174 comments

How to Sell a House

In the making since 2007

An event in the making since 2007

This is kind of a special moment for me. Since the year 2007, which is eight years ago or 20 percent of my time alive on this Earth, I have been stuck with a less-than-ideal real estate situation. And it is just about to be resolved with the happy CHA-CHING! of a cash register.

To make the long story short, my old house building company created a fancy, modern house just in time for the late-2000s housing crash. After two years of listing it for sale and dropping the price, I took it off the market. Instead of selling it into the void at 50% off, I put it on the backburner as a rental house. Since then, it has generated generous monthly checks in exchange for a low level of background stress in my life.

Finally, our local real estate market has recovered fully and the time has come to put this place on the market, and so that is where our story begins today.

And it’s not just my story – selling a house is a big deal for many people. It can be a stressful event, or a looming unknown for those who have never done it before. This fear keeps people stuck in one place while commuting to another, or locked up on top of a million dollars of equity, when they could easily use that money to retire young and live somewhere else.

Loosening up your feelings about selling a house can provide a surprisingly big life boost. As a side benefit, knowing how to do it well will add money to your life while subtracting stress.

With my habit of renovating houses and moving around a little plus a wife who is a licensed real estate agent, I’ve been through a few more house transactions than average. But my Honey Badger tendencies have gotten me stung plenty of times, so I have seen the cruel side of the real estate market just as much as the generous. Because of this history, I figured it would be worth peeking in on my current house-selling adventures as an example.

What Selling Means

At the core, when you sell something you are becoming a salesperson. This means finding out who your customers are and what they want, then figuring out how to make your product appeal to them. You can pretend this is not true, and in a hot enough market you may even get away with it, but in general you tend to get walked over if you ignore the realities of your customers.

Knowing Your Customer

When I bought and renovated my first house at age 25, I saw things only through my own narrow lens. I was an engineer, so of course I assumed that advanced network wiring to every room would be valuable to everyone. I was young and fit and had no children, so of course we didn’t need three bedrooms on the main floor, or guardrails to protect the basement staircase.

Eventually, I applied this self-centered vision to my housebuilding company in 2005 and built something the market did not value as much as I had hoped. I liked modern, open houses which worship the Sun. Big windows. Exposed structural beams. Welded steel. Stone tile that goes all the way to the ceiling. While I shared this housing taste with Dwell Magazine and Los Angeles thirtysomethings, it turned out that my customers at the time were non-coastal people two decades older than me, looking for traditional Victorian-themed homes with enough bedrooms for their kids. They didn’t care at all about how many square feet of South-facing glass a house contained.

Similarly, if you’ve lived in your house for a long time and are getting ready to sell it, you might find that the people moving into your neighborhood are a different crowd than those moving out. Blue carpet and flowery country-style wallpaper were homey touches in 1982, but have become quite destructive to resale value here in 2015.

The bottom line is that your house will sell better if it matches the desires of your ideal customer. A full decade later, people my age (who I find more likely to have similar tastes) can finally afford houses like the ones I built, which means the local market finally likes the same things I do. At last, we pass the Customer Test.

Becoming One With Your Local Housing Market

Almost ten years ago, I signed up for an automated email system that alerts me of every house listing and every sale that takes place in my neighborhood. Although I would not recommend this for people not interested in real estate, it has been fascinating to me. Over time, you develop a deep intuition for spotting deals and ripoffs at the moment of listing, which you can refine by watching how quickly or slowly each house sells. Then when it comes time to sell your own house, you know exactly how to price it to hit the fine line of maximum profit.

In the case of the rental house I’m selling right now, similar homes were selling in the $550k-$600k range, so I set my price at $565,000.

Preparation for Sale

House buyers are in an amazing situation: they are making a spectacularly expensive purchase after only 30-60 minutes of touring the product. This means that they operate based on first impressions and rapid evaluation of the spaces. And thus your house needs to hold up well to this type of evaluation. It’s worth reading a whole book on this, but to summarize quickly:

  • Think Open and Airy: When buyers walk in, they need to be confronted with light, space, and charm. So eliminate anything that blocks this feeling – open the curtains, clean the windows, and remove stuff like baby gates or pet crates.
  • Renovations: In higher-end markets, strategic renovations including a modern kitchen, knocking out unnecessary interior walls, and (oddly enough) a great front door will return more than 100% of the cost in eventual resale. The key is in watching that cost: even hiring out all the work, a new kitchen with good cabinets, stone countertops and quality fixtures should total under $25,000 rather than the $75,000 many people end up forking over.
  • Stage the House: If it’s empty, hire a staging company. If you still live there, remove most of your stuff and have only sparse, tasteful decor. Selected artwork, a nice table arrangement with flowers, the perfect books on the shelves, and so on. Buyers will claim that they can look past a mess, but it just isn’t true. The well-staged houses get statistically higher and faster offers, which makes it a profitable choice – especially in higher priced markets. I spent about $1600 to hire Design Matters Home, which covered design plus all the furniture rental and moving.
  • Photography: this is critical, cheap, and yet usually overlooked. How many real estate listings feature blurry, dim pictures of the corners of rooms taken by the listing agent running around with an iPhone for a few minutes? To do it right, you need an SLR camera with a tripod and roughly a 10-22mm wide angle lens. Or hire an affordable pro – I was able to get a great real estate photographer to shoot my house, plus process and deliver about 50 digital images for under $100. Money well spent (and thanks Josh!)
    Let’s compare the effect of lackuster versus professional photography with a real-world example.
Figure 1: These are the actual pictures from a recent $425,000 listing in my area. Four hastily-taken pictures. Seriously?

