conducted research to discover what smells have almost universal appeal. While the test they performed was small, they found that they could predict if someone would find an odorant pleasant or unpleasant across cultural backgrounds. They found the following to be the top 5 best smells:
  1. Lime
  2. Grapefruit
  3. Bergamot
  4. Orange
  5. Peppermint
When looking for pleasant aromas to fill your home, you may want to consider starting with these simple scents.

Baked Goods
You have probably already heard about baking cookies for an open house. Anecdotal evidence strongly indicates that the smell of baked goods have a lasting impact on house hunters.

Kathleen Henon, a ForSaleByOwner.com home seller, has used this strategy over the last 30 years for almost half a dozen home sales. “Each time we sold a home — and we've moved five times in the past 30 years — I would bake before anyone came to see the house,” said Henon. “And as soon as people walked in our house to look around, you could see the look on their face, like they were in a warm place, a place they could see themselves in."

These pleasant scents when used in conjunction with these timely home staging tips for fall can do wonders for helping you sell your home by owner.

This is part 4 of a 5-part series about staging your home as you prepare to host potential buyers at showings and open houses. Learn more about decluttering in Part 3 of our Expert Home Staging Tips.

Wednesday, August 27, 2014

How Real Estate Investors Get the Best Financing

When you're evaluating a potential real estate investment, one of your top considerations should be cash flow, no matter how much you love the property. For rentals, two factors maximize cash flow: the rental income and the loan terms. Your goal should be to charge the highest rent the market will bear — certainly enough to cover the mortgage payment, insurance, property taxes and maintenance — while keeping the property occupied.

The second way to maximize cash flow is to get the best loan terms. The lower your rate, the more profit you realize each month. Lenders examine three factors when establishing an interest rate for a mortgage: the borrower's credit scores, the loan-to-value ratio and ability to repay (ATR).

Credit Scores
Lenders use credit scores, also called FICO scores, to help them evaluate the likelihood that a borrower will default. The higher the score, the better the borrower's credit. For a borrower to qualify for a loan, most mortgage companies require a credit score of at least 640, although some lenders allow scores as low as 620.

Credit scores above 740 get the best rates, while scores in the 640 or 620 range will receive slightly higher rates. Real estate investors with lower scores can still be approved, but they won't get the best rates available.

Loan-to-Value Ratio
The loan-to value (LTV) ratio represents the percentage of the loan amount compared to the sales price of the investment. Conventional loans require that a borrower make a down payment of at least 20 percent, for an LTV ratio of 80 percent. For a $200,000 home, that comes out to a $40,000 down payment. If the LTV ratio is higher, lenders can require private mortgage insurance (PMI).

In the lender's eye, the higher the LTV ratio, the greater the likelihood that the buyer will default. Lenders usually offer better rates for borrowers who make down payments of 25 percent or more (an LTV ratio of 75 percent or less). They like to see that the borrower has more "skin in the game."

One place where LTV ratios play a big role is in assessing loan-level pricing adjustments (LLPAs). These are changes in loan costs derived from a combination of credit scores and LTV ratios — your risk to the bank, in other words. If you have a 680 FICO score and are planning to make a 20 percent down payment, you may be able to reduce LLPAs and get a better rate by putting 30-35 percent down.

Ability to Repay Requirements
On January 10, 2014, the Consumer Financial Protection Bureau's (CFPB) qualified mortgage rule, which includes new ability to repay (ATR) requirements, went into effect. While lenders have always compared a borrower's debt to income, the ATR sets down guidelines that lenders follow in order to avoid making loans to borrowers who may not be able to repay them. The magic ATR number is 43: In order for the loan to qualify as protected, a borrower's total monthly debt may not exceed 43 percent of gross monthly income. Lenders refer to this number as the debt-to-income ratio or DTI.

Simply put, if a couple makes $10,000 per month, their monthly debt, including the mortgage payment, may not exceed $4,300. Qualified monthly debt includes principal and interest, monthly taxes and insurance and any homeowner's or condominium dues, plus consumer debt such as automobile loans or credit cards. Daily expenses such as utilities, food, or entertainment costs aren't included.

