Ask the Egghead: How much is my house worth?

Dear Egghead: I’ve seen a lot of websites that promise to tell you how much your home is worth. Are these sites accurate at all?

ANSWER: The best method for determining your home’s value depends on the reason you want to know. If you’re not looking to sell in the near future, the free online tools will suffice. One method is to request a valuation from two or three of the most popular online tools and use an average of those results. Three of the most popular tools are Redfin, Zillow, and Realtor.com.

This method will give you a nice ballpark estimate, good enough to satisfy your curiosity. While these free online tools are OK, they fall short in a few areas: they don’t take into account recent upgrades you might have made — like installing a pool or a sunroom. Also, these tools aren’t able to assess the house’s condition or overall sizzle, sometimes called “curb appeal.”

If you need to be more certain about your home’s worth, here are some additional methods that will take a bit more time, and in the last case, will cost you some money:

Ask a real estate agent. Any agent worth their salt will prepare a written comparative market analysis if you ask them. Why would an agent spend a half hour or more to provide this free service. Simple, they would like to have you as a client. A great way for agents to get clients is to show their expertise and dedication whenever they have the chance.

Research comparable sales of similar homes. This is a major part of the comparative market analysis mentioned above that a real estate agent can deliver. But perhaps you know more about your house and the surrounding area than any real estate agent.

Hire a real estate appraiser. In this case, you’re getting the service from a professional who does home valuations every day to earn their living. It’s the most accurate way to get your home’s value, but it will cost you. The nationwide average is about $350. (If you live in a super-expensive metro area — or if the subject property is large and complex — the appraisal could cost upwards of $1,000.)

If you’re a home buyer who is obtaining a mortgage, the lender will hire an appraiser to value the house precisely. Why? The bank doesn’t want to lend you more money than the home is worth.

Ask the Egghead: How much should my down payment be for a home purchase?

Dear Egghead: I’m figuring out how much cash I might be able to scrape up for a down payment. How much should my down payment be?

Answer: The sweet spot for home buyers is a 20 percent down payment. Putting that much money up improves your odds of being approved by a mortgage lender — plus, the bigger your down payment, the lower interest rate you’re likely to get. And, since you’re financing only 80 percent of the purchase, your monthly payments will be lower.

Another plus of a healthy down payment: The home seller you’re negotiating with is more likely to accept your offer because they can see you’re serious.

Yet another perk of putting 20 percent down: you’ll avoid having to pay PMI (private mortgage insurance) which lowers the transaction risk, but saps your monthly cash flow because of the premiums. You need 20 percent equity in your home to avoid PMI.

Having said all this, some buyers simply can’t afford a 20 percent down payment — they don’t have that much cash lying around. And even if you do have the cash, you don’t want to deplete your emergency fund, which should be enough to support your lifestyle for at least six months, in case you become unemployed, disabled, or any other disasters. Likewise, you don’t want to crippled your retirement savings plan simply to get a house.

If you need to save up for a down payment, that’s delaying your entry into the housing market. So, in a rising market, you’ll be missing out on price appreciation while you’re on the sidelines saving for a down payment.

So far, we’ve been discussing “conventional” loans, which are the most common. But there’s an alternative, if you qualify: government-backed loans. If you’ve served in the armed forces, you’re likely eligible for a VA-guaranteed loan, which, if you qualify, requires no down payment. If this doesn’t spook your seller, then a no-down payment loan can make a lot of sense, especially if you don’t have much savings to contribute to a down payment.

The Federal Housing Administration also enables some home buyers to qualify with a lower down payment.

Even with a conventional loan, it’s possible to pay as little as 3 percent down, and sellers will accept that if the other elements of your offer are strong.

Ask the Egghead: What scams are most common in real estate?

Dear Egghead: I’ve been warned that scams are common in real estate. What are they, and how do you avoid them?

ANSWER: Yes, real estate scams are all too common. Here’s what to watch out for:

Deposit wire fraud: This isn’t the most common, but it’s extremely dangerous and can cost you dearly. Typically, it happens when a crook knows you’re currently involved in a real estate transaction. They impersonate an escrow or title firm, and give you instructions on where to wire your earnest money deposit. They may build a fake website that prompts you to enter your banking information, or they may ask you for this information over the phone.

Unlike fraudulent credit card or check transactions, fraudulent wire transfer are often unrecoverable. A home buyer doing business at my brokerage fell for this scam, and lost $100,000. Very painful.

