From the category archives:

Sellers

Listing a Luxury Home

I recently sat down with a Twin Cities luxury home owner and discussed listing their property in the next few weeks. When it comes to selling a luxury home, I usually do what is called a “two-step” presentation. The first meeting is a chance to tour the home, listen to the homeowner’s wants and needs, and get an overall idea on the scope of the property and its relationship to the market. Either the next day, or a few days later, I meet with the owners again, and give my presentation on the state of the market, my recommended listing price range, and the marketing plan I have developed specific to their home.

Listing a high-end home takes time and is not something that happens over night. Here are a few things that take more than a day to process:

  • For one, I use a professional photographer and it could take, at a minimum, of five days from photo shoot to processing to get the finished product.
  • It also takes time to write good ad copy. A successful luxury home ad will invite the reader in and turn a description of the home into an emotional experience which will make them WANT to see the property right away. Sadly, I cannot write these overnight, but need a few days of brainstorming to come up with something I deem worthy. It also helps to have the photos so I can get a good visual of what prospective buyers will see.
  • Gathering information on the home takes time as well – Taking measurements, building a floor plan, getting various documents etc.
  • Once everything is available, I then sit down and create a luxury website for the home. Pointing buyers to the website is a great way to cross market and give them all the information they need to make a decision. Affluent buyers can be quite picky, so putting everything in one place creates one less hassle during their home search. It also sets a seller’s home apart from all the other high-end listings and shows how this home is special.

There are of course other details that go into marketing a luxury home, but I won’t go into those here. The biggest thing to understand is that marketing a home in this category takes money. And that money comes out of the agent’s pocket, upfront. So it is important to realize how much of a commitment a luxury home agent is making to you, their client. If they don’t sell your home, they could be out thousands of dollars.

*Helpful Hint: if you interview an agent and through their marketing plan find a lack of high-end exposure, then you might want to rethink hiring that agent. Too often I find expensive homes for sale that have a lack-luster agent. One big clue is the agent taking the photos themselves. Luxury homes need luxury photography, not second rate shots. Many times I find that the photos themselves are the reason for no showings.

So there you have it, a hint of my approach to listing a luxury home. Time, energy, and money…the three pillars to successfully selling in today’s luxury market!

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How the Mortgage Debt Cancellation Relief Act Effects You

After much anticipation and a full year of home owners facing foreclosure sweating it out, H.R. 3648 – Public Law 110-142 was finally signed into law December 20, 2007.

One of the pitfalls of a short sale or foreclosure is that any debt amount forgiven or discharged by the lender is recognized as taxable income by the IRS, and then taxed at ordinary income rates for the home owner, even though no actual cash changes hands. The taxation of “fake” money was just another kick in the pants to homeowners who just lost their home to foreclosure, only to find a huge tax bill in the mail that most could not afford to pay. The Act was given a boost of support with the number of foreclosures and the mortgage/financial crisis, not to mention the decreasing home values happening across the country.

So now, with the passage of the H.R. 3648, individuals who are relieved of their obligation to pay some portion of a mortgage debt on a principal residence between January 1, 2007 and December 31, 2009 will not be required to pay income tax on any amount that is forgiven.

Here are some details that might apply to you:

  • No Income Limitation: All borrowers receive the relief, no matter what their income.
  • Dollar Limitation: No more than $2 million of mortgage debt is eligible for the exclusion ($1 million of debt for a married filing separately return).
  • Relief applies only to an individuals principal residence and the forgiven mortgage debt must have been secured by that residence.
  • No relief is available for cash-outs, whether the cash-out takes the form of a refinanced first mortgage, a second mortgage, home equity line of credit or similar arrangement.
  • Eligible debt is what is called “acquisition indebtedness.” This is debt used to acquire, construct or rehabilitate a residence.
    1) Refinanced debt qualifies, so long as the debt does not exceed the original amount of the debt. (Same rule as Mortgage Interest Deduction)
    2) Home equity debt (or second mortgages) qualifies if the funds were used to improve the home. (Borrower must have adequate records, as under current law.)
    3) See cash-outs, above. No amount of a cash-out may be treated as acquisition debt.

