Fast and Easy But is it Accurate?

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There are sites all over the web that offer to tell you what your home is worth.  Simply plug in your address and email and you’ll get a value.  It’s fast; it’s easy but is it accurate?

The value is determined by what is called an Automated Valuation Model (AVM) that analyzes public record data with computer decision logic.  Square footage, age, number of bedrooms and location are easily definable objective data.  The challenge is identifying, measuring and comparing the subjective data.

An AVM cannot identify how unique features might add or detract from the value, if the market is declining or why the comparable sales apply or don’t apply to the subject property.  Is a home worth more because it is near shopping or less because it is across the street from a high-traffic commercially zoned property?

Experienced professionals are more likely to make proper adjustments for condition, market appeal and positive and negative influences.

Imagine that you’re going out for dinner and you consult HamburgerAVM.com to tell you how much a hamburger is worth.  It might be accurate based on condiments, vegetables and weight but can it address things like taste, quality, cleanliness, service, convenience or atmosphere.  You certainly couldn’t present the printout to the waiter to negotiate a lower price.

An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.

Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate.  Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately.

Save on Homeowner’s Insurance

iStock_000029570462-250.jpgInsurance is a way to hedge the risk of a possible loss on an asset that a person or entity cannot afford. The cost of the coverage is determined by risk and exposure to the insurer and reflected in the premium.

Another way to say it is: don’t buy insurance when you can afford the loss. If you have a mortgage on your home, you must have insurance. It is probably prudent for most people to have property insurance but certain coverage might be avoided because you can afford the loss if you were to have an occurrence.

  1. Call your current agent and review your insurance coverage. Ask if there are any available discounts whether your property qualifies for now or after certain improvements are made. Monitored alarm systems, dead bolts, smoke detectors, updated electrical, certain types and ages of roofs among other things may be eligible for individual discounts.
  2. Compare the newly revised coverage and premium with other reputable agencies and insurers. Shopping can be time consuming but experts agree that the exercise can be valuable and should be considered every few years.
  3. Deductibles are an easy way to affect the premium based on the initial amount of loss that the insured wants to assume. The higher the deductible, the lower the premium. Determine the amount of risk you want to assume and select an appropriate deductible.
  4. Consider bundling your home and auto policies for possible discounts and leverage for better service.
  5. Don’t become a co-insurer. Most policies stipulate that a building must be insured for at least a certain percentage, usually 80% of its insured value to be able to collect the full amount of a partial loss. Insured value is not always the same as market value. The land is not considered in the value but replacement cost of the dwelling is.

It isn’t possible to purchase insurance after a loss; it must be purchased before a loss is incurred. Premiums are based on careful analysis of insurer’s loss and overhead expense plus a profit. As a homeowner and an insured, it would be equally wise to analyze coverage, claim service, your risk tolerance and the premium you’ll pay for that coverage.

Contrast: A Not So Hidden Secret

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Contrast. You know, contrast, like up/down, in/out, day/night/ black/white. Contrast gets our attention. In fact, contrast is what separates one salesperson from another.

I’ve read two books recently that focus on the importance of contrast in sales (although neither were necessarily focusing on sales),  Neuromarketing by Patrick Renvoise and Resonate by Nancy Duarte.

In Neuromarketing, Renvoise discusses the brain and how people make decisions. He says that only six stimuli speak to this part of the brain and one of them is contrast. Duarte’s book is about presentations, but in the bigger picture it is about contrast. She says that the goal of the presentation is getting people to see the difference between what is and what will be.

This has unending ramifications in the sales business. It is useful, obviously, in presentations. But it is equally effective in developing a negotiating strategy or explaining the virtues of a contract.

Anytime a person has a sales experience, it is an opportunity for the sales person to have them experience the difference, the CONTRAST, between what life is like right at this moment and what it will be like after the experience.

Examples? Okay: 1) The difference (contrast) between renting and buying for a first time homebuyer. 2) The contrast that comes from effective staging, you know, before and after. 3) Then of course having people understand how the world is today and how it will be tomorrow if they choose you to be their agent.

The importance of contrast can be seen most vividly in another realm: weight-loss commercials. You never see a weight loss commercial without what? Yep, the before and after shot. Why do you think that is? The answer: because it works. Advertisers get that contrast is a huge cog in the decision-making process for human beings.

Herman Melville said, “There is no quality in this world that is not what it is merely by contrast. Nothing exists in itself.”

So, how do you use contrast in your business? Are you able to clearly differentiate your value from that other person? Can you have me see how tomorrow will be better than today if I choose you?

1/2% Could Make a Big Difference

PMMS Mortgage Rates2.pngOver 50% of homebuyers don’t shop to find the best interest rate for their mortgage. While a buyer would rarely purchase the first home they look at, they will accept the rate and terms offered by only one lender.

While the borrower and the property affect the rate and terms that a lender may offer, it is not to be said that all lenders will offer the same terms and rates to the same buyer. Credit score, home location, home price and loan amount, down payment, loan term, interest rate type and loan type all affect the interest rate but different lenders can interpret this information differently.

