Category: Real Estate News & Tips

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What Is Real Estate? A Definition And A Guide

What Is Real Estate? A Definition And A Guide

Interested in buying a home so you no longer have to send rent checks to your landlord each month? This thought isn’t surprising: real estate is attractive to both investors and those who want to swap renting for owning.

But while real estate is an attractive alternative or addition to stocks, bonds and mutual funds, it does come with risks and challenges.

Here’s a look at how real estate works, what makes it an attractive investment and the steps and research you need to take whether you’re buying a home for you and your family or making an investment to boost your bottom line.

Real Estate Definition

When you boil it down to the basics, real estate has a simple meaning. It’s a piece of land and the property – such as a house, office building, apartment, strip center or warehouse – that sits on it. These structures can be both above and under the ground. For instance, if you own a strip center with an underground parking lot, that parking lot would be part of your property.

Real Property Definition

If you’re buying real estate, you should also understand what the term real property means. Real property is the land and any structures affixed to it that are factored into the value of the property. For instance, if you own a home, its garage would be considered part of its real property. A movable picnic table in your backyard, though, wouldn’t. Real property also gives you the right to use your property, including selling it or leasing out space in it, as you wish.

Multiple types of real estate are available – whether you’re buying a home for yourself or to rent out to others. No matter what type of real estate you purchase, the hope is that it appreciates with time so that when you do sell, you earn a profit. Be careful, though: While real estate can be a sound investment over time, appreciation isn’t always guaranteed.

Residential Real Estate

As its name suggests, residential real estate is any type of real estate where people can live, including single-family homes, townhouses, condominiums and multifamily homes.

Many people purchase residential real estate as a place to live. But you can treat residential real estate as an investment, too. You might buy a single-family home, renovate it and then sell it for a higher price. You can also buy a single-family home and rent it to tenants, collecting monthly payments to pay off the mortgage.

Even if you buy residential real estate primarily as a place to live, your home might still turn out to be a solid investment if it’s worth more when you sell than when you purchased it.

Commercial Real Estate

Commercial real estate is any property that provides a business service and isn’t used as a living space. This kind of property includes everything from office buildings and shopping malls to restaurants, clothing stores, movie theaters, gyms and gas stations.

You can earn money by holding onto the commercial property until it increases in value, then selling for a profit. Or you can earn money by leasing space in your property to business tenants. For example, if you owned a retail strip center, you’d charge that pizza restaurant monthly rent to lease space in it. If you owned an office building, you’d charge companies to lease space in the building.

You can also use commercial real estate as a home base for your own business. You might own an office storefront if you run an insurance business, for example.

Land

You can also buy land, which can be defined as real estate that has no buildings or structures on it. If you purchase land, you can then develop or build whatever you want on it, as long as you follow the local zoning codes and regulations for that lot.

Industrial Real Estate

Industrial real estate is any structure or piece of land primarily used for manufacturing facilities, warehouses, distribution centers and factories. This type of real estate can be pricey, but it’s also valuable.

As people spend more time shopping online, and as they expect the products they buy to show up at their doors in less time, the demand for industrial real estate has only grown. This makes this property type especially valuable since the odds of it appreciating in value are high.

Make Your Offer Stand Out!

If you’re ready to buy real estate – whether as a primary residence or an investment – it’s important to understand the basics of how this business works from start to finish.

Development And Construction

New buildings – everything from homes and office buildings to apartment towers, distribution centers and shopping malls – get their start during the development and construction phase of real estate. This is when development companies, municipal officials, architects, contractors, engineers and builders work together to create a new real estate project.

If you want to buy a home, it’s usually easier to purchase one already built. Buying land and building a new home on the site, though, can leave you with a home that more closely meets your housing needs. After all, you can tell your architects and builders exactly what you want.

Working With Brokerages And Real Estate Agents

You can purchase or sell real estate on your own. But navigating this process – finding the right property, qualifying potential buyers, signing documents and handling negotiations – can be time-consuming and confusing. So, this is where real estate brokerages, real estate agents and REALTORSⓇ come in.

Real Estate Agents And REALTORS®

Real estate agents are professionals who work with both buyers and sellers. Real estate agents who are members of the National Association of REALTORSⓇ are known as REALTORSⓇ.

Real estate agents help market properties, handle the buyer and seller negotiations and make sure all the right paperwork is signed during a real estate transaction. They don’t do this for free; they usually get paid a percentage of a property’s sale.

Real Estate Brokers

All real estate agents must work under a real estate broker. A real estate broker holds a real estate license and has extensive knowledge of the real estate industry. The term “brokerage” and “broker” often get confused with one another, but a broker is a real estate professional, and a brokerage is a real estate firm.

Property Management

If you buy real estate as an investment, you might opt to pay for a property management service. As the name suggests, such services manage rental properties that you purchase but don’t live in. They handle everything from maintenance and rent collection to emergency calls from renters at 2 a.m.

Let’s say you own an apartment complex in another state. You might hire a property management company to handle the maintenance of that property. This company would hire a landscaping service, cleaning service and security service. Your property management company might also screen potential tenants, market units when they come up for rent, and handle evictions if tenants stop paying their monthly rent. If a renter’s furnace conks out, one of your property managers would take the call and send out a repair service.

Working With Mortgage Lenders

Few people can purchase real estate with cash. Most people will have to take out a mortgage loan. This is where mortgage lenders come in.

If you want to buy a single-family home for a primary residence but lack the cash to make this purchase, you’ll work with a mortgage lender. You’ll provide this lender with income-verifying documents such as your most recent paycheck stubs, bank account statements and tax returns. Your mortgage lender will also check your three-digit credit score and your three credit reports, all to make sure you can pay back the money you borrow.

If you’re approved for a loan, your lender will pay the sellers of the property you’re buying. You then pay back your lender every month with a mortgage payment. You’ll have to pay interest on these payments, which is how lenders make a profit.

Lenders don’t originate loans for free but charge a range of fees to close your mortgage loan. Fees vary, but you can expect to pay 3% – 6% of your home’s purchase price in closing costs. On a home costing $200,000, then, you may expect to pay $6,000 – $12,000 in closing costs.

Investing In Real Estate

Ready to tackle real estate investing? Be prepared to do your research.

The key to maximizing your real estate investment is to study your local market. If you want to purchase a single-family home, for instance, you should study housing market indicators such as the median sales price of homes in your neighborhood, how long it takes homes to sell and whether home values are on the rise.

The same is true if you want to invest in commercial real estate such as a warehouse, office building or strip mall. You’ll need to research how much other owners are charging tenants for rents, how much traffic pours through retail areas and how high the vacancy rates are for neighboring office buildings or strip centers.

The more research you do, the better your odds of investing in a property that’ll increase in value over time and bring in a steady stream of rental income.

Ways To Invest In Real Estate

Of course, you can employ different strategies for investing in real estate. Let’s take a look at a few:

House Flipping

When some investors purchase single-family homes for a low price, they then flip these properties and sell them for a higher price. The key is to purchase a home for a low enough price and avoid overspending on improvements so you make a solid profit when you sell.