Here are a few points of clarification as supplied by the Minnesota Association of Realtors:

  • Refinanced Mortgages: The relief does apply to refinanced debt in some circumstances. The rules seek to assure that any debt eligible for the relief is directly related to the acquisition or improvement (such as rehabilitation, expansion, renovation, reconstruction) of the principal residence. Debt used for furnishings (i.e., any movable property) in the home is not eligible for the relief. When the proceeds of any refinanced debt is used for any purpose other than acquisition or improvement, those proceeds are not eligible for the relief.
  • Principal Residence: A principal residence is defined in the same manner as the rules that apply to the capital gains exclusion on the sale of a principal residence. An individual may not have more than one principal residence at any given time.
  • Second Homes: As a general matter, the relief does not apply to any debt forgiveness on any mortgage for any second home of the taxpayer. However, if a taxpayer uses a residence (other than his principal residence) solely as an income-producing rental property, already-existing relief provisions might apply, depending on the taxpayer’s situation. if the second home property was acquired as a speculative investment (such as for resale rather than rental), relief provisions are unlikely to be available. In all events an individual who is in a short sale, foreclosure, workout or similar situation on a residence (including condos) other than his principal residence should consult a tax adviser to determine what, if any, relief provisions might be available.

Some other points of interest that are tacked on to the Mortgage Debt Cancellation Relief Act are the following:

Mortgage Insurance Premiums: The deduction for mortgage insurance premiums is extended through tax year 2010. Income limitations on the deduction will continue to apply.

Surviving Spouses/$500,000 Exclusion: In some circumstances, a surviving spouse is denied eligibility for the full $500,000 exclusion on the sale of his/her principal residence. This most frequently occurs when the residence is not held in joint ownership at the time the spouse who is not on the title dies. In that case, the deceased spouse had no ownership interest, so there is no basis step-up on that half of the property. the surviving spouse is thus eligible only for an exclusion of $250,000. (Had the home been sold during the deceased spouse’s lifetime, the full $500,000 exclusion would have applied, so long as they filed a joint return.) Challenges for the surviving spouse are compounded when this circumstance occurs late in the year. The surviving spouse is often unable to sell the property within the same year that the spouse died. This legislation provides that a surviving spouse may claim the full $500,000 exclusion not only in the year of the deceased spouse’s death, but also during the two years after the spouse’s death.

Second Homes Converted to Principal Residence: The original House-passed version of this legislation included a provision that would have limited the application of the $250,000/$500,000 exclusion when a second home is converted to a principal residence and later sold. Thankfully, this change was not included in the final legislation that the President signed, as it would have hurt those that own second homes with huge capital gain taxes.

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Photos Make All the Difference

If you read my blog, then you should know that I love photography. Sometimes words alone cannot express the beauty of a sunset, or the serenity of one simple gorgeous flower growing in a field. But great photography doesn’t have to stop with nature.

For the most, photos tell a story. Real estate unfortunately has always been thought of as just “selling a home”. Many agents neglect, or fail to see, that selling a home has become so much more. Buyers want to hear the story of the home and know the home has been loved. In addition, especially on high-end homes, the number one thing to sell is the lifestyle story. What better way to do this then through pictures.

More goes into a photo then point and shoot. Lighting is probably the most important aspect of a great photo. The living room shot above has perfect lighting which presents a sense of warmth and relaxation to a buyer. The lighting is created to get this type of shot. One cannot just go into the room, shoot, and walk out with a fantastic photo. You actually have to work at it to get such perfection.

When marketing a luxury home, photography is the most important thing to me. If I don’t have great photos, how will I ever capture the attention of an affluent buyer? In fact, sometimes the photos need to be of the view, or of the lifestyle that will come with the home. Affluent buyers need to sold. They are not going to just flop down a couple million just because they can, as least not here in Minnesota. They want to know that they are not only making a sound investment, but they also want to know they will be able to live in and enjoy the luxury estate.

So when it comes time to put your luxury Minneapolis home up for sale, make sure the agent you hire has a marketing plan that includes professional photography. It will make all the difference in capturing the buyer’s attention. If you don’t, chances are your home will be languishing a long time on the real estate market, and the word “price reduction” might be uttered in your agent’s next conversation with you.

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The Hidden Cost of Selling Real Estate

Ok, so you are looking around your neighborhood for homes that have recently sold, to get a good idea on what your home might be worth. You find out the Mr. Jones sold his for $600,000, and you are pretty happy because his home is almost like yours. The next day, you call an agent and ask them to do an analysis on your home, figuring they will come up with the same conclusions you did.

As the agent starts to point things out, you notice that Mr. Jones house is valued $10,000 less on the agents sheet. You ask why, because after all, it is the same house as yours. You are surprised to learn that the agent knows something you don’t know, and something that only those with MLS access would know. Mr. Jones gave a seller’s incentive to the buyer in the amount of $10,000, thus that $600,000 you thought he got, was really only $590,000.