Figure 1: These are the actual pictures from a recent $425,000 listing in my area. Four hastily-taken pictures. Seriously?

Figure 2: Since the system allows up to 25 pictures, I provided 25. Each with a full text description (most real estate agents leave the description field blank).

Hire an Agent or Sell it Yourself?

Even Mrs. Money Mustache (an accredited agent herself) admits that there is no special difficultly involved in what real estate agents do. While there are surely some brilliant, talented and hardworking people in the field, the hard truth is that only a minority of the agents either of us have met would fit this description. Besides, the real work is making the product great and getting it in front of buyers. In the US, this means getting your property listed in the MLS (multiple listings system). Although it is an antiquated and proprietary system, it is still where most buyers are shopping so you need to be in it to win it.

Suggestion: hire an intelligent and dynamic agent if you can find one and are not interested in doing the work yourself. Otherwise, hire a discount fee-for-services agent, or just put your place on Craigslist and then pay separately to get it into the MLS.
Most of your buyers, unfortunately, will still be shopping with a buyer’s agent, so you should expect to fork over 2.8% of your purchase price to pay his or her fee if you want access to that big pool of shoppers.

Showings, Offers and Negotiation:

Once you get the place listed, you are off to the races. Buyers will find it on the MLS system as well as Craigslist if you listed it there. They book appointments, review your hard work, and if you are lucky, make you an offer.

There will be negotiations, an inspection, and various deadlines and hurdles to clear, and the level of stress all depends on what type of market you are in: in a slow market, buyers might ask you to replace the whole furnace or roof, and walk away to the next deal if you don’t comply. In a fast one, you can safely reject anything silly and the buyers will tend to give in, lest they lose yet another house to other competitive buyers.

Pro Tip: Normally, buyers can make an offer at any time and you have 24 hours to respond. But if you write something like “All offers will be reviewed on Saturday July 11th at 12PM”, you can wait a week or so to collect multiple offers and respond to everyone at once. This increases your chance at having multiple options and creates competition between buyers, which increases your leverage in negotiations.

So Should you Do it?

Selling your house is always going to take some work, no matter how you approach it. But if you do the math right, it can be some of the highest paid work around, and come with great lessons in human nature as well. I have never regretted a sale and have many good memories (and dollars) to show for the hard work of the past.

At the same time, you should think about the work of eventually selling any house before buying it in the first place. If you’re not ready to devote a few weeks at some point in the future, and potentially absorb a 20% loss if you need to move in a down market, you should definitely consider renting instead.

Epilogue:

I started writing this article a few weeks ago, as Mrs. MM and I were working through all of these steps ourselves. We were ready at last on June 9th, finishing the last details and getting everything uploaded into the system just before midnight.

Just after breakfast the next morning, the phone rang with an incoming number from a Hawaiian area code. Some new arrivals to Longmont had studied our listing in detail and were very excited to tour the house in person. We agreed on an appointment time of high noon on that same day.

I biked down to the house to meet the prospective buyers, and we immediately got along like old friends. The house tour was more of a celebration of our shared tastes in home design, and they were full of questions about how every detail had been designed and built.

Before leaving, they gave me a verbal, full-price offer with no buyer’s agent to suck money out from the middle of the deal. In other words, $565,000 with no funny business, heading directly to our investment account in just a few weeks. We shook hands and I thanked them for their wonderful interest and the offer.

Following the Pro Tip above, we left the place on the market for a full week, collecting two more solid offers – but nothing quite as good as that first offer, because cutting out a buyer’s agent made their offer effectively 2.8% higher (about $16,000). So we sealed the deal, the house is under contract, closing will be next month, and all is well.

SOLD!!!

I wish you even better luck than I’ve had in your own real estate adventures. Own the house you truly want to own, sell any that don’t fit that description, and prosper.

Related Reading: How (and how not) to Buy a House

  • Heather June 20, 2015, 7:26 pm

    So, how did it turn out financially? Did you have to take a hit in the long run? Cost to build, rents, sales price? How did it all stack up? Beautiful home, by the way!

    Reply
    • Mr. Money Mustache June 20, 2015, 8:23 pm

      That’s a really good question. I think the break-even price for this place back when we first built it was probably around $520k (it was originally intended sell at around $650).

