The housing market is a sizzling seller’s game at the moment, where homes stand to spark bidding wars and sell for sky-high prices.
“COVID-19 caused so many people to re-evaluate their shelter needs, resulting in increased demand for homes and a continued lack of inventory,” explains Lindsay Reishman, founding partner at The Reishman Group in Washington, DC.
All in all, this is great news for sellers—yet with soaring prices and high expectations come a whole new set of possible pitfalls that could trip up inexperienced sellers, particularly if they’re selling for the first time.
Curious how you might risk ruining a good thing? We asked some real estate experts to identify what many first-time home sellers get wrong when listing their home today.
1. Overpricing your property
Just because sellers dominate now, don’t think “red-hot market = super high list price.” A smarter strategy is to list lower than your goal and let the market do its magic.
“First-time sellers often erroneously believe that the list price means the desired purchase price,” Reishman says. “In fact, the list price simply indicates an approximate appropriate price, and its purpose is to drive interest in the property.”
The greater the interest, the more likely the price will climb as eager buyers bid on it. You’re more likely to get interest with a lower asking price.
2. Skimping on home showings
In our not-quite-post-pandemic era, some homeowners may list their property, then feel skittish about having strangers traipse through. To cash in, however, you can’t wait it out.
“As soon as the house is listed, it’s vital to allow as many qualified buyers view it as possible, to help build demand,” says Jonathan Faccone, managing member of the Halo Homebuyers company, based in Bridgewater, NJ. “A seller has a fairly short time window to do this effectively, since if the house sits on the market, buyers may assume something is wrong with it.”
If you’re truly uncomfortable with in-person showings or have serious scheduling conflicts, virtual tours may separate out looky-loos from truly interested parties. Then, once you know you have a prospective buyer who loves your listing, you can have them scheduled for a (masked) showing.
3. Staging slip-ups
With houses selling so fast, you may think you needn’t bother with professional staging. Still, if you want to fetch that dream price that you’ve heard is within reach, it could pay to present your home perfectly, with some professional home-staging help.
“In my recent experience, staging can reduce a property’s time on the market considerably and have a 1% to 5% increase in value offered by buyers,” says Stephen Keighery, CEO of Home Buyers Louisiana.
Today’s market is keeping these interior design pros busy—as in booked solid for months in advance. So plan ahead.
4. Seeing only dollar signs
A big payoff is tantalizing, but money isn’t everything.
“Many people look at price as the end-all-be-all, but a smart seller considers a variety of factors to make an educated decision,” says Aaron Carroll, a real estate agent at Douglas Elliman in Dallas. “For instance, the highest offer may have a loan with an appraisal contingency, while a somewhat lower offer might be in cash.”
Perhaps the bidders with the highest offer need to sell their home first. That could mean a slow or snag-filled deal. You might be better off taking a slightly lower offer.
5. Pouncing on an implausible offer
Guess what: Buyers know it’s a seller’s market too, so some may make ginormous bids to beat out the competition—offers that can fall apart in financing or upon appraisal or inspection.
“In this market, it’s not uncommon for a buyer to submit an offer for a home, sight unseen,” says Deborah Ann Spence, a broker at Fierce Real Estate Corp. in Bala Cynwyd, PA. “Then, if the buyer doesn’t like what he eventually does see, the offer can be withdrawn, and the property is likely to lose traction.”
The takeaway? If something seems too good to be true, it usually is! Work with your real estate agent to understand who is bidding and how serious they are, to avoid having your deal unravel.
6. FSBO blunders
While “For sale by owner” sounds like a direct route to extra profit, cutting brokers out of the picture is a risk.
“Today’s rookie sellers may be tempted to try selling their house on their own,” says Faccone, to save the agent’s commission. “But doing so severely limits your exposure.”
FSBO homes, after all, can’t be listed on the Multiple Listing Service, which is where most buyers shop for homes. And this exposure is crucial if you want to reach a large audience and fetch the best price.
“At the very least, put the house on your local MLS [multiple listing service] through a flat-fee listing agency,” says Faccone. “You’ll still be responsible for the commission to the buyer’s agent, but by reaching more potential buyers, you’re apt to get a higher price.”
Also, in this era of bidding wars, having an agent at your side is a huge help. Navigating a flurry of “highest and best offer” bids is tough for a rookie!
7. Spacing out on the new place
So you’re all set to sell your house—great! Now, what’s your next move? Avoid winding up with an anxious buyer on one hand and no place to go on the other.
“It can be hard to find the right new home now, so start searching immediately once your property comes to the market,” Reishman says. “Then be sure to negotiate an extended closing or leaseback, or even make the sale contingent upon purchasing another home.”
If all else fails, line up a rental.
8. Assuming this hot market will last
Inexperienced sellers may turn down a worthy offer or even forestall listing their home, hoping prices will continue to go up. While it may take a while for the seller’s market to top out, interest rates are expected to creep up this year, which could reduce the pool of hungry buyers.