I had a home owner contact me the other day with a similar scenario. He was surprised to learn about the incentive, and was equally disappointed. He wanted to know if that $10,000 would affect the value of his home and I had to give him the honest answer and say “yes”.

See, agents can come out and value your home, but they are not appraisers. The appraisers are the ones you have to watch out for when it comes time to sell your home to a buyer. They will research recent home sales in your area and compare them to your home, looking for any discounts or incentives that were given with the home as well. All of it goes into the big pot called the appraisal and that appraisal goes to the final approving authority, the buyer’s lender.

Incentives are great for buyers and help sell homes. But they can also hurt future sales by devaluing neighboring homes. Now this devaluation might not be large, but it is a factor. As I was writing this post, I came across an article from the Real Estate Journal, similar to this topic. It is a good read and can give further insight on how incentives can distort a home’s true value.

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Certified Residential Specialist

For the last three years I have been working toward obtaining one of the most prestigious real estate designations available, that of the Certified Residential Specialist (CRS). This week it finally happened and I got confirmation just today that I am being awarded the CRS designation.

It’s not an easy one to be awarded. For one, an agent has to have production numbers that are verified by a broker. You have to sell alot of homes in order to be considered…no “one home a year” sales allowed. An agent must also complete classwork and additional education that can take years to finish. Classes only come into town so often and sometimes we have to fly to them in another state.

I have to say, the classes have been some of the best I have seen, and I have learned many new things that will help me to continually strive to be a better agent. Remarkably, less than 38,000 Realtors hold the CRS designation nationwide. With over 1 Million members in the nation, those that are Certified Residential Specialists are rare to say the least. In Minnesota, only 3% of Realtors have the production to be a CRS.

So when you think about choosing a quality real estate professional, be sure to ask them about any designations they hold. If they hold the CRS designation, then you can rest assured that they have completed extensive training on residential real estate and a have proven track record of sales transactions. The more transactions an agent has, then the more experience they have. When the average agent completes only three sales a year, is it any wonder that there are so many inexperienced Realtors in the industry. Next time you choose an agent, make sure they have the experience to back themselves up.

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The Reluctance to Reduce Home Prices

Our Regional Multiple Listing Service gives us agents the ability to track listings of our choice. I have been watching some homes across the cities for the last six months. What I find interesting is that many of these sellers have been very reluctant to reduce their prices. Knowing the market is my job, so I know when a home is over-priced. My question is, why does the listing agent not see this as well?

I am sure there are some agents that over-price a home, just to get the listing and make the seller happy. This is nothing new to the real estate business. I am also sure there are many more agents who are trying to get their sellers to reduce the price, but the sellers are unwilling. The latter is most likely what most agents are experiencing right now.

Of the homes I am watching, nearly 25% of them have finally reduced their prices in the last week to more realistic selling prices. The smallest reduction was $20,000…the highest was $50,000! The sad thing is the seller will always have in their mind, when faced with an offer on their home, “But I have already lost $50,000”. What they fail to understand is that “$50,000” was never really theirs, but was only an illusion created by an unrealistic market.

It is really hard for an agent to convince a seller otherwise. Hopefully it will only take another year for things to get sorted out. If you find yourself, as a seller, with this mindset, please take the time to reevaluate your reason for selling. It could be that you have reduced your home so much that you will now be bringing money to table. Instead of facing this possibility, why not reconsider selling, and think about staying in your home another couple years. Who knows, by then, it is much more likely you will be in a better financial position to sell then you are today.

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Do You have a Clue?

More Minnesota Buyers should Look into a C.L.U.E Report before Purchasing

A great little report that can tell you more than the sellers might, but is mostly unheard of by the majority of the public, is a CLUE Report. What is a CLUE report you ask? To begin with, the acronym means Comprehensive Loss Underwriting Exchange. It is a database used by the insurance industry which includes information about any and all claims filed on a particular property.

In Florida, where I am also licensed, the report is being utilized more often due to the amount of past hurricanes. While full disclosure of any problems associated with a home is required by sellers, some sellers do neglect to inform prospective buyers if any damage has ever occurred to the home. A CLUE report will tell a buyer exactly what kind of claims have been filed against a particular property and when. Some might think such a report is not needed for Minneapolis real estate, but with hail storms, tornadoes, and fires still possible in the area, the report can be used as just another piece of information to put buyers mind at rest.

Buyers, the report can only be requested by the owner of the insurance policy, so don’t try to do it yourself if you are thinking of purchasing a home. Instead, make your offer contingent upon review of the document. Consider it an extension of the Inspection Report.

Sellers, from the beginning, always disclose any and all damage & repairs that have effected the home during your ownership. If a buyer asks for a CLUE report, gladly provide one. While you might see it as an annoyance, it could just be the final key to selling your home.