      Since then, the place has been rented at a pretty inefficient rent-to-price ratio of $2400/month or $28,800/year. Less than 5% annual return on all that tied-up capital after you subtract expenses.

      Plus the company lost money in other ways as well, and meanwhile I could have invested all this cash in the stock market and it would be up about 100% since then.

      So overall, while I am really, really happy to have this house sold, I might be about $300k richer if I had never started the company in the first place. But no regrets from this vantage point here in the great present.. I learned a ton about building houses and had fun re-earning the lost dough as well.

      Reply
      • Sarcasm June 21, 2015, 7:03 am

        No. You only became retired because of exceptional luck. You never made a mistake. Early retirement is only available for the lucky few that live life without ever making a financial mistake. That is why early retirement is an impossible dream.

        ;)

        Reply
        • Doug June 21, 2015, 9:59 am

          Because of exceptional luck you say? My findings about luck are the more effort I put into ANYTHING I do, including saving and investing for retirement, the luckier I get! I’ve made some mistakes along the way, namely bad investments, and still managed to become semi retired at age 34 (working on and off) and now am fully retired at age 54.

          If you’ve been following this blog for any time (I’ve been following it for 2 years now) you’ll see how MMM calls our western middle class way of life an erupting volcano of wastefulness. Personally I compare it to a hydroelectric power plant with ALL the sluicegates fully open, dumping all that surplus water down the spillway (and wasting all that potential energy) because there’s more water coming down the river than can be put through the turbines to produce power. If you live in a wealthy country like the USA or Canada (where I live), and make a decent income it’s not that hard to keep your expenses in line, save and retire early.

          Many years ago I failed a college financial course and somehow, despite my total ignorance of financial matters, still managed to retire early.

          Reply
          • Seraph June 21, 2015, 10:18 am

            Doug,

            All valid points but check the username of the person you replied to :)

            Reply
            • Mr. Money Mustache June 21, 2015, 12:27 pm

              Mr. Sarcasm also provided a winky face for those that didn’t notice his username.

              And it was actually a friend of mine that posted that comment – I could tell by the email address he used, which shows up on my admin side of the website. Nice one buddy ;-)

              Reply
        • Doug June 21, 2015, 9:01 pm

          Okay, I confess, you got me! You’re just as good as MMM himself is, with his April Fools postings over the last 2 years. Good post!

          Reply
          • Zac June 22, 2015, 11:41 am

            Doug, he almost got me too! I was starting to respond and, since I wanted to address him/her by name I scrolled back up to get a look at the name… and that’s when I stopped and chuckled a bit. Your comment enhanced the chuckling. :) Have a great day, sir!

            Reply
      • Dividend Growth Investor June 21, 2015, 11:15 am

        MMM,

        Thanks for the honest and detailed article on how to sell a house. I am in the process of evaluating whether purchasing a house makes sense. However, the aspect that I have not given much thought is the ‘obsolescence” factor in housing – the kitchens, interiors, house designs that are “hot” in 2015, might look terrible when/if I have to resell the place in 2025 – 2035.

        You might have answered this before, but what do you plan to do with the money/profit from selling this house?

        Best Regards,

        DGI

        Reply
        • Mr. Frugal Toque June 22, 2015, 8:12 am

          My two cents on this:
          People like rocks and wood and they always will.
          The more you use stone, granite, rough edges and hardwood (and good lighting) the more timeless your house will be.
          No one has ever gotten tired of living in a castle.
          The shiny, tin-foil rooms of the 70s are still out there, as are the carpeted walls, excessive mirrors and peeling floral wallpaper. Those things easily go out of style.

          Reply
          • Craig in Cary June 22, 2015, 2:10 pm

            “People like rocks and wood and they always will.”

            Excellent way to sum it up, and I agree 100%.

            Reply
            • JB June 23, 2015, 11:24 am

              Sell the house As Is and let the new homeowners update as they want. Why spend money only to get 80%.

              Reply
              • Heather June 23, 2015, 4:33 pm

                Kitchens that are mainly white in color are also timeless!

      • Chris June 21, 2015, 1:33 pm

        Congrats on the sale and thanks for the tips on selling oneself. And interesting that you too achieved an all-in return of about 5% or less.

        I have two rental properties, a condo since 1994 and stand alone house since 2006 and both have a total return of about 5% annually (surprisingly) after all expenses calculated and estimated. I too am surprised that the return isn’t greater and cringe that had the same money been invested for example in a boring old bank stock (RY, TD e.g.), my return vs the condo anyway would have been 5 fold greater. Oh well, likewise great learning and wiser for it. Cheers.

        Reply
        • Craig in Cary June 22, 2015, 2:14 pm

          I feel that having a rental property is a decent way to hedge your bets.

          Over time, odds are that in most cases, the stock market will beat your rental property ROI. However, the rental property will generally be more resilient to economic downswings (folks gotta have a place to live!!).