Avoid this scam by verbally verifying the transaction with your title or escrow company.

Foreclosure scams: Crooks target homeowners in financial trouble, and promise that they can drastically reduce their mortgage payment, but it will cost you a stiff fee upfront.

Some of these scammers will tell you they’re affiliated with the federal government as part of a foreclosure relief program. They will usually discourage you from consulting your lender, which is a major warning sign. Avoid this scam by contacting your lender — they have a vested interest in keeping you in your home, and they will be aware of any federal or state relief programs.

Fake listings of homes for sale or rent. These scammers use social media or classified services such as Craigslist.com to advertise a home opportunity. These online services do not vet these ads. The pictures used for the fake listing are usually copied from existing listings elsewhere.

When these scammers ask for a cash deposit before you visit the property, that’s your warning flag. Confirm who owns the property by searching for contact information.

If you suspect a scam, report it to the Federal Trade Commission or the Better Business Bureau so that other consumers will be warned.

Lockout contracts: A supposed buyer says they want to complete a quick cash transaction to buy your home, and they pressure you to sign a lockout clause that prohibits you from selling to anyone but them. The scammer then asks for processing fees or a reduction in the sale price.

Beware of supposed cash buyers who say they are in a big hurry.

Sketchy ads for cash purchases. Surely you’ve seen the flyers for “We buy homes for cash!” stuck to utility poles. These scammers target homeowners who need the cash. They’ll ask you to sign a deed, which gives them control of your property without any legal transaction taking place.

A company without a physical or online presence is usually a crook trying to get the rights to your home without actually buying it.

Loan flipping: Predatory lenders encourage you to refinance your mortgage. You’ll pay a hefty fee, and you’ll end up worse off financially at the end of the day. Sure, the homebuyer will get some cash out of the transaction, but it’s more than offset by fees, higher interest rates, and perhaps other penalties.

Ask the Egghead: Can pet odors prevent the sale of my home?

Dear Egghead: My real estate agent has recommended that I take several expensive steps to deodorize my home before she lists it for sale. She insists that my dogs have created a foul odor. I can’t smell anything offensive, and I don’t know anyone else who does. Should I ignore my agent?

ANSWER: It wasn’t easy for your agent to bring up this touchy subject. Pets are often treated as part of the family, and nobody likes to face the fact that a beloved pet might prevent the sale of your home. Dogs, cats, and other animals produce odors, just as humans do.

It’s no mystery why you’re unaware of the problem. Repeated exposure to a certain smell can lessen over time — you simply become less sensitive to it, or totally immune. Visitors to your home, however, can be very sensitive to it — some people more than others.

Sure, you can get a second opinion as to the presence of offensive smells, but my advice would be to follow the agent’s instructions sooner rather than later. You don’t want to sabotage the sale of your home by refusing to pay the cost of cleaning. If your home sits on the market for several weeks because you haven’t acknowledged the odor problem, the less and less likely it will be that your home ever sells at its true market value. You can prevent this situation by going to the time and expense of cleaning now. Don’t waste your time arguing about whether your house stinks or not, take action. (And while we’re on the subject, odors of tobacco smoke can kills the sale of your home, just like pet smells can.)

Trust me, if the problem is bad enough that your agent brought it up, it’s serious enough for potential buyers to cross your home off their list. And walking through your house with an aerosol can of deodorizer isn’t going to fix the problem. The more you introduce synthetic fragrances, the more suspicious buyers will be.

You’re going to need professional help, and here’s the kind of action needed:

  • Relocate the pets until your transaction is closed. Needless to say, pet toys and bedding should be removed.
  • Hire a professional to clean your carpets. This means someone with long experience in extracting dirt and smells. This is the biggest step to fixing the problem, and if it doesn’t fix matters, replace the carpets.
  • Ventilate. Open all your windows, even if it’s the dead of winter.
  • Clean upholstery, drapes, and other fabrics, including blankets and clothes. These materials have soaked in the smell for a long time, and they will give the same smell off until cleaned.
  • For staining and smells from urine, use the Clorox disinfectant it calls “Urine Remover.” The stuff works. Another effective product is “Resolve Ultra Pet Stain and Odor Remover.”
  • Paint your interior spaces. A fresh coat of paint works wonders, it has the same impact as the smell of a brand-new car.
  • For those times when your pet will be present, give them a thorough bath.