Rental Properties

You can buy a rental property and rent out apartment buildings, single-family homes, condo buildings and commercial properties. Your monthly rent collections might cover part or all of your mortgage payment, offsetting the costs of holding onto real estate while you wait for its value to rise. If you collect enough rent, you might make a monthly profit without having to sell your investment.

REITs

Buying into REITs – real estate investment trusts – is an easier way to invest in real estate. REITs are companies that own real estate, both residential and commercial. When you buy into a REIT, you purchase a share of these properties. It’s like investing in mutual funds, but instead of stocks and bonds, you’re investing in real estate. You earn money from REITs through regular dividend payments and when the value of a REIT increases. If the value goes up, you’ll earn a profit when you sell.

Real Estate Crowdfunding

In real estate crowdfunding, investors pool their money and then use it to invest in REITs, giving people who might struggle to come up with enough money to invest on their own a chance to invest in real estate.

The Pros And Cons Of Real Estate Investing

It’s easy to look at the advantages of investing when a big payout could be waiting in the end. But before you make an investment, let’s take a look at both the advantages and disadvantages of real estate investing.

The Pros Of Investing In Real Estate

Investing in real estate has plenty of potential advantages. By investing, you can:

  • Expand your investment portfolio
  • Bring in passive income
  • Live in your real estate investment
  • Get tax breaks

The Cons Of Investing In Real Estate

While investing in real estate can prove profitable, it can also:

  • Be expensive to start
  • Require selling property to gain funds
  • Lack guaranteed profits

Real Estate FAQs

Keep reading below for answers to some frequently asked real estate questions.

What is a real estate broker?

As mentioned above, a real estate broker is essentially a step above a traditional real estate agent. They have additional education and have passed the broker license exam, allowing them to employ other real estate agents under their license.

How can I finance a real estate purchase?

Real estate is most often financed through a mortgage. There are many different types of mortgages and lenders, so if you’re thinking about purchasing real estate, be sure to research your options and find the ones that best fit your situation.

What is digital real estate?

Digital real estate is any website or other online asset. This internet property can be bought and sold similarly to traditional real estate.

The Bottom Line

Real estate involves many terms that are important to understand, and investing is one of them. Investing in real estate can be a smart financial move if you understand your market, are willing to take on the risks, and borrow only what you can afford to pay back.

Source: rocketmortgage.com ~ By: Dan Rafter ~ Image: Canva

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How to Sell Your Home Super Fast

Sell Your Home Super Fast

The more work you do before you tell the world you have a house to sell, the faster it will likely happen.

Experts say one home improvement that can really help is a new paint job.

Key Takeaways:

  • You may be able to sell your house fast, but you can’t close fast. Expect that to take at least a month.
  • The more work you do before you tell the world you have a house to sell, the faster it will likely happen.
  • There are some corners you can’t cut, even if you try to sell quickly. You have to be upfront about any needed home improvements.

Some people need to sell their home, like, now. Maybe you are moving yourself, or you need money quickly. Perhaps there’s been a death in the family, a divorce, or you found your dream house, but you can’t move forward unless you sell your current home first. Whatever the reason, you’ve got to sell your home now, and there’s simply no time to upgrade, fix up the home or add curb appeal.

How do you sell your home super fast – and still get a reasonable deal?

Those two goals are sometimes incompatible. It’s also important to realize that due to the laws in your state and how your lender works, you may make a sale in a day or less, but you won’t be able to actually close on a the deal for weeks or even months – generally about 30 to 45 days, according to Rocket Mortgage. But if you’re looking to make a quick sale, here’s a roadmap.

Do a Lot of Work Beforehand

This advice doesn’t help somebody who found out yesterday they need to sell their home, and they’d like to do it today. But if you’re buying and selling a home in the same window, and you have some time before you start this game of musical houses, it will go faster and more smoothly if you can do some work beforehand.

The more prepared you are, the faster your home should sell. In theory.

Adie Kriegstein, a licensed real estate salesperson at Compass in New York City, has some suggestions for any home seller who wants to sell their home fast:

  • Make home improvements before you even list your home. You want your home “in the best possible condition for both marketing purposes and for those who will come to view it in person,” Kriegstein says. One home improvement that can really help is a new paint job, she says. You should consider painting the rooms white, she adds, if the walls aren’t already “naturally colored.”
  • Clean. Scrub everything, including the windows. “Make sure to declutter,” Kriegstein says. It’s hard for a buyer to imagine living in your house if your stuff, including your old CD collection and a pile of laundry, is everywhere.
  • Think about how you’re going to market your home. “You want to win the beauty contest,” Kriegstein says. She suggests hiring a professional photographer, possibly someone who can also shoot video. “In this digital age, marketing is a must,” she says. “People will start their search online, so it’s important to have a floor plan, stunning photos and a video.”

San Francisco real estate agent Ying He agrees that preparation is the best way to sell a home fast.
“All the painting, landscaping, and staging need to be finished before we go alive to best present the property,” she says. “Also, on the paperwork front, we need to make sure all the disclosures are ready to go.”

Pricing Is Vital

As insight goes, this is about as obvious as it gets. Still, you want to be smart about how you choose your price. You could slash the price of your home by 50% to try to sell it in a hurry, but your goal isn’t to sell your home fast and also go broke fast.

“You’ll need to price your property at what we refer to as the compelling price point or even slightly under that – depending on how fast you need or want to sell,” says Sabrina Conti Erangey, a real estate broker associate with Baird & Warner who is based near Chicago in Elmhurst, Illinois.

The “compelling price point,” Erangey says, “is slightly below the market value pricing but just enough to ramp up demand and drive up the sales price.”

This is the sweet spot where buyers spot a good deal, and they descend upon your home to take advantage of the deal and begin offering bids. This drives the price up, so you still end up doing well.

Timing Is Crucial

“Timing is extremely important. We don’t want to waste a single day on the market,” He says. “When it comes to timing, there are several layers. The first is seasonality. In San Francisco, the best time for sellers to go on market is actually the very beginning of the year. Spring and fall are good. Summer and winter are less ideal due to a smaller buyer pool.”

You also want to think about other factors, like holidays, the weather or an election. You can start selling your home in the dead of winter or during the rainy season, but “weather can be extremely important, especially for houses with a view,” He points out.

She suggests that the best day to have your property go live is on a Thursday to maximize weekend open house traffic.

Decide What Matters More – a Fast Sale or the Best Price?

You can sell a house fast and get an excellent price, real estate agents say. But if your house needs a lot of work and you won’t budge on selling as soon as possible, you may not get the best price. One way or another, you’ll need to bow to reality.

That includes trying to fix some of the issues with your home, Erangey says.

“In a fast sale, you want to do your due diligence as a seller and do what we refer to as a pre-listing walkthrough,” she says. “During this walkthrough, we will bring up factors that could be raised during the inspection and connect our clients with our vendors to make appropriate adjustments and changes to avoid concerning buyers.”