Shopping around to compare rate and terms for a mortgage is a reasonable exercise considering that a half percent lesser interest rate could not only lower the payment but the cumulative interest that is paid while that loan is outstanding.

Some borrowers don’t shop the mortgage because they are concerned that having their credit checked multiple times could adversely affect their credit score. The credit bureaus take this into consideration when several requests are made by the same category of lender in a short period of time.

Check to see the difference 0.5% could make in the mortgage you’re considering by using the calculator provided by Consumer Financial Protection Bureau. Contact your real estate professional for a list of trusted mortgage professionals to consider.

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Converting a Home to a Rental

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A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.

If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.

Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years. This would allow a temporary rental for up to three years before the exclusion is lost.

Let’s assume there is a $100,000 gain in your principal residence. If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets. At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.

Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less. If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

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It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.

Is Attention Worth Dishonesty?

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The headlines this morning were: Travel Bans Lifting, Big Storm Not As Big As Forecasted.

Really? The biggest storm in the history of the universe did not come to fruition? Snowageddon didn’t actually occur? I am, in the words of Kramer’s ever poignant lawyer Jackie Chiles, “Shocked and Chagrined. Stupefied and Mortified!” Actually I am not.

In a world where the media will do anything to capture the public’s attention, over exaggeration, fabrication, and downright dishonesty have become the norm. This is easiest to observe in business of television programming, news and sports. So called “reality” shows have become anything but reality. The news has become a slanted interpretation of things we’re assumed to be too stupid to interpret ourselves and sports (SPORTS, for crying out loud) has become just like the news. And then there is the weather.

The weather used to be a “we call it as we see it” sort of report as to the climatic conditions of the day. Daring and astute weather folk would occasionally take a risk and predict tomorrow. That has changed. With new predictors and the latest satellite models, we are led to believe that mortal man (and woman) is able to accurately foresee the movements of nature. We are not.

To get attention, however (because attention is ratings), we humans and our media must act as if WE are in control of the universe and its changes. Every storm is the biggest ever, every cold front is the coldest ever, and every hurricane is going to place us into the depths of historical and biblical torment unseen in human times.

“The sky is falling, the sky is falling.” Well Chicken Little, I don’t believe you. You’ve lost credibility. You (and the news channels, and the sports channels, and even the Property Brothers for crying out loud) have become self serving, attention grabbing, agenda driven scripted liars.

What does all this have to do with us: you and me? Simple. The best marketing, the best presentations, the best reporting, is honest, authentic and real. Interestingly, the two most cited characteristics sellers look for in a real estate agent are reputation and honesty. Not lead generation technology, not a fancy car, not drama: reputation and honesty.

Don’t believe what you see on the tube, that’s “entertainment.” (and I put quotes around that word because frankly I find little of this television foolishness entertaining). Good agents, good salespeople, don’t act like what you see on HGTV or on CNN, or Fox News, or ESPN. Good agents, good salespeople, are honest, authentic, and trustworthy. You can see it in their marketing. You can see it in the way they run their business. You can see it every day.

Marsha Friedman at Business Superstar in her article entitled The Best Marketing Tool Is Honesty, gives three easy steps to achieving honesty in your marketing (and thus your business): full article here http://www.business-superstar.com/super-tools/the-best-marketing-tool-is-honesty/

1). Be honest about what you can and cannot do, 2). Keep Your Word, 3). Remember, there’s a fine line between attention getting and trickery.

Doesn’t seem that difficult.

SO, Back to the “bigger” world. The solution for honest, authentic people to alleviate our twisted television (as well as those more twisted inhabitants of Washington DC) is by demanding better, not taking BS as the norm. Not wanting to appear to be someone from the 60′s, I believe we actually can change things; make them better.

Honesty is making a comeback and frankly, IT WILL BE THE BIGGEST COMEBACK IN THE HISTORY OF THE PLANET, IF NOT THE ENTIRE UNIVERSE!!!!!

 

Converting a Home to a Rental

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A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.

If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.

Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years.  This would allow a temporary rental for up to three years before the exclusion is lost.

Let’s assume there is a $100,000 gain in your principal residence.  If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets.  At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.

Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less.  If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

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It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.

Garage Sales Are Cool

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A well-planned garage or yard sale can make room in your home, get rid of unused items and make some money but it needs some planning to be successful.

  • Start early to research and plan
  • Promotion is key
  • Display items attractively
  • Price items right
  • Organize checkout

Saturdays are generally the best day but there may be some exceptions.  Experienced garage-salers believe that a well-planned one-day event will do as well as a multi-day event.  Serious purchasers will look for the “new” sale and most people don’t come back multiple days.

Advertise in local newspapers and free online classified sites like craigslist.  If several families are going together for the sale, mention that in the ad; it will be a big draw.  Mention your bigger-ticket items like furniture, equipment and baby items.