To get the best rate, the loan needs to conform to the ATR standards, otherwise the loan may either be declined altogether or approved using different types of loans with higher rates.

Different Lenders, Similar Rates
You'll discover when you're comparing mortgage rates from different lenders that they're probably very similar. You won't find one lender offering you 4 percent while everyone else is quoting 5 percent on the identical loan. In addition, when researching current mortgage rates, remember that the rates you're quoted are based upon your specific scenario. There's no "one-size-fits-all."

At the same time, rate adjustments are typically in increments of 1/8th of one percent, so it's not necessarily a deal-killer if you can't make a higher down payment or improve your credit score — but it does affect your monthly cash flow. (Note: FHA loans are available for down payments as low as 3.5 percent at competitive rates, but do come with built-in insurance premiums.)

Another strategy you can use to reduce your monthly payments is to pay more points up front. A point is a fee equal to 1 percent of the loan amount. For the $200,000 home mentioned earlier in this article, a point would be $2,000. "Discount" points are pre-paid interest on your loan in return for a better interest rate. This strategy works best if you plan to own the property for several years, for its rental income.

In sum, optimizing these three factors — credit scores, the loan-to-value ratio and ATR — can help you get the best rates and terms for an investment property. Even if you don't get the absolute best rate on the planet, you'll know what to do the next time when you apply for a loan. Get your credit scores up, plan on putting more down and keep your debt-to-income ratios in line.

This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace. Founded in 2008, the company has sold nearly $20 billion in assets since 2010. Auction.com has more than 900 employees and offices in Irvine and Silicon Valley, California as well as offices in Atlanta, Austin, Denver, Miami and Newport Beach. Visit us at www.auction.com, or on Twitter, Facebook and LinkedIn.

Monday, August 25, 2014

The How-To Guide for Garage Sales [Infographic]

Hosting a garage sale or two is a great way to get rid of items that you don't want to leave in your home or take with you when you move. Once you've decluttered, cleaned and determined what's coming with you (or going into storage), you can find new homes for those items that don't quite make the cut. Then, your newly organized home will be ready to stage and show in its best possible light.

From advertising your garage sale to how to price and arrange your items, the below infographic will help you lighten your load — and maybe make a few extra bucks in the process. Late summer and early fall are prime times to host a garage sale, so take advantage of the dwindling warm weather days now.


Got a few things left over after your sale? Clothing, electronics and toys are especially good candidates for charity donations.

The How-To Guide for Garage Sales infographic was originally published by Affordable Self Storage.

Friday, August 22, 2014

Expert Home Staging Tips: How to Depersonalize Your Home

What’s one of the most important elements to success when selling your home by owner? Getting buyers to imagine your home as their home. Depersonalizing your home for sale is essential to creating a welcoming atmosphere for potential buyers. Darlene Parris, Owner, Home Stager and Interior Redesigner of Los Angeles-based UPSTAGED!, guides you through the process of helping buyers see the sale through depersonalization.

Home staging is all about helping potential buyers visualize your home as their home. Getting professional advice from a home stager as well as decluttering and cleaning your home are crucial first steps in the home-staging process. As you continue to prepare your home for photos and visitors, we will discuss our third home staging tip: depersonalization.

What Is Depersonalization?
What does depersonalization actually mean? In setting the stage to get your home ready for sale, depersonalization is best explained as eliminating your personal tastes or neutralizing the space while still trying to make it feel warm and inviting.

Most people fall in love with their home, making them an extension of their style and personality. While living in a home, the homeowner often chooses colors, accents and finishes that they enjoy. This can be seen in everything from the red accent wall in the family room to the little statuettes adorning the front lawn. While these choices make the home unique, they make it unique and specific to the owner, which can be distracting to potential buyers. This is the purpose of depersonalization: allowing buyers to picture themselves making their new home out of your home for sale.