That might mean something simple, like digging up recent receipts showing that you had your heating, ventilation, and air-conditioning system fixed, Erangey says. If those need replacing or fixing, Erangey would encourage the seller to do that. You’ll sell your house faster and take less of a hit on the price, she says, if the worst of your home improvement projects are addressed.

“Price and condition determine everything,” Erangey says.

He puts it this way: If you try to sell your home quickly and cut corners, such as not fixing obvious problems or making subtle but critical repairs, you could defeat your own purpose. You may find yourself with a ready-to-sign contract and then realize, thanks to issues your buyer or the buyer’s home inspector has discovered, your interested party is now less keen and wants to negotiate your price downward – or even back out of the sale altogether.

If you have to start over, you won’t sell your home super fast, but possibly super slow.

Source: realestate.usnews.com ~ By: Geoff Williams ~ Image: Canva Pro

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These Are the Tax Breaks You Can Get When You Buy a House

Tax Breaks You Can Get When You Buy a House

Buying a home is expensive, but these tax credits and deductions can help you recoup some costs.

Key Takeaways:

  • There are several tax breaks for homebuyers that can help make homeownership more affordable.
  • Tax credits apply to the tax owed, while tax deductions reduce taxable income.
  • Some tax benefits extend beyond the initial purchase of a home.

One of the biggest benefits of homeownership is tax breaks. If you’re a homeowner, tax credits and deductions could save you thousands of dollars per year. But are there tax credits for buying a house? And what about deductions?

To help you come next tax season, here are tax credits and deductions you can get when you buy a house, and additional tax breaks that come with homeownership.

Both tax credits and deductions can help a homeowner save money on their tax bill, but they work differently. “Both lower one’s taxes, but a credit applies to the tax owed, while a deduction applies to one’s income that is subject to tax,” says Asher Rubinstein, partner and tax, asset protection and trusts and estates attorney at Gallet Dreyer & Berkey in New York City. “In other words, it’s a matter of timing and when the tax discount is applied.”

There are also refundable and nonrefundable tax credits. According to the IRS, if your tax bill is less than the refundable credit, then you get the difference back in your refund.

Credits are typically much more valuable than deductions. “For example, someone with a $1,000 tax credit in the 20% tax bracket will see their tax bill reduced by $1,000. Someone with a $1,000 tax deduction will only see $200 in tax savings,” explains Eric Presogna, founder and CEO of One-Up Financial and a certified financial planner public accountant.

There are two types of deductions available to all taxpayers: standard deduction and itemized deduction. If you take the standard deduction, you reduce your taxable income by a set amount. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. “There is no need for the taxpayer to keep records of individual tax deductions if the taxpayer takes the standard deduction,” Rubinstein says. Itemized deductions are individual tax deductions that could potentially add up to more than the standard deduction.

According to Presogna, homeowners should only take the standard deduction when they don’t have enough itemized deductions to exceed the standard. “With the SALT deduction (state, local, real estate taxes) currently limited to $10,000, a married couple would need more than $19,200 in mortgage interest, charitable donations and other qualifying deductions in order to warrant itemizing,” Presogna says.

The IRS has specific rules regarding how homebuyers qualify for certain tax credits. There are also credits that are only available to first-time buyers. You generally qualify as a first-time homebuyer if you’re purchasing your first home. However, you may still qualify if you’ve not owned a home for three years prior to the date of purchasing the new home for which the credit is claimed, according to the IRS. That home must be your principal residence.

One federal tax credit available to first-time buyers is through the Mortgage Credit Certificate (MCC) program. This program was designed to help lower-income families afford a home. The MCC program allows buyers to claim a dollar-for-dollar tax credit for a portion of the mortgage interest paid per year, up to $2,000. Eligible individuals must be first-time homebuyers, use the house as their primary residence and meet the program’s income and purchase price requirements.

There may also be tax credits available through your state. These buyer programs vary from state to state. You can research what may be available in your local area or look through the U.S. Department of Housing and Urban Development’s directory of local homebuying programs.

There are more tax deductions available to homebuyers and homeowners than there are tax credits, but Presogna says it depends on whether you itemize your deductions or take the standard deduction. Regarding homeownership, “If you have enough deductions to itemize, real estate taxes, home equity loan and mortgage interest are some of the larger deductible costs,” Presogna adds.

Keep in mind that not everything is deductible. According to Rubinstein, most costs associated with homeownership do not qualify for any tax benefits, including cosmetic upgrades, homeowners insurance and your mortgage principal, to name a few.

Here are several tax deductions buyers may qualify for after purchasing a home:

First-time homebuyer savings account (FHSA). Some states offer tax benefits to first-time homebuyers to open an FHSA. This is a specific type of savings account that helps first-time buyers save up to $15,000 or $30,000 per year for a down payment, closing costs and other expenses related to their home purchase. You can deduct the annual savings from your state-taxable income, but limits vary by state.

Mortgage interest deduction. This is a deduction for interest paid on mortgage debt, but you will need to itemize your deductions to qualify for this tax break. “Under current law, this applies to loans up to $750,000,” Rubinstein says.

Property tax deduction. Through 2025, taxpayers who itemize their tax deductions can claim a deduction on their federal tax return up to $10,000 each year for local property taxes paid, according to Rubinstein. “When the tax law changed in 2017, this was very controversial, because taxpayers previously had an unlimited deduction,” he says. “The $10,000 limit is significant for taxpayers in high-tax states like New York and California.”

Mortgage points deduction. Per IRS guidelines, mortgage points are fees paid to take out a mortgage. This also includes origination fees or discount points purchased in order to reduce the interest rate.

Home office deduction. “If you’re a business owner or self-employed and work from home, you may be entitled to a deduction for the portion of your home used for business,” Presogna says. However, Rubinstein warns that this is the most audited deduction due to the amount of taxpayers who try to claim this deduction. “The IRS has specific rules to follow. For instance, you can’t work from home for an employer. You have to use a dedicated room and you have to use it regularly. And there are square footage limitations,” Rubinstein explains.

Many tax benefits extend beyond the initial purchase of a home. The IRS offers some tax benefits for certain capital improvements, such as renovating your home office, making energy-efficient improvements or making changes due to a medical condition. If you take out a home equity loan to buy, build or improve your home, you could qualify for the home equity loan interest deduction. The IRS would classify the interest you pay on the borrowed funds as home acquisition debt, which may be deductible.

First-time homebuyers could also potentially qualify for a traditional or Roth IRA penalty waiver. If you meet IRS qualifications as a first-time buyer and take out $10,000 or less, you can use those funds toward a down payment without a 10% tax penalty if you close within 120 days. However, the actual withdrawal may still be considered taxable income.

One of the biggest tax breaks for a homeowner is the exclusion of capital gains when they sell their home. Capital gains are the profit from the sale of the home. For married couples, the first $500,000 in capital gains are not subject to tax. For individuals, the first $250,000 in capital gains are not subject to tax. “However, the home has to be used as one’s personal residence for two out of the last five years in order to get this tax break,” Rubinstein says.

