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Selling a Home and Protecting Equity

When my wife and I decided to sell our home earlier this year it was not a long, drawn out process (Selling a home by owner).  We had a rare opportunity to avoid the trap of buying and selling a home at the same time.  My grandparent’s 100 year old home had been rented for the past 10 years, but when the tenant moved out in December it sat vacant.  A 100 year old house, without proper maintenance and a little TLC will not make it too long.  We decided we could move into this house, show it some love and free ourselves from the chains of a mortgage so we could make the right decision on our next home purchase.  Although I have never undergone the buying and selling process simultaneously, I can imagine it is harrowing.  Therefore if you have the opportunity to sell, move into another place and then deliberate your next move I would absolutely recommend doing such.

Now that we had lined up a place to stay upon selling our home we were ready to do the dirty work.  We entertained the notion of hiring a realtor, but the economics of it simply didn’t work out for me.  Over the course of 5 years we had built up about $5,000 in equity.  If we sold the house for $100,000 (less than we gave) after the 6% commission we would owe the realtor $6,000 then after paying our portion of taxes and closing costs we would need to bring $1,500 to the closing.  Even if it meant spending a bit of money upfront it was worth it to me.  The way we looked at it was “we’re paying ourselves 6% to sell our house”. Given the stakes involved it seems a little bit strange how few people sell a house on their own.  I know people that drive 5 miles to save a dime on a gallon of gasoline, but they list their house with a realtor, immediately forgoing 6% of their most valuable asset.    We had never sold a house before, but how hard could it be?


Staging the House

The first thing we did was repaint the vibrant colored rooms a neutral tan.  This is not exactly a trade secret, but it is astonishing to see the number of sellers that neglect this important detail.  We then began to move out any unnecessary clutter in the house.  We had the option to go ahead and move it to our new home, which was convenient.  Even if this is not an option for you then rent a storage unit.  We moved quite a bit of furniture including our loveseat (leaving only a couch, but making the room look much bigger).  We moved out the computer desk, printer and other items that looked out of place.

Living Room

After minimizing the clutter we moved around our furniture for pictures.  The home should look picturesque, not lived-in.  If moving furniture from your house permanently is too much of a burden at least move the excess out of the room for pictures.  If you have wall to wall furniture in a room it will look even more cluttered in pictures.  After arranging the room the way you like and cleaning it thoroughly, take your photos.  DO NOT use an old Nokia camera phone or a polaroid.  We used our Canon t2i digital SLR, but there are plenty of point and shoots that offer quality photos.  Memory is cheap, so take hundreds of photos from every angle the photos are what will sell your house.  Hopefully you have taken photos over the course of living in the house and stored them somewhere you can find them.  For instance, when we were starting to list the house there were only dreary days and the grass had not greened up.  I had photos of the exterior of the house from the previous year after all the flowers had bloomed and the grass had pretty stripes.

Selling The House

Although I would contend that pictures sell the house, they are absolutely useless if nobody sees them.  So now is the easy part, we will just list them online and wait for the calls.  Unfortunately this is where we hit a bump in the road as “For Sale By Owners”.  With the exception of Zillow, the majority of the big home sites did not allow FSBOs to list their own homes.  We put our home up on craigslist, Zillow and got people to share it on Facebook (don’t laugh).  I even made a website that included all of our pictures, descriptions, maps to the house and everything.

After a few days of these marketing tactics my dear wifey was ready to give up her career as a realtor.  She recommended that we hire a realtor to sell the home for us.  I could not stomache the thought of parting with a minimum of $6,000 to do work that we could do.  We had already taken better photos than most realtors, we had already done their job for them.  I told her to give it a few more days while I walked the information superhighway in an attempt to circumvent the listing services.  Finally after much searching and deliberation I solved our problem.

We Hired a Realtor?

Yes, it turns out the best way to gain maximum exposure in marketing your home is to use a realtor.  Then the realtor loads your home on the MLS and then that data feeds all of the other pertinent websites.  It seems really unfair that I can do most of the work and I have to pay the guy 6%, so I found another way.