          Of course, a rental property requires more work than stock investing (assuming you do the buy-and-hold philosophy).

          I think they’re a nice complement to each other, if you’re willing to deal with the “renters” aspect of it. Sort of like stocks and bonds, IMHO…probably shouldn’t invest 100% in either one, but a nice mix is probably a good idea.

          Craig
          (who hasn’t yet bought his first rental property, but has been lightly shopping around for several years).

          Reply
          • Andy in Sydney June 22, 2015, 11:28 pm

            In most markets the return on a rental property isn’t just the income but comes from capital growth.

            The problem is that you don’t know how much the market will grow or shrink over the time you hold the property.

            Here in Australia the market is crazy. I’ve just sold a rental property for 35% more than I paid for it in 2010.

            Reply
          • Rick June 25, 2015, 10:15 pm

            I’m not at all convinced by the “folks gotta have a place to live” argument. What we saw in the last recession was that a big chunk of America found moving out of mom’s basement to be an optional expense and the housing market tanked partly as a result of that.

            Reply
  • Bubba Jr June 20, 2015, 8:21 pm

    Congratulations on the sale!

    Good idea on the Pro Tip – with the delayed offer review. Another good tip I once got: if you’re selling an older house, then getting an inspection (or performing the steps yourself) beforehand can keep you from being surprised when under contract.

    Reply
    • PK June 21, 2015, 9:30 am

      Great advice. Just remember homeowner’s disclosures in many locales require you to disclose if you’ve had an inspection done and include it. An approach that might satisfy the letter of the law (but perhaps not the spirit) would be for a trusted family member or friend to commission an inspection, based on the premise they themselves may want to buy the house, and let you know of any critical items requiring attention. But one way or another getting an inspection done and fixing critical deal-killers in advance is really important.

      Reply
      • Dr. Bill June 22, 2015, 12:34 am

        @PK: That’s funny. I actually hired a licensed inspector –the full show–and highlighted what needed fixing and documented the fixing I did. That seemed to work exceptionally well, and it precluded low-ballers from ruining the sales experience for me. I was able to sell my house at a $30K loss in 2012 because I’d put about $40K down when I bought it. NoBigDeal, I made $70K in a house in NW FL we owned for 16 months, so for that period of chaos I was net ahead.

        Why I bought that last house in 2006 after just getting out in time leaving FL is a separate story for the marriage files, but we came through it all okay.

        Reply
    • Craig in Cary June 22, 2015, 2:18 pm

      Also, some (silly) people will walk away from a home because it has a problem. If you’d caught and fixed it yourself, you might have had a sale instead.

      Another thought: If you’re a DIY-er (like me or MMM), finding the problem ahead of time will give plenty of time to DIY and save money on the repair. If you find out about it from a buyer inspection, you’ll have to deal with it on the buyer’s schedule, so might wind up shelling out a couple grand paying someone to fix something you would usually have done yourself.

      Reply
  • Amanda June 20, 2015, 8:35 pm

    FYI – MLS is not the only option. We gave our house at a very fair price, followed the same pattern w/r/t copywriting, staging, and photography – and put it up on Zillow as a “Make Me Move” listing. Cost to list? $0.

    We had 3 families schedule showings over a weekend; received 3 offers – 2 full price, all cash and one with a 30 day close. No agents on either side, about $750 in attorney fees plus sales tax to state & town (~ 1%).

    Conservatively, in Connecticut, this saved us ~ $30,000 in cost.

    Selling is not everyone’s bag, but if you approach the sale of your home by being reasonable and fair about your own price (this what most people get wrong) and are helpful and transparent, it can save you a boatload to do it on your own.

    Reply
    • Holly June 21, 2015, 6:09 pm

      I’ve thought about doing that when/if we sell. Houses in our neighborhood rarely last a month on the market, and the vast majority sell in less than a week. I can’t imagine paying 6-7% for a realtor without even trying to sell by owner first!

      Reply
  • Mikes Reiche June 20, 2015, 8:39 pm

    The house looks pretty great! You’ve only given us bits of the house in the past, its fun to see the whole thing! I am finally getting rid of the weight of an old property purchased in 2008… on an FHA loan covering 100% of the cost. Of course we moved 3 years later and couldnt afford to lose 15K by selling it. We became overnight landlords and have been dealing with bad property management companies and other headaches since. Losing on average of $250 per month for the last 4 years. We are FINALLY about to close with the current tenants and I will only be losing another 6K, but what a relief. I want to get rid of it and move on. Luckily we are in a much better situation now and already have over 50K in equity on our current home. Looking forward to selling in the next few years and downsizing to something we can upgrade and pay cash for! Thanks MMM for all the inspiration over the past 10 months I’ve been reading…

    Reply
  • Mike June 20, 2015, 8:41 pm

    When selling cars in the past, I’ve found that well-shot pictures go a long, long way, especially when you’re selling among a crowd of folks with 1 or 2 blurry shots of the same side of the car. It’s a high ROI for just a few minutes of work.