Source: realestate.usnews.com ~ By Josephine Nesbit ~ Image: Canva Pro

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15 questions to ask before purchasing farmland

questions to ask before purchasing farmland

Record land values are making buying decisions tougher. Here are 15 questions to ask before purchasing farmland.

Growing demand for farmland has driven land values to record highs in many areas. Whether you’re considering using cash or borrowing money to purchase new farmland, the buying process should include a well-researched financial plan.

“Farmers should consult their banker throughout the land buying process, to ensure decisions made today best position them to prosper and obtain credit in the future,” said John Blanchfield, senior vice president of agricultural and rural banking at the American Bankers Association. “When it comes to buying land, you cannot spend too much time researching all of the contingencies.”

ABA’s Agricultural and Rural Bankers Committee has developed the following recommendations for buying farmland:

  1. What is your business’s financial condition? Consider needed investments, expected expenditures, and crop conditions to determine if buying land is the best use of your cash. Are there other opportunities that can provide a better return?

  2. Have you created a pro forma cash flow? Research sales trends and expected revenue of a potential plot of land to determine how well the purchase fits within your plan. Does the potential return meet your objectives? Your banker can help you develop this essential planning tool.

  3. Given your revenue forecast, are you overpaying? If you are paying a premium, how long will it take you to recoup? Determine how much your business should prudently spend on a land purchase and the revenue needed to justify your purchase and stay within those targets.

  4. Have you thought long and hard about it? Never be rushed by a broker and never confide your best price or financial goals with a party working for the seller. Don’t buy impulsively or make a deal before visiting the property numerous times. Rework the standard broker’s purchase contract with your lawyer, deleting what you don’t like and adding what you want, before presenting the offer.

  5. Does it make more financial sense to rent the land rather than owning it? Rental rates are high but renting frees your cash for other activities. What will be your total land payment per tillable acre owned and how does this compare to cash rents in your area?

  6. Should you go all in with your cash? Talk to your banker about alternatives to using all cash in the transaction. Land is an illiquid asset and purchasing it will impact your farm’s liquidity. Your banker can work with you to structure a loan that will enable you to acquire the land you need while preserving some of your working capital for necessary expenditures.

  7. How much land are you acquiring? Sounds simple, but many times there is confusion about how much land is actually being purchased. Know exactly what you’re getting before making a bid. See if the land has been surveyed and make sure it matches the details of the offer. If the land has not been surveyed, work with your attorney to determine the acreage based on the legal description, or consider having the land surveyed and determine who will pay for it. Make sure that there are no special easements tied to the land. If there are, make sure you spend time studying them and understanding them completely.

  8. What does the land appraise for? Are there some comparable sales in the area? Appraisals are expensive, but they are the best way to establish value. Even if you do not get a full appraisal, attempt to find some comparable sales to determine if the purchase price is reasonable.

  9. What is the soil story? What is the capability of the soil you are buying and how does this impact your revenue forecast? Good soil is paramount. Know the type of soil you’re buying and the history of annual crop rotation. Any seller should be more than happy to provide you with a soil’s profile and information about past farming practices.

  10. What is the water source? Is the property irrigated? Do the water rights convey with the property? Adequate water is essential to establishing the value of the property. Account for water costs in your financial plan to ensure this cost doesn’t negatively impact your return. Make sure all water wells are registered with the appropriate authorities. Each state has its own water laws so make sure you are familiar with the state that you are doing business in.

  11. What do you know about the gas, mineral, and wind rights for the property? Do these rights convey to you as the purchaser? Have they been surveyed or severed from the surface rights? Are they currently under lease? If so, under what terms? Have a thorough knowledge of property rights, as mining and drilling can have an impact on surface and water quality, access to the property, and the viability of the farm or ranch.

  12. How is the property zoned? Will your plans for the property conflict with existing zoning restrictions? Are there conservation easements that could restrict the use of the property? This factor has a significant impact on your valuation of the property, particularly if your plans conflict with current zoning restrictions. Make sure that you understand the assured leases that may go with the property — many of the states in the west have a large percentage of their ground that falls into this category (Bureau of Land Management, Forest Service, state land, national grassland).

  13. How will you hold the deed to the property? Will you own it individually, jointly with a spouse, in a family-owned entity (corp., LLC, LLP), or in a trust? The pros and cons of how you own the land will depend on your long-term goals.

  14. Are there any environmental problems? The last thing you want to buy is a costly environmental problem. Paying for an onsite environmental audit before you buy the land may be worth the cost and will help ensure you are not buying into an expensive cleanup.

  15. How long will you actively farm?  Make sure your financing plan matches the rest of your intended career as an active producer. Will you fully retire all debt from the acquisition before you retire? Do you have sufficient life and disability insurance?

    Source: farmprogress.com ~ Image: Canva Pro

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5 Things to Not Ignore At a Home Showing

Don't ignore these at an open house

There are common things you should look for at a showing, like dripping faucets, but the less obvious things are sometimes revealing as well.

Looking at homes can be overwhelming, especially if it’s your first try at buying a place of your own. Most homes have some flaw, small or large, and sometimes you can pick up on them during a showing or an open house. While most problems can be corrected with enough money, time, and patience, being aware of these items will make the process – and your ownership – a lot easier.

Here are five things real estate agents say you should never ignore at a showing:

1. Clutter

Sometimes, clutter is just the end result of a busy life or too many things and not enough places to put them, but sometimes it’s covering up things you should really know about.

“Even though clutter is usually just clutter, it could be hiding some things,” says Laura Carroll Duckworth, a real estate agent with Flat Fee Redefined, an agency brokered by eXp Realty LLC in Springfield, Missouri. “I had one where the seller refused to move a lot of their stuff for the inspection, and then it turned out there was termite damage behind it.”

Termites are bad enough, but they’re not the only bugs you may come across living in a cluttered home. They’re all going to require an exterminator at minimum, and the problem could be a lot worse than you imagine.

“I was showing a foreclosure and they didn’t do a trash out of the property,” says Tammy Nevin, real estate agent with First Weber Inc. in Tomah, Wisconsin. “There was debris and garbage everywhere. It looked like they just picked up and walked out. The stench was a combination of cigarettes and cats. As I was walking through and I looked closer, I noticed lots of little bugs jumping around – they were fleas. We ran out of there pretty quickly.”

2. Room Deodorizers

Homeowners often will use plug-in deodorizers or other air fresheners to make their home smell welcoming to a potential buyer. But if you smell something more than just the air freshener, it’s time to look a little closer.

“Some people have air fresheners and room sprays and the buyer might wonder, ‘Oh, what are they trying to cover up?’” says Duckworth. “Sometimes they’re not trying to cover up anything, they just want the house to smell good for the buyers. Other times, there are layers to that scent that might indicate problems with mold, rodents or insects.”