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What Really Matters When Listing Your Home

There are numerous decisions a seller must make when putting their home on the market. The first is obviously whether you will sell it yourself, or hire a real estate agent to market the home. I find that most high-end home owners in Minneapolis and St Paul, take the latter. They usually don’t have the time to do so, but also lack the experience in what it takes to sell a luxury home.

Probably the most important decision though is who you hire as your real estate agent. Do you go with the number one top producer in the Twin Cities, who is usually too busy to actually speak with you (you’ll hear from their “team” members more than the listing agent), the Goliath real estate company who’s signs are everywhere, or the brokerage that specializes in luxury homes?

Well, my advice would be none of the above.

The reason being, and this is my opinion, is that is does not matter what company you choose. That’s right, doesn’t matter one iota. The real estate brokerage you choose will never sell your house, nor will the red or blue sign. Do you really think a buyer drives up to a house, sees the pretty red sign, and says, “Wow, this is for sale by X realty! I think I’ll buy it”?

What matters is the real estate agent. She is the one you actually hire. She is the one you will be speaking with weekly. She is the one who will be finding every possible way to expose your home to the right buyers. *Remember though, make sure you actually like the agent you hire. Don’t hire someone just because he sells alot of homes. If he annoys you or doesn’t fit your personality, don’t torture yourself for the next six months by having him represent you.

Take a look at the agent’s marketing plan, her enthusiasm for your home, and her business philosophy. There is more to an agent than the list-to-sell ratios, her age, etc. Determine if the agent fits your needs and goals, and if she does, hire her on the spot. Don’t take your decision lightly, but also don’t be blinded by the pretty neon flashing lights of the big box real estate companies. Picking the perfect real estate agent isn’t a hard decision, but choosing the wrong could hurt you where it matters most, your wallet.

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Camera, Lights…

…No Sale! Yes, that’s right, your home isn’t getting sold. Why not, you ask? Have you checked out your home photos that your Realtor took when she listed the home? If you are like most sellers, you have never seen the photos of your home.

I took my two young sons to get some professional photos taken this weekend here in Minneapolis. I’m a pretty good photographer, but I don’t have the tools to make them look “studio quality”.

As I was sitting there, I had to laugh. Here I was, spending extra money to get some good photos of my most precious things, but I see sellers all the time penny pinching on quality of photos for their most precious thing, their luxury home. Looking through the MLS listings every day, I see Million dollar homes with pictures that are fuzzy, snow on the ground in July, out of focus, too much/too little light, not level, etc. And I just don’t understand how the seller could allow this to happen.

I have actually gone to listing appointments in which the sellers are looking for a new agent, and they ask me what price they should be at. See, they believe the price was the reason the home didn’t sell the first time. I look at them and tell them presentation is EVERYTHING. Then I show them their last photos on-line. Most are shocked, as they had no idea. With more than 70% of buyers looking on-line for homes before they start hitting the pavement, sellers really have to have top notch photos to impress that buyer.

So when you start looking for an agent to market your home, ask them what type of photos they will take. If you hear the photos will come from their camera, then move on to the next agent. Look for the agent that is willing to spend the extra money for professionally done photographs. Minneapolis has some great photographers that have experience with luxury homes, so be sure to look around, or ask your agent for referral advice. Put your best foot forward from the beginning, so your home is SOLD, not still SITTING!

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The Institute for Luxury Home Marketing

Being designated as a member of the Institute for Luxury Home Marketing is highly sought after in the luxury field.

Real estate agents that hold this designation are professionals specially trained to provide high quality service to buyers and sellers of luxury homes and estates. The Institute is also the premier authority in training and certification for real estate agents working in the upper-tier residential market.

Currently I am only one of six agents in Minnesota that are members of the Institute. If you are looking to sell you luxury home, make sure you ask any agents you interview if they are members. Luxury homes are special, and require special marketing to get them sold. Each home I sell has it’s own unique marketing plan. Many times there are special attributes of the home that can be highlighted and presented to a target market. Members of the Institute understand this and have been trained on how to get the home as much exposure as possible.

If you have any questions about marketing your home, let me know and I would be happy to answer them. Many times I will need to see a home to get a feel of what I can do. Preparing a marketing plan and properly pricing the home take more than a day. If you want the best out of your agent, don’t be surprised if the listing process takes a week or two. Photography, appraisals, staging, brochures, etc, take more time with a high-end home.

Don’t worry though, you want the best for you home and hiring a member of the Institute for Luxury Home Marketing will get you there.

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