I Googled “MLS Flat Fee Listing Kentucky” and found .  Chuck is a realtor in Kentucky that charges $199 and he will load your pictures, descriptions and important data onto the MLS.  If a buyer’s agent sells the house then you pay them an agreed upon commission (in our case we offered 3%), but the most the listing agent makes is the Flat Fee.  So even if the house sold through an agent we would only pay $3,200 in fees (per $100,000 sales price).

The regulations are much more strict when working with an agent even in this capacity.  By law we were no longer to say “For Sale By Owner”, even though we were doing all the work.  To make matters worse, we did not know that there are multiple MLS for each area.  All of the agents in my city use a local MLS, but my home was placed on the regional MLS, making it less useful.  However, we were listed on all major websites and even with hindsight I would probably do the same thing again.


My wife spent the next day emailing and calling every realtor in our town to let them know that our home was on the market.  In fact, we got a showing the very first day, within minutes of posting on the MLS.  The realtors told us our home was beautiful and it “showed very well”, but we did not get an offer that day.  A few days passed and nobody called.  My wife continued to notify realtors in the area, update Craigslist and Facebook.  Then we randomly got two calls in one day.  A realtor called and scheduled a showing for Sunday and an unrepresented buyer saw our pictures on Facebook and asked to see our home that day (Friday).

Cleaning and Showing

My wife cleaned the house all day and had it looking flawless for our second showing.  The woman and her family looked through the house and she seemed to light up.  She was definitely an interested buyer!  We showed her around the place, left her alone and she continued asking questions.


She asked if she could come back later that same night at around 10 and we told her that would be fine.  It was at this point that she made us an offer that came in a little low, but we countered with an offer that met in the middle, but allowed us to keep our kitchen appliances.  She said she already had kitchen appliances anyway, so it was a fair deal for all.


The best part about selling without paying commissions is that you actually get the vast majority of the selling price.  If I had sold my house for $100,000 without a realtor, I would need to sell it for $106,000 with an agent and at 6% commission on 106k I would actually only make $99,640.  Including the Flat Fee MLS listing of $200, the $50 lawyer fee and the $400 tax bill we only paid $650 to sell our house.


Living Off the Grid

Earlier this year my wife and I came to the realization that the 1,200 square foot dwelling that we have called home for the past 5 years was getting smaller.  She kept on me, asking if I was ready to move and sell our house, nearly every day.  Then the perfect opportunity presented itself to us.  We would sell our 2008 model brick home and move into a 1913 model, converted school house.  Obviously this was a no brainer for us and we lept in with both feet.

I will address the move, selling the home, fixing up the home etc in some detail in the near future, but this entry is not about all that.  For the past month living in this house we have had no cable, internet, or even decent cell phone data speeds.  This includes losing a beloved Samsung plasma TV and Samsung Galaxy S2 in separate mishaps.  All of these absent modern amenities are in addition to getting our water from a well.  These changes are drastic enough without making mention the washer and dryer sitting lonely in the kids’ room waiting for proper wiring in order to fulfill their life purpose.

My wife has been into the “crunchy” lifestyle for a while now, but unlike many of these posers she actually embraced the lifestyle.  No city water? Check.  Clothesline?  Check.  Free Range Chickens?  Check.  Cloth Diapers?  Check.  Really, when you break it down that way it just seems like all these other girls use “being crunchy” as an excuse to grow out their armpit hair, the one lifestyle modification my wife did not adopt.

It is truly amazing the extent to which we, as a society, have grown so dependent on the internet.  With my internet absent and my main computer on the fritz, I constantly felt like I was forgetting some payment.  I was also unable to commit any time to crapping out any new blog content.


Reward Miles and Points Valuation

Trying to decide how to top off the extra 5,000 miles I needed to attain a companion pass I tried to do some evaluation of valuations.  I looked around to see different ways to transfer miles to Southwest that will count toward the companion pass.  I have some Ultimate Reward points from Chase, which transfer to Southwest at a 1 to 1 ratio, but do not count toward the Companion Pass.  However, transfers from Hyatt to Southwest do count, but the transfers from Hyatt to Southwest are at a rate of 10,000 Hyatt points to 4,800 Southwest points.  I would transfer 10,000 Chase Ultimate Rewards to Hyatt and then get 4,800 points.  How could I even consider such?  Afterall Chase Ultimate Rewards are worth 2 cents per mile and with this valuation I would be getting only 48% of the possible value.  A poor value proposition by any standards.  This got me thinking, what is a point worth to me?