3. Area Rugs

While it might not occur to you that a seller could be hiding damage in plain sight, it’s not uncommon. Area rugs should always be considered suspicious until you’ve seen what’s underneath.

“One of my clients purchased a home about seven years ago and it had beautiful hand-scraped hardwood floors throughout,” says Neil Brooks, real estate agent with My Home Group in Scottsdale, Arizona, and an agent within the Veterans United Realty Network. “During the showing, the owner was there and took us on a tour. When shown the living room, he pointed out the area rug and mentioned that it was expensive and placed it there so their grandchildren could play comfortably. He added that he would leave it for my client because it fits nicely in the room.

“My client decided to purchase the home, and upon moving in, moved the carpet to buff the floors to find out that the rug covered a three-foot area where the previous owners’ dog chewed the floor down, exposing the slab.”

4. The Neighborhood

Most neighborhoods show well enough during the daytime when everyone is at work. It still pays to familiarize yourself with the neighborhood you’re considering, especially if a house is having trouble selling.

“One major red flag is not the house itself, it’s the neighbors,” says Bob Thompson, a real estate agent with American Homes Of Eastern VA, Inc., in Hampton Roads, Virginia. “I encourage all my buyers to do what I call the Friday night drive-by. Every neighborhood looks great at 3 p.m. on a Tuesday, but weekends are when you find out what people are really like. That’s important because no one wants to get stuck next to the loud drunk neighbors or racist neighbors.”

5. DIY Repairs

Homeowners often do home repairs, and to a high quality standard, because they care about their homes and want to take care of them to the best of their ability. But sometimes, no matter how hard someone may try, they might just not be cut out for DIY. When those repairs are obvious, it’s something to pay close attention to.

“When you can tell the homeowner did their own repair work on something and did a poor job on it, that’s important – what else did they attempt to repair?” says Thompson. “Also be sure to look at minor repairs on a rehabbed property. If they did poor work on the small things, did they do poor work on the big things?”

What if You Spot a Problem at the Showing?

A showing is just a chance to get to know a house that you might be interested in. It’s an opportunity to see all the home’s visible red flags and decide how much those things bother you. This is why it’s so important not to get too serious about a house right away, even if you think it’s your dream home.

“Try not to fall in love with a home initially, just date it until you have a thorough understanding of what you’re buying,” says Brooks. “It’s a Realtor’s duty to be the voice of reason and point out all of the potential issues and err on the side of caution in order to protect their client.”

Once you’ve identified the issues that may or may not be serious enough to fall out of love with a property, it’s time to put pencil to paper. Ignoring issues won’t solve them, but every problem related to a home can be fixed, if you go in with your eyes open.

“Every issue can be overcome with time, money, expertise or a combination of all three,” says Aimee Thayer-Garcia, broker-associate at Montalvo Homes & Estates in Santa Cruz, California. “Ignoring red flags at a showing can set buyer, seller, and their agents up for a challenging escrow. Every transaction has its own speed bumps – a huge part of the work as an agent for buyer clients is preparing for them and setting expectations.”

Source: realestate.usnews.com ~ By: Kristi Waterworth ~ Image: Canva Pro

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Escrow: What Is It And How Does It Work?

Escrow: What Is It And How Does It Work?

If you’re buying a home, you’ll probably hear the word “escrow” used in a few different contexts. Let’s look at what escrow is, how it works and how it can benefit you as a home buyer, seller or homeowner.

What Is Escrow?

Escrow is a legal arrangement in which a third party temporarily holds money or property until a particular condition has been met – such as the fulfillment of a purchase agreement.

How Does Escrow Work?

It’s used in real estate transactions to protect both the buyer and the seller during the home buying process. Throughout the term of the mortgage, an escrow account will hold funds for taxes and homeowners insurance.

What Is An Escrow Account?

In real estate, escrow is typically used for two reasons:

  • To protect the buyer’s good faith deposit, so the money goes to the right party according to the conditions of the sale
  • To hold a homeowner’s funds for property taxes and homeowners insurance.

Because of the different purposes served, there are two types of escrow accounts. One is used during the home buying process, while the other is used throughout the life of your loan.

Escrow Accounts For Home Buying

When you’re buying a home, your purchase agreement will usually include a good faith deposit – (also known as earnest money). This deposit shows the seller that you’re serious about purchasing the home. If the contract falls through due to the fault of the buyer, the seller usually gets to keep the money. If the home purchase is successful, the deposit will be applied to the buyer’s down payment.

To protect both the buyer and the seller, an escrow account will be set up to hold the deposit. The good faith deposit will sit in the escrow account until the transaction closes.

Sometimes, funds are held in another type of escrow account past the completion of the sale of the home. This is called an escrow holdback. There are many reasons an escrow holdback may be needed. For example, perhaps you agreed that the seller can stay in the home an extra month, or there are outstanding bills on the home that the seller is responsible for (a water bill, for example).

If you’re building a new home, money may remain in escrow until you’ve signed off on all the work. Once the conditions are met, the money will be released to the right party.

Escrow Accounts For Taxes And Insurance

After you purchase a home, your mortgage lender will establish an escrow account to pay for your taxes and homeowners insurance. Each month, your mortgage servicer takes a portion of your monthly mortgage payment and holds it in the escrow account until your tax and insurance payments are due.

The amount required for escrow is a moving target because your tax bill and insurance premiums can change from year to year. Your servicer will determine your escrow payments for the next year based on what bills they paid the previous year. To ensure there’s enough cash in escrow, most lenders require a minimum of 2 months’ worth of extra payments to be held in your account.

Your lender or servicer will analyze your escrow account annually to make sure they’re not collecting too much or too little. If their analysis of your escrow account determines that they’ve collected too much money for taxes and insurance, they’ll give you what’s called an escrow refund.

If their analysis shows they’ve collected too little, you’ll need to cover the difference. You may be given options to make a one-time payment or increase the amount of your monthly mortgage payment to make up for a shortage in your escrow account.

Who Manages An Escrow Account?

Escrow accounts may be handled by a variety of third parties, including an escrow company, escrow agent or mortgage servicer. Where you are in the process will determine who manages the account.

Escrow Companies And Escrow Agents

When you’re buying a home, escrow may be managed by a mortgage servicing company or agent. The escrow agent or company is sometimes the same as the title company.

The escrow company not only manages the buyer’s deposit, but they may also be responsible for holding the deed and other documents related to the sale of the home.

Because the escrow company is working for both the buyer and the seller in the real estate transaction, the fee for their services is usually split evenly between the two parties.

Mortgage Servicers

Your mortgage servicer manages your mortgage, from closing until you pay off your loan. Mortgage servicers are responsible for collecting your mortgage payment, maintaining the records of payments and managing your escrow account.

Your mortgage servicer is sometimes your originating lender – but not always. Sometimes, lenders sell the servicing rights to your loan. It’s a good idea to know ahead of time whether your lender typically services their own loans. Not all mortgage servicers provide the same level of service.

With your mortgage servicer taking care of your escrow account, you don’t have to worry about your tax or insurance bills – your servicer will make sure they know who to pay, and when.

