What Is Home Equity?
Equity is the value of the unencumbered interest you have in your property. The value of your interest in the property is determined by comparing the market value of the property with the amount owed on the property. For example, if the current market value of your home is $700,000, the balance you owe on your mortgage is $200,000, and you have no additional liens on the property, then the equity you have in your home is $500,000.
The equity you have in your home changes as the value of your home changes, which can be affected by how well you maintain your home, whether or not you update and improve your home, and fluctuations in the real estate market.
You gain equity in your home when you make a down payment, pay down the principle of your mortgage, complete home improvement projects that add value to your home or when the market value of your home increases.
You lose equity in your home when you take out a second mortgage, use a home equity line of credit, have a lien placed on your home, do not maintain your home in a way that retains your home’s value or when the market value of your home decreases.
While the purchase price of your home reflects what your home was worth at the time of purchase, it has little to do with the current value of your home. This means that whether you paid $300,000 or $2,000,000 when you purchased your home, the current value of your home may be a very different number.
Why Does Home Equity Matter?
For most homeowners, the equity they hold in their primary residence is a significant portion of their overall wealth. For many, it makes up the largest portion of their net worth, which indicates just how important equity can be. This also shows that increasing the equity you have in your home is a way to increase your net worth.
The equity you have in your home is an integral part of determining your potential profit if you choose to put it on the market, which, in turn, is essential in determining how much you can afford to spend on your next home.
You can also use a percentage of your equity as collateral in order to obtain a home equity loan (commonly referred to as a second mortgage) or a home equity line of credit. This means that, while equity is not a liquid asset, it can be used as collateral to help you obtain necessary funding to cover medical bills, pay college tuition, pay down higher-interest debts or fund your retirement. You can also borrow against your equity to pay for home improvements that may increase the value of your home.
If you would like to learn more about what your home is currently worth and the potential sale price of your home in today’s market, contact Nora Davis.
AimeeJo Davis-Varela is a freelance writer specializing in real estate, sustainable home improvement, eco-friendly landscaping, green living and travel writing. She is also the owner of Mind Your Manors, which provides second home management services.
Spring is the most popular time to put your house on the market and, as noted in this Realtor.com article, listing in spring can lead to better appraisals and a higher sale price.
While a good cleaning is certainly in order when planning to list your home, you may not want to wait for your annual spring cleaning if you want to be on the market by spring.
In order to get your home ready to sell early in the year, here are nine pre-spring cleaning tips to help you prepare your home and increase that all-important curb appeal to attract more potential buyers.
9 Pre-Spring Cleaning Tips to Increase Curb Appeal
Curb appeal is critical when selling your home. Potential buyers get their first impression of your home from how it looks as they drive by or walk up to it. It is also important to note that many folks in the market for a new home drive by houses to check them out before they make an appointment for a showing. Therefore, it is incredibly important that the front of your home is visually appealing in order to attract buyers.
1. Remove the clutter.
The first – and often most important – step in increasing curb appeal is clearing clutter. This could mean picking up toys left behind by your children or dogs, packing up your collection of garden gnomes, or reducing the number of flowerpots on your front porch.
If your front yard has any trash, car parts, furniture that has seen better days or other types of junk, it really is in your best interest to find a way to discard these items. Potential buyers often drive by a home before making an appointment, and if they see junk or clutter in the front yard, they will likely assume that there is more of the same inside. This will reduce your home’s perceived value and will likely make your home more difficult to sell.
Clean up the clutter to see an immediate increase in your home’s curb appeal and help get it ready to put on the market.
2. Trim trees, shrubs and bushes.
The next step is to trim low-hanging branches, prune shrubs that may be partially blocking walkways and cut back bushes to give your yard a cleaner look. If your front yard has views, now is also a great time to cut back trees and shrubs to highlight the view. Or, if your home has interesting architectural features, you will want to prune your landscaping to highlight those features.
Most importantly, you want your yard to look clean and be safe, and you want to avoid having branches or bushes that impede your potential buyers’ ease of movement throughout your yard. If your potential buyers have to duck under low-hanging branches or step around shrubs encroaching on walkways, they are more likely to think about the amount of work that will come along with buying your house. While a few untrimmed trees might not seem like a big deal, this could cause your potential buyer to choose another house that will require less work.
3. Clear the weeds.
This one might seem a bit too obvious to need to include on this list, but you might be surprised at the number of homeowners who forget to pull weeds before a showing. The only time potential buyers do not mind seeing weeds growing in the front yard is when they are looking at fixer uppers or other homes that they expect to get for a great deal. When purchasing homes that need work, it is expected that the landscaping will need work as well.
However, this also means that weeds are a sign that your home might need work or has not been cared for quite as well as one might hope.
We all have weeds and it is a pain to stay on top of them, but when you are preparing to sell your house, keeping weeds out of your yard is a critical part of increasing and maintaining your home’s curb appeal.