First Steps to Depersonalization
The process of depersonalization should begin as soon as the homeowner decides to sell.

  1. Wall Coverings - If your home has wall treatments such as upholstery, wallpaper or stencils that have not been updated within the last five to seven years, it is advisable that you remove or replace them. Buyers may have a particularly difficult time seeing beyond wallpaper designs and patterns that are decades old and unfashionable.

  2. Wall D├ęcor - Putting personal effects like sports memorabilia, autographed musical equipment and family photos into storage is recommended as these items serve as distractions for potential buyers. Clocks, mirrors and pieces of art should be evaluated to determine if they present the proper neutrality for the home.

  3. Color Palate - Using a neutral color palate can help you present a “blank canvas” to the buyer. Being aware of the underlying tones for the colors that you choose can help you bring out the character of the room without insinuating your own personality. For example, if you choose a shade of beige with gold or tan undertones, utilize those colors for accents where appropriate.

  4. Collections - Neutrality shouldn’t just apply to color palate; it should also be applicable to the subject matter of the collections around your home. Neutral books or magazines about architecture or food may be appropriate for display, but other reading materials should be hidden or even turned inward to hide the spine. Collections of religious artifacts and niche subject matter should be removed.

Neutralize By Room
While the above tips are helpful for a top-level view of how to depersonalize your home, it can be even more beneficial to have a clear idea of what to watch out for in each specific area of the home. Here are some room-by-room tips to depersonalize your home for sale:
  • Living Room - This will likely be the first room that your potential buyers see and will act as the front line for your interior presentation. Consider all of the aforementioned tips from removing collections and photos to neutralizing the color palate of your walls and furniture.

  • Bedroom - This is likely the most personal space in your house and you will want to dedicate a significant amount of your consideration to this room. In addition to personal items it will be crucial to consider the overall design of the room. It may be necessary to purchase new bedding to match a neutral paint scheme.

  • Kitchen - The kitchen is typically the most utilitarian room of the house, but there are still a few items that you will want to keep an eye out for. Remove any magnets or artwork from the refrigerator, and consider removing small appliances from your counter tops and place them neatly in your cabinetry.

  • Bathroom - The bathroom is a functional room like the kitchen except for the presence of personal products. Soap, razors, deodorant and more personal items should be hidden away. Consider that a buyer will want to look through the cabinetry and examine the storage capability of the area, so use decorative and matching baskets to store these items neatly away.

You can also consult these quick staging suggestions for every room in your home including your kitchen and bathroom.

Detaching from the personality of your home can be difficult, but these tips will help guide you through the process of depersonalizing your home and helping your buyers see the sale.

This is part 3 of a 5-part series about staging your home as you prepare to host potential buyers at showings and open houses. Learn more about decluttering in Part 2 of our Expert Home Staging Tips.

Thursday, August 21, 2014

4 Simple Steps to Closing Your Home Sale

Think of the closing table as your home sale end game it takes effort to get there, but the payoff is what you've been working toward.

Here's how to make sure you finish strong with a four-point game plan to stay on track and seal the deal on your home sale.

1. Set Your Timeline. Once you've accepted an offer on your home and the contract is signed, keep everything on schedule by creating your closing calendar.

2. Expect an Inspection. After you've agreed on a sale price, the next step for the buyer is to have an appraisal done on your home. Be prepared by doing your own assessment beforehand and making any necessary home repairs.

3. Call in the Professionals. It's time to hire a real estate attorney and title company to ensure everything goes smoothly with your sale, from organizing paperwork to conducting the closing.

4. Make Your Move. You're not just selling a home, you're also moving somewhere new. Work with your buyers to coordinate a move-out date that works well for everyone.

We want to know: What are your best tips for a streamlined and successful home closing? 

Wednesday, August 20, 2014

How to Use Private Money to Finance Real Estate Investment

Novice real estate investors may not be familiar with the term "private money," but veteran investors have probably tapped into this resource more than once. Sometimes referred to in the investment community as "hard money," this type of financing is available for properties that don't quite fit the traditional lending model. These are basically properties that banks won't touch.