The only exception is if you change insurance providers or policies. You will need to provide the new policy information to your servicer.

The Benefits Of An Escrow Account

The biggest benefit of having a Rocket Mortgage® escrow account is that you’ll have peace of mind knowing you’re being taken care of by the most awarded mortgage company ever, based on J.D. Power’s consumer surveys.*

For Home Buyers

An escrow account is key to protecting your deposit during a home sale. For example, say you have a purchase agreement, but the sale falls through due to a problem found during the home inspection.

If you’d given your deposit directly to the seller, there’s a chance they wouldn’t return your deposit. But since the deposit is being held by a third party, you can be confident it will be returned according to your agreement.

For Homeowners

An escrow account takes the pressure off you to come up with a lump sum to cover taxes and insurance. Since you’re paying for your taxes and insurance throughout the year, the payments are much more manageable.

Another bonus is that you don’t have to keep track of all the different due dates. When your tax bills and insurance premiums are due, your mortgage servicer will make sure those bills are paid on time, every time. That way, you’re not responsible for any late payments. Your servicer will even cover bills for you if your escrow account is short on funds – but, as mentioned above, you’ll be responsible for making up the shortage later.

For Lenders

Lenders have a vested interest in making sure your property taxes and insurance get paid:

  • If your tax bills don’t get paid, the tax authority could put a lien on your home – which could end up costing the lender money if the tax authority chooses to foreclose.
  • If your homeowners insurance coverage lapses, significant damage to or loss of the home could lead to extreme loss of value of the home.

Having an escrow account on the loan allows the lender to ensure the bills get paid.

The Disadvantages Of An Escrow Account

Although there really aren’t any disadvantages of having a mortgage escrow account, here are some that could be considered as such:

Higher Monthly Mortgage Payments

As stated before, an escrow account is funded through your monthly mortgage payment, making your monthly bill higher than it would be without escrow. But this also means that you don’t have to pay your taxes or insurance in a lump sum when they are due, so this is hardly a disadvantage when you think about it.

Lower Escrow Estimates Than Actually Required

Again, the amount needed for your escrow depends on your property taxes and homeowners insurance costs, which can change from year to year. Your servicer will determine the amount needed based on the previous year’s bills. But here’s the thing: When you first move into your home, your property is reassessed for tax purposes. This may cause your property taxes to increase substantially, especially if the home value has risen. When a servicer estimates the escrow, they may not be able to predict an increase in your property taxes.

Because of this, your escrow may come up short. If that happens, you’ll have to pay the difference with an increase in your monthly escrow payment. On the flip side, if there’s any money left over in your escrow after paying the taxes and insurance for the year, your servicer will refund you the excess funds.

Changes To Your Monthly Payment

Escrow is reassessed each year and, depending on if you were short or had excess money, your servicer will come up with a new estimate for the year. If you’re short, your mortgage payment will go up because the estimate will increase. This higher estimate is an effort to prevent another shortage. If you had too much money in the account, your mortgage payment may go down and you’ll receive a refund each year.

What Escrow Accounts Don’t Cover

Escrow accounts don’t cover all the expenses related to homeownership. Your lender or servicer won’t collect money to pay your utility bills or homeowners association (HOA) fees, for instance.

Supplemental tax bills also aren’t covered by escrow accounts. These are one-time tax bills that are issued due to a change in ownership or new construction.

Do You Need An Escrow Account?

It may be possible to pay for property taxes and insurance yourself instead of using an escrow account. Doing so will lower your monthly mortgage payment, but you’ll have to save for tax and insurance payments on your own. Plus, you may incur a fee for managing your own taxes and insurance. And because managing escrow accounts is a free service provided by servicers such as Rocket Mortgage, it doesn’t make financial sense to opt out of escrow for your mortgage.

Truthfully, not everyone even has an option for opting out of an escrow account on their loan. Escrow accounts are a requirement on certain loans. For VA loans, for example, you’ll need 10% down and a strong credit profile to opt out of having an escrow account. For conventional loans, you’ll need to have a down payment of 20% or more. FHA loans require all borrowers to have an escrow account.

It’s also possible to use your escrow account for some expenses and not others. Sometimes, lenders require escrow for property taxes but not homeowners insurance.

Source: rocketmortgage.com ~ By: VICTORIA ARAJ ~ Image: Canva Pro

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How to Price Your Home to Sell

pricing your home for sale

Pricing your house to sell requires a “Goldilocks” frame of mind. A price that’s “just right” is the one that attracts a buyer, is in line with the market, and puts the most money in your pocket.

It took Goldilocks some time to find exactly what worked for her, but you might not have that luxury when selling your house. So here are some do’s and don’ts for pricing your home to sell.

Don’t price it too high

When selling a home, first impressions matter. Your house’s market debut is your first chance to attract a buyer and it’s important to get the pricing right. If your home is overpriced, you run the risk of buyers not seeing the listing.

Let’s say you want $299,000 for your home, but you list it at $315,000 to see if anyone will pay the higher price. A buyer with a budget of $299,000 may search online only for homes priced through $300,000. Because of the way it’s priced, your home won’t appear in any of those searches, and you could miss out on a potential buyer.

Don’t price it too low

Listing a home below its market value is a strategy some sellers use to generate interest in the property and possibly spark a bidding war. It’s also used by sellers who need to sell their property quickly.

But price your house too low and you could end up leaving some serious money on the table. A bargain-basement price could also turn some buyers away, as they may wonder if there are any underlying problems with the house.

Do consider the comps

Comparable sales or “comps” are recently sold homes that are similar to yours in size, location, and features. Armed with comps, your listing agent can put together a comprehensive report called a comparative market analysis, or CMA. A CMA can help you determine a realistic listing price.

“One of the challenges we have as a seller’s agent is to really pull back the curtain and show data,” says Michael J. Franco, a licensed associate real estate broker at Compass in New York City. “You have to prove to the seller that their place isn’t really different unless it really is unique, then it deserves a premium.”

Don’t overvalue your home’s upgrades

Spending $70,000 to renovate your kitchen and install a swimming pool means you can add $70,000 to your home’s selling price, right? Not always.

While some renovations may increase your home’s value, it’s unlikely you’ll get back the full dollar amount that you put in. Before investing in any improvements, look at comparable homes for sale near you to see if upgrades are in line with the neighborhood and if they appear to have an impact on resale value.

Don’t let your emotions get the best of you

Market research should be your guide when pricing a home to sell, not your emotions. A buyer doesn’t care what you paid for the house, the sweat equity you’ve put into the property, the years of memories you’ve created in the home, or how much profit you hope for.

“You have to separate yourself emotionally from the property,” Franco says. “Yes, hold on to your memories and the experiences you’ve had in the home. But when you’re selling, you have to focus on it as a business transaction. Chances are, it’s your biggest asset and you have to do what’s right.”