Ultimately I did not decide to go this route, but it did make me further examine valuations that I have seen on other blogs.   The most baffling valuation to me comes from Starwood Preferred Guest points and their SPG AMEX card with a 25,000 point bonus.  It seems like many bloggers push its benefits and some say that it’s worth 2 cents per point.  Making the sign up bonus worth at least $500.  I have not signed up for this card, because it does not seem very valuable to me. Many people argue that you take the retail price of a room and divide it by the number of points needed and you come up with value.  Thus, if you spend the night in a room that is normally $900 per night and you spend 30,000 points you are getting 3 cents per mile of value!  I wholeheartedly disagree with this kind of valuation and reject the premise entirely.  Simple economics suggests that something is only worth what someone would pay for it.  I would never actually pay $900 to stay at any hotel so believing I got $900 worth of value from 30,000 points is a bit silly.  What is my opportunity cost of using these points?  Are there other options that would offer more nights?  I would be much happier staying 5 nights in a 5,000 point per night room that usually costs $100 per night even though my value is 2 cents per point, I am much happier.

Another favorite move of bloggers is to overvalue a first class award ticket.  I understand the desire to have bigger seats and more leg room on a plane.  I would also love to fly first class if anyone is interested in proving to me why it is worth doing.  However, I have read many accounts of trips stating, “I used 125,000 miles to fly first class roundtrip on a flight that would have cost $7,500 I maximized value by getting 6 cents per mile!”  Certainly telling your friends that you took a $7,500 flight for free is remarkable.  Again, this kind of valuation ignores the opportunity cost.  Let’s assume that instead you could book an international flight in coach for 50,000 points, but that flight only costs $1,500 normally this is only 3 cents per mile, which is pedestrian compared to the first class flight.  My first thought is that a plane is for transportation.  The goal is to get from point A to point B, if I want to sit in a comfortable chair I would just stay home.  I would never pay the $6,000 fare difference to ride first class so why would I sacrifice 75,000 more points?  What is my opportunity cost of doing this?  Instead of one first class flight I could (assuming award availability) invite a friend along and pay their way and still have 25,000 points to spare.  Many people use Chase Ultimate Rewards to top off their travel, but these 25,000 Ultimate Reward points are minimally worth $250 as a statement credit.  Which sounds like the better scenario, flying alone across the ocean or flying with a friend and arriving with $250 of free money to start?

When it’s all said and done only you can decide what is important to you.  I like to get more value out of my miles by purchasing more happiness and creating more memories.  Sure, I would probably love 1 night at the W. in Washington, D.C., but if I could get a week’s worth of hotel stays instead I am doing that.


Southwest Deals Abound

If you are not a Southwest Rapid Rewards Member you should sign up now and get 750 points just for signing up!  This bonus alone will eventually be enough for nearly $15 worth of travel.  Southwest is currently offering their credit cards with 50,000 point bonuses again, which will get you at least 2 round trip tickets.  This is a very good deal, but can actually be made better with a little bit of work.

Companion Pass

I got in on the offer last time and signed up for both the Personal Premier and Business Premier credit cards.  These both offer 50,000 points after you spend $2,000 in 3 months.  Spending $2,000 in 3 months is very easy to do if you shift all spending to your card.  The annual fee for these cards are $99 each, but after the bonus and spending you will have 104,000 points.  These points count toward a companion pass!  Southwest offers anyone that gets 110,000 points in one calendar year a companion pass which is good for unlimited flying of a companion.  So if I book a flight with either points or cash my wife’s (or whoever you identify as your companion) flight is free!  So, the $198 in annual fees leaves me with 104,000 points that I can use toward travel and my wife will fly with me.  Currently there is a great sale where a trip from Louisville, KY to Denver, Colorado would only cost 10,560 Southwest points per roundtrip ticket, but with the companion pass my wife and I could both fly for 10,560 total.  This is a very lucrative bonus especially for infrequent fliers such as us.


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