    Reply
    • Darrell June 22, 2015, 6:40 pm

      I was thinking that on a lower scale, this works for cars, too. When I had a car I needed to sell, I was crazy about keeping it perfectly clean. I wiped it every day, buffed the headlamps, vacuumed as needed, kept the tires shiny and black. So if someone called and asked to see it, even if I was at work, it looked perfect. I took all of my personal belongings out of the car, too, and kept from eating or drinking in the car. I remember spending 2-3 hours deep cleaning all of the upholstery, too. I ended up selling higher than kbb!

      I’d guess selling a house would be similar. Keep it freakin’ clean at all times, as if the Queen might stop in for some tea.

      Reply
  • Diana June 20, 2015, 9:47 pm

    Beautiful home! I love the pantry…it’s so huge or was that a mini-mart?

    Reply
    • Danielle June 30, 2015, 8:39 am

      Haha, good one!

      Reply
  • Frugal Bazooka June 20, 2015, 10:06 pm

    Do you know what the tax implications on your gains will be? We flipped 2 fixers many years ago and if memory serves me we paid our marginal tax rate on the gains. Even if it was the cap gains tax 20% +/- it was still painful to take so much risk and end up with so little gain. It made us rethink real estate as an ongoing investment.
    As you mentioned there are so many things that could (and did) go wrong the rental. After it was all said and done, even with the nominal gains that we did realize, if I put a price on my time, anxiety and frustration dealing with all the legal and human variables I would argue that we made no profit at all.

    Reply
    • Frugal Bazooka June 20, 2015, 10:10 pm

      I forgot to add that I’d love to see a similar post on how you go about selling a car. This “how to sell your house” post was a good course on marketing 101. I’m getting ready to cash out my primary residence and move to a more tax friendly state – so it’s very relevant to my current state of mind.

      Reply
      • Dr Bill June 22, 2015, 12:37 am

        @FruBaz: I don’t know if MrMM can help you here, because he wears his used puppies out! Maybe one of the former Clown Car Owners who came out well can help!!!!

        Reply
        • Frugal Bazooka June 22, 2015, 10:33 pm

          Dr Bill,

          You’re probably right about that…and yes i am a semi-former clown car owner. I won’t bother mentioning the idiotic car I’m trying to sell, but I will admit that I’m in the market for a used Honda Fit. My wife has one and it’s amazing – 39 mpg, zero repairs at 95,000 miles and incredibly comfortable. I would love to avoid buying a car altogether, but we live in SoCal – unnecessarily spread out freeway capital of the world.

          Reply
    • Hamster June 20, 2015, 10:28 pm

      The biggest tax hit on sale of rental properties is often not just the cap gains, but depreciation recapture. The year you sell the house, you have to pay tax so the government can ‘recapture’ all of the depreciation you claimed over the last X years that the property has been a rental. This means that even if you buy a house for $600k and sell it for $550k, you may still owe taxes if you have been depreciating it for a few years.

      Reply
      • Frugal Bazooka June 22, 2015, 12:04 am

        Hamster,

        I completely forgot about the depreciation recapture noose. Ultimately we cashed out, made a very small profit and stuck to REITs and other indirect RE investments.

        I’m sure RE investing can be profitable and maybe even only mildly frustrating for some people, but after I had to evict my first tenant – in a city court system sympathetic to tenants who do not pay their rent – I knew it was not for me.

        Reply
        • jestjack June 22, 2015, 7:09 am

          I’m with ya Bazooka. I’m a long time Landlord (37 years in September) and the “world is upside down” ESPECIALLY in rent court. The key phrases …”mold”….and “lead based paint”…simply add to the angst. The funny thing is I just read an article in local paper concerning the “lack of affordable housing” and the causes….and of course the need for government to get involved to “correct” the imbalance….
          Hamster brings up an excellent point and the “bogey-man” investors forget about…DEPRECIATION RECAPTURE…Recently I had my accountant “run the numbers” on a long held property that I was/am considering selling. It was “breath-taking”…almost 50% of the “profit” would go to State, local and Federal taxes. My hope is Mr. Money Mustache has taken this into consideration.

          Reply
          • Frugal Bazooka June 22, 2015, 11:01 am

            Jestjack,

            the funny thing about my land lording experience was I started it as an idealistic hippie-ish kid who did everything by the book and went out of my way to create a home for my tenants that I would want to live in. By the time I had thrown in the towel I was a world weary businessman who saw tenants as liabilities who went out of their way to try to destroy what I tried to build.

            Kudos to you for putting up with the nonsense of gov’t intervention and bad tenants for so long.

            Reply
            • jestjack June 23, 2015, 6:09 am

              Frugal Bazooka….Thank you for the kind words. Like you I was very idealistic when I began in the real estate biz….But time and “the times” wear you down. The “client pool” is shallow and the tenants are unrealistic and many(most) have no respect for the property. Add to this the costs of properly maintaining properties and it’s a recipe for disaster. MMM seems to have put this in perspective with the recent sale of his rental. Taking that money and putting it in a balanced mutual fund yielding 10% makes PERFECT sense from an investment and “peace of mind” standpoint.