Do adjust the price or approach as needed

If, despite your efforts to identify the “just right” price, your home isn’t attracting offers, regroup with your agent as soon as possible. Try to figure out why your home isn’t selling and be open to making adjustments that will fix the problem.

Pricing: While it’s unlikely in a hot market, if your home is languishing without an offer, it may be necessary to drop the price. Perhaps the market has changed since your agent conducted the CMA. Take a look at some more comparable properties and adjust accordingly.

Marketing: Make sure there aren’t any errors in your listing. Confirm with your agent that the home is being shown in all of the appropriate places. Your agent may need to boost marketing efforts to increase the number of people who see your listing, like offering more open houses or posting 3D tours on social media.

Alternate ways to sell: If your home isn’t attracting a traditional buyer, you may have to look into other options, like selling to an iBuyer. An iBuyer is a real estate company that uses technology to buy homes with cash. While the process is typically faster and you don’t have to get your house ready to sell, iBuyers don’t operate in every market and you may need to have a specific style of home to qualify.

Condition: Talk with your agent about what improvements may improve the salability of your home, including necessary repairs, staging, or curb appeal upgrades. A little TLC can go a long way.

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Thinking of Selling? You Want an Agent with These Skills

Selling your Home

Selling your house is a big decision. Your home is one of the biggest investments you’ve probably ever made, and it’s a place where you’ve created countless memories. That combo means there’s going to be a lot of emotions involved. You want someone who understands your perspective, knows what it feels like, and is an expert at helping homeowners just like you navigate the process of selling a home.

That’s where a good listing agent, also known as a seller’s agent, comes in. Here are just a few skills you’ll want your agent to have.

The Ability To Turn Something Complex into Something Simple

Some agents are going to use big, fancy real estate terms to try and impress you. But you shouldn’t have to know all the industry jargon in order to understand what they’re saying. If anything, it’s an agent’s job to keep it simple, so you don’t get overwhelmed or confused.

A great agent is going to be someone who is very good at explaining what’s happening in the housing market in a way that’s easy to understand. But they’ll take it one step further than that. They’ll explain what’s going on and, specifically, what that means for you. That way you’re always in the loop and it’s a lot easier to feel confident when you’re making a big decision. As Business Insider explains:

“Maybe you have a better rapport with one of the agents you’re considering, or you just feel like they’re easier to approach. You’re going to be working closely with this person, so it’s important to choose an agent you’re comfortable with.”

A Data-Based Approach on How To Price Your House

While it may be tempting to pick the agent who suggests the highest asking price for your house, that strategy may cost you. It’s easy to get caught up in the excitement when you see a bigger number, but overpricing your house can have consequences. It could mean your house will sit on the market longer because the higher price is actually turning away buyers.

Instead, partner with an agent who’s going to have an open conversation about how they recommend you should price your house. They won’t throw out a number just to win your listing. A great agent will back up their number with solid data, explain their pricing strategy, and make sure you’re both on the same page. As NerdWallet explains:

“An agent who recommends the highest price isn’t always the best choice. Choose an agent who backs up the recommendation with market knowledge.”

A Fair, but Objective Negotiator

The home-selling process can be emotional, especially if you’ve been in your house for a long time. But that sentimental tie can make it harder to be objective during negotiations. That’s where a trusted professional can really make a difference.

They’re skilled negotiators who know how to stay calm under pressure. You can count on them to handle the back-and-forth and have your best interests at heart throughout the process. Not to mention, they’ll be able to rely on their market expertise and what they’re seeing work in other transactions to offer the best advice possible. As Rocket Mortgage explains:

“Whether this is your first or third time selling a house, listing agents work to help make the home selling process smoother and less stressful. These real estate professionals know the ins and outs of the industry and can help you secure the best deal.”

Bottom Line

Whether you’re a first-time seller or you’ve been through this before, a great listing agent is the key to your success.  Feel free to connect with me. I am a skilled local expert and I will be with you through every step of the process.

Source: keepingcurrentmatters.com ~ Image: Canva pro

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Negotiation Process of Selling a Home

Selling a Home

The negotiation process can be one of the most exciting parts of selling a home, but until you get there, you may be wringing your hands, worried that you won’t be able to secure the deal. Will you be deluged with offers, or will your home be pervaded by the lulling but ever-so-unnerving sound of crickets?

And if you do get just one or two offers, and they’re not as high as you’d hoped, what do you do?

Here’s how to navigate the real estate negotiation process and come to a deal that will make you happy. More than happy, even.

Getting those offers in

If you’re not in a rush to sell your house, it may make sense to see what offers roll in over a few months. But if you need to sell quickly (or just don’t want to wait), your real estate agent (here’s how to find a real estate agent in your area) might be able to push things along by setting a deadline—usually within a week or two of listing.

“When you expect multiple offers because your price is competitive or your home is in a popular neighborhood, you should always set a deadline,” says Cathy Baumbusch, a real estate agent with Re/Max Executives in Arlington, VA.

But you’ll need to be confident that your home is priced right, relative to its appeal. If all goes well, you can sell for over asking.

The negotiation process begins

Once you have an offer in hand, you’re probably scanning for one thing: the price.

“In our area, houses rarely sell for less than 90% to 95% of the asking price,” Baumbusch says. The offers on your home may fall in that range, but don’t rely on price alone. According to Baumbusch, every offer has five important components:

    • Price
    • Closing assistance
    • Closing date
    • Buyer financing
    • Contingencies

Some offers may seem great on the surface, but significantly less so once you dig in. For instance: Is the buyer asking for closing assistance? Often first-time buyers don’t have enough money to cover the down payment and the closing costs, so they’ll ask the seller to foot some of the bill—about 2% to 3% of the total closing costs is a common request. If you agree, any assistance you give will lower your bottom line, so factor this amount into the asking price.

The buyer’s time frame to close may not seem like a big deal on the surface, but it can actually matter a lot, especially if you give the buyer a long leash. If the deal falls through, you’ll have to put the house back on the market and wait for more offers. On the other hand, if the buyer wants to move in right away, you might be left scrambling (and, quite possibly, temporarily homeless). Make sure the timing works for you.

Good so far? Now make sure the buyer has financing. Hopefully, the buyer’s agent included a note verifying the buyer’s financing and how much the buyer will put toward the down payment and earnest money. The last thing you want is to accept an offer, only to find out afterward that the buyer can’t come up with the necessary cash.

Finally, look over contingencies, which give the buyer the option to back out of the deal if something goes wrong. The buyer may say the final sale is contingent on a home inspection, or he may want to move in early. Both requests are fairly standard and acceptable. But keep an eye out for buyers asking for too much. For example, “it would be over the line for a buyer to ask a seller to wait more than 30 to 60 days for the property to go under contract,” Baumbusch says.

When to counteroffer

The negotiation process doesn’t end here. You always have the option to return the buyer’s offer with a counteroffer of your own.