“Generally speaking, now is a good time to both buy and sell, with historically low interest rates fueling activity,” says Reishman. “But with rates on the rise, I anticipate the velocity of transactions to slow down. Overall, I encourage my clients not to try to time the market, but to let their own specific housing needs dictate what they do.”
Source: Realtor.com, Nina Malkin
When your home’s for sale, you want it to sell quickly—and preferably, above the asking price. And I’ve never met (or even heard of) a homeowner who was disappointed that their property inspired a bidding war. However, even in a seller’s market, there are things you need to do in advance to position your home to be in such an enviable position.
Here are nine home improvement projects our experts recommend tackling before putting your house on the market. Complete these projects to boost your home’s selling price.
Apply a fresh coat of paint
Unless you’ve recently painted it, your home could use a fresh coat (or two) of paint. Over time, walls experience a lot of wear and tear and can also get dingy. Christopher Totaro, an agent at Warburg Realty, says he’s always surprised when a seller looks at him sideways and says, “You want me to do what?” But he explains that painting the home is a must. “You have lived in your home for 10 years, have four kids, and you expect to bring top dollar, so yes, I am suggesting that you paint.” Totaro says painting the home makes it stand out from other properties and can help to reduce the time on the market.
Since you see the house every day, it’s easy to overlook problems that may jump out to buyers. “Often, a wall can be scraped or peeling, and sometimes, previous water damage was left unattended,” explains Mihal Gartenberg, another agent at Warburg Realty.
Also, if you have accent walls, she recommends painting them white. “Let the buyer imagine the color they want the wall to be,” she says. That way, they won’t get distracted by having to add repainting to the to-do list for their new home.
Wash the windows
Another part of your home that may be overlooked because you’re accustomed to viewing it: your windows. “Break out the #0000 steel wool, Windex, and scrub and polish those windows,” advises Totaro. “If you’ve ever replaced the windshield in your car after driving for a decade viewing through a dirty, pitted windshield, that new glass makes it seem like you are driving a new car, and the same applies to the windows in your home.”
You may need a power cleaner for the window exteriors. In fact, Ryan Dalzell, a realtor with the Dalzell Group in San Diego, recommends calling in the pros. “Having windows professionally cleaned prior to showing the house will help bring in natural light and allow buyers to take in any view the property offers.”
Do a deep clean
Commence operation deep clean, recommends Dennis Hsii, co-founder and realtor at Highland Premiere Real Estate in Los Angeles. You know how to clean your house; you may not enjoy it, but you know how to do it right. A true deep clean means grabbing a ladder to remove the dust collected on ceiling fan blades and on hanging picture frames, all the way down to the baseboards. Clean the interior and surroundings of your oven, and your refrigerator should sparkle. Lastly, replace the filters for your heating, ventilation, and air conditioning (HVAC) system.
Declutter, declutter, declutter
Another project that costs nothing (except some time) but pays big dividends is doing a room-by-room decluttering, suggests Dalzell. Every buyer loves going into model homes because they are perfectly staged, and while that’s a tough standard to meet, just clearing off countertops, boxing up extra picture frames and decorations, and thinning out some furniture will make rooms appear bigger and allow the buyer to imagine their own furniture in the living spaces.
Pump up the curb appeal
Landscaping is the first impression a potential buyer has of your home. Your local garden center can provide expert advice for inexpensive seasonal plants and ground cover ideas. Your front yard can be transformed to create that “wow” factor for not a lot of effort, says Hsii.
Dalzell agrees, recommending that home sellers put fresh mulch around plants, reseed the bare patches on the lawn, and add some colorful flowers to the garden beds to really brighten up the look of the house. Remember: curb appeal sets the buyers’ expectations for what they’ll see inside the house.
Address pesky pests
A project that sellers sometimes overlook is pest control, warns Gartenberg. Are there signs of pests in your home? If so, clean up those signs and call a pest control company to take care of the project. This is ongoing. Sellers will want to know where the major pest issues are in their home and continue to monitor them for any ongoing activity.
Minimize pet paraphenalia
“Just as sellers would be advised to minimize the effect of young children’s toys strewn about the home, they should do the same with pets and their toys, accessories, furniture, etc.,” says Gartenberg. Before potential buyers view the property, make an effect to declutter the pet supplies and keep them out of sight whenever possible.
Upgrade your cabinets
Since the largest (and oftentimes, most costly) component in a kitchen is the cabinets, refreshing them is a great way to update your space, says Pamela O’Brien, principal designer at Pamela Hope Designs in Houston. “Options range from simply painting stained or painted cabinets, to replacing the doors and drawers with a new style. For a very budget-friendly refresh, scrub your cabinets and polish them with a cabinet restorer. Finish them off with new hardware to update your look.”