              Reply
    • Frugality Runs in the Family June 23, 2015, 11:20 am

      I read about one interesting way to avoid a tax hit on flipping a house: use funds from within a self-directed IRA. It almost certainly wouldn’t work if you lived in the house, but for investors who want to flip, I understand that it can be done. An article is at http://www.mainebiz.biz/article/20150323/CURRENTEDITION/303189991.

      CAUTION: according to the article, you have to be very careful to follow IRS rules. I’ve never done it at all, so I can’t speak from personal experience, but it’s something I’d like to look at after I retire.

      Reply
  • The Professor June 20, 2015, 10:21 pm

    The timing of this post really coincides with what’s going on in my life now. I went to sell a 2 bdroom/2 bath condo I lived in for many years around the end of 2008. With the downturn in the economy the timing was bad. I pulled it off the market and proceeded to rent it for over 6 years straight. Not one month of vacancy so it turned out well. In addition I went through a divorce and since the property was bought before I was married it was still in my name. I guess it was on my to do list but I never put her name on that property..haha. Anyway, that turned out well. Now it’s back up in value and I want to sell it and use the proceeds to pay off my current mortgage.
    I sold another condo in that same building a few years ago (to pay off the ex) and was able to sell it without listing on the MLS. I worked with a realtor and we had two offers without even putting it on the MLS. This one was a small studio and closed- all cash. Paid 2 1/2% to listing and buying agent each.
    Tenants are moving out at the end of the month and hope to have it ready within a month. It’s walking distance to a major university in southern CA so if it doesn’t sell I suppose I can always rent it again. Nice to have options since it’s already paid off.

    Reply
  • Ricky June 20, 2015, 11:11 pm

    So, I love this post, even though it seems a bit out of character. I had no idea you had such great taste in home design and architecture. My style is similar, though with a bit more of a timeless approach.

    That’s a huge, fancy pants house. How come we never heard about it before? I like the idea of building something that YOU would want to live in, not just use the cheapest materials and methods possible like many home builders and landlords. Love that philosophy.

    Could we get a tour of your current house? Does it mimic a similar style?

    Also, interesting last paragraph of the post there. It doesn’t sound like the most Mustachian thing to say, to own the house you truly want to own, but I whole-heartedly agree. I value a space I truly want to be in above most other things in the world. So I’m okay with paying up for a great place to live: small, well designed, efficient.

    Reply
    • longwaytogo June 21, 2015, 1:24 am

      He has mentioned it many times before.

      Mainly the house and his defunct building company are discussed in the article titled “Mr. Money Mustaches big mistake”

      It’s also the rental house that he refers to that has been funding most/all of his retirement expenses.

      Reply
  • Smart Money MD June 20, 2015, 11:34 pm

    It was fortunate that your house was in a location that was favorable for renters and that you were able to rent out it out during the down market. Did you often find that there were things to repair and maintain as a landlord even though the house was relatively new? And did you have many months without a tenant?

    I’m currently renting, and consider myself a low-maintenance tenant. I do find it a hassle to ask my landlord to take care of basic routine items like changing out the air filters in the HVAC air return, repairing broken closet doors…etc. Of course, I am still slaving away trying to recover from over a decade of negative net worth to get out of having to deal with a daily commute and long hours. I do consider renting to provide more freedom, but I wonder if my mindset will change when we have kids.

    Reply
    • The Professor June 24, 2015, 8:41 pm

      Just a side note SmartmoneyMD, you might want to keep all those receipts and document the time you put in to fix things. When or if your landlord decides to raise the rent that can be a good negotiating tool!

      Reply
      • Smart Money MD June 24, 2015, 9:12 pm

        Good point. My rent will probably go up the next time the lease is up. One of the frustrating aspects of renting is that while the landlord’s mortgage remains unchanged with time but rent will inevitably get raised. One of the perks of being a landlord if you are in a hot market with a good tenant pool. Thanks.

        Reply
        • Insourcelife June 25, 2015, 7:24 am

          Mortgage might stay the same but property taxes, insurance, HOA fees (if required), maintenance/repairs and other expenses will all go up over time. As a landlord myself, I have no problems with passing those increases to the tenant over time if my rent still remains competitive. Also, remember that not all landlords have a fixed mortgage – some might have a variable rate, although I don’t consider that a good reason to raise the rent if the landlord didn’t lock a good fixed rate on when they could.

          Reply
          • Smart Money MD June 25, 2015, 6:40 pm

            True. In my case, my landlord has me paying the HOA (which I’m not sure is appropriate–most would just add that to the rent). Looking at the sale price of my rental, my landlord is getting quite a deal out of me, even if it’s a 15-year mortgage.