Private Money Described
Private money comes from an individual or a group of individuals — even friends and family members — who pool their funds to finance real estate transactions. Private lenders establish their own lending standards, and as long as they apply their guidelines to all applicants without regard to race, sex or any protected class, they can pick and choose when and where to lend.

Private money is sometimes called "hard money" due to the typical "hard" terms of the note. It's become such a common term in the investor community that many lenders will market themselves as hard-money lenders. A hard-money loan can have interest rates in the teens, require a down payment of 50 percent or more and require higher rates and fees compared to traditional forms of financing.

Private loans are usually issued only for the time needed to buy, repair and sell the property. A typical private loan might require a 40 percent down payment, balloon in 24 months and have an interest rate of 14 percent as well as four or five points. With terms like these, why would anyone ever choose to work with a private lender? Does the private lender make the loan hoping to foreclose? Quite the opposite.

Hard Choices
A loan for a real estate investment has two separate approvals — one for the borrower and one for the property. When a property falls into a state of disrepair, it can become so damaged that a bank won't make a loan to buy it. The borrower may have a credit score of 800, a sizable down payment and single-digit debt ratios, but if the property isn't up to standards, the loan won't be approved, regardless of the quality of the borrower.

Take the example of a foreclosed property that a bank owns but can't sell. Two major problems need to be fixed before a conventional lender will finance a purchase: The slab foundation is cracked and needs about $20,000 worth of repairs, and the entire roof has to be replaced, including new trusses. In all, the house needs about $35,000 in repairs.

The home is the bank's collateral, but it needs to be in good condition before a loan will be issued to a potential buyer. So it just sits there, listed at $100,000.

A real estate investor sees that property in a bank's inventory and makes a visit. Along with his contractor, the investor verifies the items that need correcting. He determines that once the property is rehabilitated and prepared for market, it could easily sell for $200,000, based on sales of similar homes in the area. Enter the private lender.

The investor lays out his plan for the property and provides the private lender with an application and with an itemized list of the needed repairs with their costs. Included is a new appraisal that supports the future value of the property once renovation is completed. The private lender is convinced and makes a $135,000 loan.

After buying the home, the investor makes the necessary repairs and sells the property for $200,000. Now that the property has been rehabilitated, any qualified buyer can finance it. A simple breakdown is:
  • Acquisition price: $100,000
  • Repair costs: $ 35,000
  • Loan costs (including miscellaneous fees): $ 8,000
  • Selling costs (based on a 5 percent sales commission): $ 10,000
  • Final sales price: $200,000
  • Net to investor $ 47,000
The terms of the private note included five points to the lender, loan costs and accrued interest. Still, even with the "hard" terms of the loan, it's a viable transaction due to the net profit. Without private money, homes could be left in a permanent state of disrepair, leaving fewer available homes on the market.

The Exit
As mentioned earlier, because private lenders set their own terms, they can set their own credit guidelines. Many private lenders have credit score requirements well below traditional loans. In fact, they may not even require a credit score. Banks and mortgage companies need to verify income and assets by looking at income tax forms and bank statements, but a private lender may forego that vetting process entirely.

Instead, a private lender focuses on the outcome of the deal. What is the investors' final exit strategy and does the overall transaction make sense? If the investor can document how the property will be sold and at what price, a private lender may consider the loan application. Private lenders are usually more concerned with the story and less so about the nature of the individual borrower.

Do yourself a favor and get references for a few private lenders in your area. You may not need a private lender today, but if you intend to be active in the real estate investment community, at some point a private lender will be just the resource you need to pull off a successful transaction.

This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace. Founded in 2008, the company has sold nearly $20 billion in assets since 2010. Auction.com has more than 900 employees and offices in Irvine and Silicon Valley, California as well as offices in Atlanta, Austin, Denver, Miami and Newport Beach. Visit us at www.auction.com, or on Twitter, Facebook and LinkedIn