4. Replace your mailbox.
If you have a great mailbox that is in good repair, you may be able to skip this one. However, it is worth considering, since this is an affordable way to improve the street view of your home. A new coat of paint might also be enough to give your mailbox a facelift. Just be sure that you take a look at your mailbox and consider whether a new coat of paint or a new, upgraded mailbox might make your home more attractive.
5. Upgrade exterior light fixtures.
This home improvement project may be a bit more expensive than replacing your mailbox and may require an electrician but can really make a difference in the first impression folks get from your home. Older fixtures can make your home look dated, but new exterior lights can freshen your home’s façade with little effort.
6. Reseed natural grass lawns.
Many Southern California homeowners are moving away from natural grass lawns and towards drought-tolerant landscaping. While fewer homes have front lawns, this is still a common landscaping feature and one that requires extra care to keep it looking its best when it comes time to sell your home.
When your home is on the market, you will need to keep your lawn mowed, weeded and edged regularly so that you are always ready for last-minute showings. For now, you can get started on improving the appearance of your lawn by reseeding it. This will allow new grass to grow and fill in bare or thin areas by the time you are ready to list your home.
7. Refresh plantings.
Plants are a great way to quickly and affordably add color and texture to your yard. If your plants are looking a bit lackluster, now is the perfect time to refresh your garden beds. By replacing or adding to plants now, you are giving your flowerbeds a couple of months for the plants to get established and begin to fill in before your house goes on the market.
This is also the perfect time to increase visual interest by adding pops of color to your front yard landscaping.
8. Apply a fresh coat of paint.
It is often a good idea to repaint the exterior of your home when you are preparing to sell, but this is not in everyone’s budget. If your house does not need to be completely repainted, or if you would like to keep your home improvement expenses to a minimum, you may want to consider just painting the trim to freshen your home’s façade.
You may also want to consider painting your fence, front porch or any patio furniture that may be on the porch. Paint is an inexpensive way to quickly refresh surfaces and structures, which makes it an easy, affordable way to immediately increase your home’s curb appeal.
9. Clean your windows.
While you definitely will want to add this to your to-do list, you will want to take on this task after you have completed most of your other updates or cleanup efforts. Washing your windows too early in the process could result in needing to clean them again after paint or dust is introduced from other projects.
Make sure you clean both the exterior and interior sides of your windows to allow in light and give your home a clean, bright look that potential buyers will appreciate.
Savvy sellers know that potential buyers get their first impression of your home before they ever set foot inside. In fact, many buyers will drive by your house before calling your realtor to schedule a showing, which means that first impression could determine whether or not those buyers even see the inside of your home.
This makes increasing curb appeal important for every seller, but it is particularly important if the inside of your home is far more impressive than the exterior. If most of your home's finer points are found inside -- like travertine tile, granite counters or other appealing upgrades -- you must first entice your potential buyers to come inside before they can see them.
If your home is lacking curb appeal, this can be pretty challenging.
Fortunately, even if a paving stone driveway or river rock garden wall is out of your budget, there are plenty of easy ways you can improve the first impression people get when they drive by your home.
Here are three easy ways to increase curb appeal to help attract potential buyers:
Removing unnecessary items and cleaning up your front yard is not just for homeowners who happen to have an old clothes washer on their porch or car parts filling their driveway.
It can be just as distracting to see a plethora of potted plants, an extensive collection of garden gnomes or other items that make your driveway, front yard, porch or entry look crowded and cluttered.
Of course, if you do have car parts, old appliances or extra furniture in your front yard, those things need to be the first to go.
Part of increasing your home's appeal to potential buyers is creating a welcoming atmosphere where they can see themselves living. If the space is filled with your personal items or shows off your very distinctive personal style, you may need to de-personalize the space enough to allow potential buyers to see their bistro set on the porch or their garden art in the yard.
Therefore, removing the clutter and de-personalizing the space is just as important as mowing the grass or pulling weeds.
3. Fix the Little Things
Larger home improvement projects may have a more significant impact on your home's value or its curb appeal, but small projects are easier on your budget and are often enough to immediately improve the look of your home.
Replacing missing window screens, repainting your home's trim and filling cracks in concrete walkways will help increase your home's appeal and show your buyers that your home has been well cared for over the years.
Make a list of the small projects from which your home could benefit. Then prioritize them with those that will make the most difference at the top of the list. Determine which of these small improvements and repairs will most comfortably fit into your budget, and spend a weekend or two checking them off of the list and improving the look of your home.
By following these simple steps to increase your home's curb appeal, your home may spend less time on the market before it sells. If your home has been on the market for a while and there seems to be a lack of interest, try these simple steps to refresh its look, which may lead to renewed interest and more showings.
For more ways to increase curb appeal, check out 101 Ways to Prepare Your Home to Sell.
If you would like to speak to an Ojai realtor about preparing your home to sell, contact Nora today.
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