            Ironically, I’m in a market where there aren’t too many middle of the line rentals, so my landlord is able to keep the rent somewhat high and still keep tenants.

            Btw, in general is the landlord responsible for yard maintenance?

            Reply
            • Insourcelife June 26, 2015, 7:33 am

              Yeh, I just include the HOA fees as part of the monthly rental. The less bills my renter pays the easier my life is since I don’t have to worry about them missing a payment.

              If it’s a condo or a townhome the HOA will usually do the yard maintenance. For a single family home it’s all negotiable and depends on a renter really. If they want to save some money on rent in exchange for some manual labor, then maybe let them do it and see how it goes. Although I would make the official rent cover the maintenance as if it was outsourced to a third party and then “pay” my tenant back. This way if they are doing a piss poor job I can easily outsource it again.

              Reply
  • Jeff June 20, 2015, 11:50 pm

    I just fixed up and got an offer on my BFM, also, a rental house I bought in 2005 and *tried* to flip. I did a lot of things wrong on that one. Getting a nice tax write off this year (although I would rather pay taxes on a gain) and we are buying a Tesla. Just kidding, plowing it into paying off other debt (on LFMs and MFMs ;) thanks in part to your philosophy. We’ve always been frugal, but after reading what you’ve written, I feel we have a purpose to our frugalness and it makes a big difference. So thanks!

    As my wife likes to say “we’re turning this franchise around”.
    Oh yeah, and I’m switching to Ting, I think I owe you $25 :)

    Reply
  • Jackie June 21, 2015, 6:13 am

    Are you dumping it all in to Vanguard (etcetera) as you did with your old house? Or are you doing something different this time with the proceeds?

    Reply
    • Michelle June 21, 2015, 2:13 pm

      Ditto to this comment. I was also wondering if you could touch on the tax implications.

      Reply
      • JB June 23, 2015, 11:28 am

        Unless you make over $500K on the sale, there are no taxes .

        Reply
        • DrFunk June 23, 2015, 2:54 pm

          Um… not entirely true. If you lived in the house as your primary residence at lease 2 of the last 5 years, did not acquire the house through a like-kind exchange, and owned the home at least 2 of the last 5 years, THEN – you and your spouse can each exclude $250,000 ($500,000 total) in capital gains. If you don’t meet all of those requirements, then you have to pay.

          http://www.irs.gov/publications/p523/ar02.html

          Reply
    • Mr. Money Mustache June 26, 2015, 7:42 am

      Yes – all to Vanguard (probably at least in large part via my Betterment account).

      There will definitely be some tax implications to this sale:
      – I “bought” the house as part of closing down my construction company, for $460k
      – It has been rented roughly 5 years since then, depreciated to about $402k

      So my $565k sale price will trigger roughly $105k of long-term capital gains, plus $58k of depreciation recapture.

      Lots of tax! But only because it is coming in a year when I will already have a surplus of taxable income. First world problems and nothing I will complain about.

      I do have a very good accountant now that is helping out on structuring business and real estate income properly for tax efficiency. The most efficient would be to “1031 exchange” this into a multi-unit dwelling, but I’m too stubborn for that and want life simplicity even if it costs me financial efficiency at this point.

      Reply
  • Anemone June 21, 2015, 7:49 am

    When my aunt sold her house, she had it painted first, had the wood floors refinished, and she got someone to do some gardening, too. I think she said she could add 10k to the price just from that (in the ’90s). It moved fast once she listed it.

    Reply
  • Alexander June 21, 2015, 8:33 am

    So are you going to use that extra money to buy another rental? One that has a better rent/price ratio? :p

    Congrats on selling it without using the realtors! That is some good cash you saved. If I ever sell any of my homes, Im definitely going to do it on my own. What your wife said is correct, what a realtor does is not that hard and I think I could do better myself. Problem is like you said, listing it on the MLS is crucial and a must I think.

    Reply
    • Brooke June 22, 2015, 10:04 pm

      Seriously? I’m a broker in the Denver area and I take offense to the statement that what a realtor does is “not hard”. That is ridiculous. For each of my clients I take tons of time out of the day to meet with them, assess their wants and needs, and then scour tons of listings for them so they don’t have to. On the listing side, I coordinate home cleaners, photographer, stager, pre-sale inspection all so they don’t have to as well. Then for every U/C I meet inspectors, make sure the title company is on point, make sure lenders are getting docs out on time, etc. I’ve even been on my hands and knees helping a seller de-weed her garden so it would look better for showings.No, it’s not astrophysics but it’s a LOT of effort, organization and energy into establishing these relationships and meeting expectations. Just because realtors live off of commissions DOESN’T mean you can devalue what we do.

      Reply
      • Brooke June 22, 2015, 10:09 pm

        To further my point, I bet Mrs. MMM doesn’t find real estate “that hard” because if you’ve followed what’s been said about her career, she occasionally sells for family and friends and that’s really it. I’m sure if you only do a few transactions a year, real estate is a breeze. For those of us who juggle tens of clients at a time, not so much.