Garage sale signs can be purchased or made at Staples, Fedex Office or Kwik Signs.  Signs need large lettering so they’re easy to read while people are driving. Most important info: Garage or Yard Sale, address, date and time.  Directional signs are also important.  Balloons and streamers to attract attention to the signs are very helpful.

Consider using the service Square so that you can take credit cards.  The cost is 2.75% per swipe and can be done on your smartphone or iPad.  You’ll need to sign up at least two weeks in advance to receive your reader.

Unless you’re having an estate sale, keep your home locked.  You don’t want people wandering through your home while you’re outside.  If you start to accumulate a lot of money, take some of it inside.  Don’t discuss how much money you’ve made during the sale or how successful it has been.

People will want to bargain; it’s the nature of the game.  Consider this strategy: less negotiations early in the sale and possibly, more toward the end of the sale.

Five Leadership (and Life) Lessons From Stuart Scott.

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Picture from www.thesportsfanjournal.com

A great journalist and entertainer, Stuart Scott, died after a seven year fight with cancer Sunday morning. He was 49 years old. My sons grew up with Stuart. He was their introduction to sports from a perspective to which they could relate. He was different, he was fun, he was COOL.

Stuart Scott was more than cool, however, he was a leader. He was a Black leader in a business of salt and pepper haired white men who thought sports should be reported a particular way. He really was THE ONE who made ESPN cool (there’s that word again).

After witnessing countless tributes, farewells and memories in the days since Sunday morning, those of us who didn’t have the opportunity to meet him or know him as a person, have a better understanding of who this wonderful man was and the impact he had on those he touched. For me, and maybe for you, there are some lessons Stuart Scott leaves us for our businesses and for our lives.

  1. Be yourself. Stuart Scott had a different vision in 1993 when he began his career at ESPN. That vision was to provide sports entertainment to the young, the hip, the cool. It was not always well received. In fact, Stuart faced a ton of adversity (even hate) to his style and delivery early on. Luckily for us and for the network, he stayed true to being HIMself, to being the authentic, real life Stuart Scott. Oscar Wilde said, “Be yourself. Every one else is taken.” Stuart was Stuart. True leaders, real inspirations are who they are, without apology, without regret. They embrace being “the cool side of the pillow.”
  2. Know Who You Are Leading. Many will follow. The knack to being an effective leader is focusing on the right tribe to lead. In a way, Stuart Scott saw the future of sports broadcasting and spoke to it, long before the establishment knew it existed. Without vision, leadership has no effect on those it could lead.
  3. Be Relentless. From everything said about Stuart Scott, he was a professional. His quest to be the best he could be was, well, relentless. A leader rarely knows satisfaction, or worse yet, complacency. They are on a constant mission to take it to the next level every day, every moment. Obstacles, like cancer in Stuart’s case, are simply things to be fought, and ultimately overcome.
  4. Preparation is Everything. This whole leadership thing cannot work without the tireless efforts of the leader. From the countless stories told by his colleagues, Stuart Scott thrived on being prepared. Even in the throes of sickness, his unwavering pursuit to excel never slowed. He looked at every aspect of his profession in an effort to deliver the best end result product possible. If Malcom Gladwell was right that we need 10,000 hours of “practice time” to become awesome at something, Stuart understood. And worked triple time.
  5. Love Others. Stuart Scott was loved. By his fans, by his colleagues, by his friends, by his family, Stuart Scott was loved. The biggest reason for such love was simple: Stuart Scott loved. Love is a powerful mover of people and it was that love for what he did and for the life he led that separated him from the masses. Great leaders, powerful inspirations know that the best results happen when the focus is not self, but others. Stuart Scott existed in an entertainment world that is all about “love me, love me, love me.” Yet he led by loving others.

We can learn a lot from the life, as sadly cut short as it was, of Stuart Scott. And maybe that is some of what he always wanted. Rest in Peace, Stuart Scott. And BOOYAH!

Reducing Interest Expense

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0% financing has induced car buyers into taking the plunge because it doesn’t cost anything to use someone else’s money.  While mortgage rates are not at zero, they’re close enough that many buyers are applying similar logic.

Qualified mortgage interest is deductible on taxpayers’ returns subject to the maximum acquisition debt of one million dollars.  For the fortunate homeowners who have paid off their mortgage, their acquisition debt was reduced to zero and only the interest on a maximum home equity debt of $100,000 is deductible.

If you have to pay interest, deductible interest is preferable because it reduces your actual cost.

Consider the following example of a taxpayer with a $500,000 debt-free home.  If they did an 80% cash-out refinance of $400,000, $100,000 would be considered home equity debt and the interest on that would be deductible on their income tax.  The other $300,000 of debt is considered personal debt and the interest is not deductible.

However, because the rates are currently so low, the loss of deductibility of the interest doesn’t have as much impact as if the rates were higher.  The key is to have a good purpose for the money that would offset the actual cost of the interest.

Paying off a higher rate debt such as credit cards, student loans, possibly, business debt could all have significantly higher interest rates.  Refinancing a home and eliminating debts like these could be a big savings.

All lenders are not the same.  Call for a recommendation of a trusted mortgage professional.