“You should always counter if the price is not what you are looking for, or if you can’t support the amount of closing cost help they are looking for,” Baumbusch says. But if you do, keep it reasonable. If the buyer was 15% below asking, he probably won’t go up to full asking amount. Consider being flexible with your price; you can always make it up in other ways. For example, submitting a counter with a slightly higher price and contingencies that may help you—like having the buyer waive an inspection to speed things along—might pay off in the end.

If you don’t agree with the buyer’s contingencies, consider your position first before making the next step in the negotiation process.

“If your home is in a popular area, [you] have an advantage,” Baumbusch says. Keep in mind, the buyer may not accept your counter outright. You can play “Let’s Make a Deal,” but always consider your bottom line.

Is it worth it to keep countering for a small amount of money or single contingency?

Don’t get trapped in a loop; consider the buyer’s side of things. These prospective buyers may be maxed out. To help you decide, ask your listing agent to call the buyer’s agent and hash it out it with them. Get some insight into the buyer’s state of mind, and whether they can budge.

Source: realtor.com ~ Image: Canva Pro

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How to Downsize Your Home Before a Move

Downsizing Home

How to Downsize Your Home Before a Move

Living in a large house is great for some families, but for others, the cost and effort of maintenance is a burden. This is especially true after your kids have grown up and moved out. If you’re overwhelmed in your current home, moving to a smaller space can be a great move both financially and mentally.

However, decluttering and downsizing can be a daunting task. Downsizing to a smaller home and need some help getting started? Follow our best tips for a stress-free move.

7 Most Effective Downsizing and Decluttering Tips

1. Take Inventory of Your Belongings

When you’re downsizing to a smaller home, you naturally won’t have as much space for all the items you’ve accumulated throughout the years. Before you start packing, you’ll need to take inventory of your belongings.

As you sort through everything, it’s important to separate aspirational items from the ones you actually need. If you come across something you haven’t used in the last year, you should probably get rid of it. And if you didn’t even know you still had an item in question, it’s definitely time to let it go. The purpose of downsizing is to simplify your life, so take only what you need with you.

Downsizing Tip

Start decluttering in 3 simple steps. First, set a timeline and goals for your project. Then, create a sorting system for going through your belongings. Once you’ve decided what to keep and what to part ways with, you can purge your house of the clutter. Find more expert tips on room-by-room organizing and decluttering in our ridiculously thorough home declutter guide.

Three-Box Decluttering Method With Boxes Labeled “Keep,” “Donate,” and “Store”

2. Sort Through Items Room-by-Room and Minimize Duplicates

As you go through your belongings, you’ll need to set up a system to stay organized. We recommend the Three-Box Method, which forces you to make a decision item-by-item. Gather three boxes or bins and label them as “Keep,” “Get Rid Of,” and “Put In Storage.”

You should keep items that are useful in your daily life. Once you’ve filled your “Keep” box in each room, you can pack it up and label it to make moving and unpacking easier.

Get rid of items that you no longer have a use for. Once you’ve defined the items you’re getting rid of in each room, you can sort them further by identifying what will be donated or passed down to family members, and what is worn or broken and should be thrown away.

Sentimental or seasonal items should be put in storage. After you complete each space, empty the “Put In Storage” box into neatly labeled storage containers.

Downsizing Tip

In each space, look at which items you have multiples of and only keep your favorites, or the ones that aren’t damaged. The kitchen is typically a clutter hotspot for duplicate items, so pay extra attention when decluttering this area.

3. Create a Plan to Get Rid of Unwanted Items

Once you’ve identified which items aren’t coming with you to your new home, you have several options for getting rid of them:

  • Donate or Freecycle: Give something you no longer need to someone who does. Local charities usually accept clothing, shoes, and other household items that are in good condition. You can also try posting to freecycle.org or a Facebook resale group.
  • Have a Yard Sale: One person’s trash is often another person’s treasure. If you’re downsizing a lot of your belongings before the move, consider having a yard sale to make some extra cash. Furniture, toys, books, kids’ clothes, power tools, and lawn equipment are usually popular items at a garage sale.
  • Rent a Dumpster: Chances are, not everything you’re getting rid of will be in good enough condition to donate or sell. Renting a dumpster is a stress-free option if you have a lot to downsize and declutter, or if you’re throwing away larger household items, like broken appliances or tattered furniture.
  • Pass Down to Loved Ones: It’s difficult to declutter sentimental items you no longer have use for but that hold years of memories. If there are family heirlooms in good condition that you feel a family member or friend would enjoy, offer to give them as a gift.

4. Go Digital When Possible

Over the years, paper clutter can really add up. Make time to sort through old bills, receipts, and other documents, and recycle anything you don’t need. Store older paper files, such as taxes from the last decade, in a plastic bin. Scan any other records and receipts you may need in the future so you have a digital copy, then shred and throw them away.

Home movies, music, and photos can also be converted into digital files. This will free up a lot of valuable real estate in your living room and office without having to part with things you’d otherwise keep. In the world of endless streaming services, it’s probably not worthwhile to hang onto VHS tapes, scratched DVDs, or CDs. When in doubt, throw them out (or recycle them).

5. Make the Most of Your Storage Spaces

When you’re downsizing to a smaller home, it’s important to maximize any storage space you have. While not every home has designated storage areas like a basement, attic or garage, here are some general tips to keep in mind:

  • Create built-in storage options whenever you can. Multifunctional furniture such as storage ottomans, platform beds with drawers, entertainment centers, wardrobes, bookshelves and baskets are all helpful for hiding and minimizing clutter, but traditional shelving units are always a great option too.
  • Use open wall space. Floating shelves are great for displaying knickknacks around the house, as well as adding storage in your kitchen, bedroom, and bathroom.
  • Take advantage of hidden storage spaces. Utilize extra areas in your new home, such as under the stairs, closets, and crawl spaces to store seasonal or sentimental items. Add floating shelves or cubbies, and stack clear plastic bins in these hidden spots to make the most of the space and easily find what you need. You can also get creative with adding storage to small bathrooms by adding over-the-door hooks, towel racks, standalone shelves and bins for under-counter storage, an over-the-toilet shelving unit and a medicine cabinet.

6. Measure Furniture and Wait to Buy New Things

You may not have enough room in your new, smaller home to fit all of your current furniture. While taking inventory of your belongings, measure your furniture to see if and how it will fit in your new space, or if you’ll need to part with any of it. It’s much easier to figure this out ahead of time, rather than moving a sectional couch into your new home to find it doesn’t fit.

For this same reason, you should also avoid buying new items until you get a sense of the space you’re working within the new home.

7. Give Yourself Plenty of Time

Part of figuring out how to downsize is figuring out when to downsize. Decluttering is a journey, so give yourself more time than you think you’ll need to plan for the move and downsize your belongings. Eliminate the stress of rushing to purge everything, and allow yourself to reflect and make rational decisions on what to downsize and declutter.

Finally, don’t be afraid to ask for help while downsizing. Recruit family and friends, or even hire a professional service to assist with clearing out your house and moving into your new home.

Source: budgetdumpster.com ~ By: Liz Kane ~ Image: Canva Pro

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