Daren Herzberg, a licensed associate real estate broker and co-founder of the Babst + Herzberg Team at Compass in NYC, agrees that refreshing a cabinet can give a new look without a major remodel. “By just repainting cabinet fronts and replacing hardware, the kitchen can look largely redone without any real construction.” If the cabinet style itself is outdated, consider replacing just the fronts, which is much more cost effective than brand-new cabinets.
Add a backsplash
Several of our real estate experts agree: a new backsplash is a smart way to update a dated kitchen. “A backsplash is often overlooked, but can be a very impactful part of the design palette for a kitchen,” says Herzberg. “The average backsplash is 30 square feet and nice new tile can be had for only a few bucks a foot. So for a few hundred dollars including installation, this can provide a huge aesthetic upgrade to an older kitchen.”
“The trendiest new tile is fun, but for time-tested, long-term good looks, a simple backsplash in a neutral subway tile always works,” suggests O’Brien. “You can mix it up a bit by selecting a larger or irregularly sized subway tile and considering a pattern, such as installing them vertically or in a herringbone or basketweave pattern.”
“The main purpose of a backsplash is to protect your walls from grease and other stains while you are cooking, but why not have some fun with it?” says Lanna Ali-Hassan, owner and principal designer of Beyond the Box Interiors in Washington, DC. Subway tile in unexpected patterns and contrasting grout can keep it classic, while infusing a little more personality.
Source: Real Simple, Terri Williams
You may be wondering if there are tax deductions when selling a home. And the answer is: You bet!
Sure, you may remember way back to 2018 and its new tax code—aka the Tax Cuts and Jobs Act—changed some rules for homeowners. But rest assured that if you sold your home in 2021 (or are planning to in the future), your tax deductions when you file with the IRS can still amount to sizable savings.
Want a full rundown of all the deductions (as well as tax exemptions or other write-offs) at a home seller’s disposal? Check out this list to make sure you don’t miss any of them.
1. Selling costs
These deductions are allowed as long as they are directly tied to the sale of the home, and you lived in the home for at least two of the five years preceding the sale. Another caveat: The home must be a principal residence and not an investment property.
“You can deduct any costs associated with selling the home—including legal fees, escrow fees, advertising costs, and real estate agent commissions,” says Joshua Zimmelman, president of Westwood Tax and Consulting in Rockville Center, NY.
This could also include home staging fees, according to Thomas J. Williams, a tax accountant who operates Your Small Biz Accountant in Kissimmee, FL.
Just remember that you can’t deduct these costs in the same way as, say, mortgage interest. Instead, you subtract them from the sales price of your home, which in turn positively affects your capital gains tax (more on that below).
2. Home improvements and repairs
Score again! If you renovated a few rooms to make your home more marketable (and so you could fetch a higher sales price), you can deduct those upgrade costs as well. This includes painting the house or repairing the roof or water heater.
But there’s a catch, and it all boils down to timing.
“If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing,” says Zimmelman.
3. Property taxes
This deduction is capped at $10,000, Zimmelman says. So if you were dutifully paying your property taxes up to the point when you sold your home, you can deduct the amount you paid in property taxes last year up to $10,000.
4. Mortgage interest
As with property taxes, you can deduct the interest on your mortgage for the portion of the year you owned your home.
Just remember that under the 2018 tax code, new homeowners (and home sellers) can deduct the interest on up to only $750,000 of mortgage debt, though homeowners who got their mortgage before Dec. 15, 2017, can continue deducting up to the original amount up to $1 million, according to Zimmelman.
Note that the mortgage interest and property taxes are itemized deductions. This means that for it to work in your favor, all of your itemized deductions need to be greater than the new standard deduction, which the Tax Cuts and Jobs Act nearly doubled when it went into effect.
To make matters a tad more complicated, those figures changed once again in 2021, increasing to $12,550 for individuals, $18,800 for heads of household, and $25,100 for married couples filing jointly.
5. Capital gains tax for sellers
The capital gains rule isn’t technically a deduction (it’s an exclusion), but you’re still going to like it.
As a reminder, capital gains are your profits from selling your home—whatever cash is left after paying off your expenses, plus any outstanding mortgage debt. And yes, these profits are taxed as income. But here’s the good news: You can exclude up to $250,000 of the capital gains from the sale if you’re single, and $500,000 if married. The only big catch is you must have lived in your home at least two of the past five years.
And remember that capitol gains are calculated on the cost basis of your home, not the original purchase price. What’s cost basis? Say you purchase a home for $400,000, then spend $100,000 on improvements, you would have a cost basis of $500,000. A married couple could then sell for the home for $500,000 (after living there two years) without having to pay any capital gains taxes.
In other words, the higher your cost basis, the smaller your tax bill once you sell. Just remember to keep track of every single home improvement receipt.
Finally, look for the rules of this exemption to possibly change in a future tax bill.
Source: Realtor.com, Margaret Heidenry