        And for the record, when you’re dealing with contracts and people’s money, there’s a ton at stake. It’s a huge responsibility to word contracts the right way and in your client’s best interest so that you don’t get sued or your client’s finances are at stake. Real estate is not just taking pretty pictures and talking about how great the open floor plan is. I’m sure I could trivialize your job too, if I took some very basic components of it and made it seem like the whole story.

        Reply
        • Axecleaver June 23, 2015, 8:43 am

          It obviously depends on the market and the relative effort of other agents in that market. All of the agents in my rural area know each other very well and collude to exclude other agents breaking into the market. They’ll never show a place that one of the anointed doesn’t have as a listing contract. This drives listing business to the colluding agents, because if you don’t choose one of them, you can guarantee your property never gets any traffic.

          Our experience trying to sell a couple of years ago was frustrating. Our agent’s plan for selling our property was to take some pictures, list it on MLS, and wait for his commission check. Obviously, this type of strategy is not likely to succeed. This level of service is what I think people are talking about when they say what a real estate agent does is not hard.

          We were also frustrated because after interviewing several agents, none of them had any ideas for marketing the property beyond “list it on MLS and wait for a phone call.” Any tips for finding an agent that is more proactive and engaged?

          Reply
          • Brooke June 23, 2015, 9:38 pm

            Ask to see a realtor’s portfolio of their marketing and closed properties (with permission of former clients of course). I keep a binder with printouts of my blogposts, pictures from my open houses, I explain what reverse prospecting is (finding buyers through their search parameters in MLS), I include before and afters of staging, etc etc etc. Being a broker is something I find myself constantly having to prove myself at, a realtor who doesn’t feel that way and isn’t ready to show value isn’t going to be your top choice.

            Reply
        • ezra June 23, 2015, 10:05 am

          Brooke,
          From what I understand (outside of MMM): using a realtor is more profitable because of the work the realtor does results in a higher selling price and the difference in price more than makes up for the commission.

          I am with you; being a realtor is hard work, takes a lot of hustle, emotional intelligence and grit to be any good at it.

          Reply
        • Leslie June 23, 2015, 6:36 pm

          Real estate really does look like a profession that requires multiple skills that need to be done well with the buyer in mind. I think that the bar for entry is low so that might attract too many people that think it is an easy way to make a living. I am sure they are surprised when they find out that it takes a lot of planning, marketing, and strategy. Knowing how to stage a home is something that real estate professionals should be good at, and if they hire it out, they need to know what to look for in a stager’s portfolio. I was surprised last spring when we looked at homes that were listed for over 1 million dollars, that no one had bothered to stage, there were dirty clothes lying around and the counters were cluttered. (Just because it was near the ocean does not mean it can look unkempt.) I felt that the agent had let down his clients and was being lazy by not educating them about presenting their home in the best possible light.

          Reply
          • Brooke June 23, 2015, 9:40 pm

            I agree, there aren’t a lot of barriers to entry – just a few thousand bucks, some classes and you’re done. The tough part is convincing people to trust you with their time and money. I think some new agents just think they’ll automatically garner that trust just because they’re licensed, and that’s not true at all.

            Reply
  • T-Lou June 21, 2015, 9:02 am

    I’m recently separated and am living in my “dream house”. The children are off to university come September. I’m having a difficult time sorting out what to do. I’ve put so many hours into my gardens and the house is R2000 so my utilities are about the same as a rental I used to own 1/3 the size. This is important given that I reside in the Canadian North. I keep vacillating between putting in a rental suite downstairs and just selling out and renting elsewhere or posting notes on the doors of my neighbours living nearby with smaller homes asking them to call if they wish to sell.

    What I’ve come to realize is we have a huge amount of emotional baggage that goes into the owning of a house. As much as I love my house and feel like I’ve just finished renovating almost every room, there must be a reason I’ve taken to googling the small house movement so popular on the internet.

    I do agree that if you are at all capable, selling your house without an agent makes sense. I don’t expect it is an industry that will survive in it’s current form for more than the next decade. With the internet and downloading good quality pictures on a site where people are going to look anyway if they are interested in buying the real job of the realtor is so diminished. You just don’t need a realtor anymore to introduce you to potential buyers.

    Reply
    • Brooke June 22, 2015, 10:16 pm

      Regarding your last paragraph – it is seeming like in this super competitive market that people are thinking this way, that it’s just so easy to look at pics online and call up the seller and make an offer and then you’re done. There are so many reasons this isn’t true. For starters, in a less competitive market, your realtor’s marketing of your home is SO important to drive traffic to the listing. Also, the majority of people wouldn’t even know where to start in drafting an offer to purchase real estate. There are so many nuances and little things to consider, and just one small mistake can mean giving up a chunk of money. Also, any good realtor is going to meet the inspector, make sure the title company is set, and make sure the lender has what they need and are getting docs out in a timely manner. No, you don’t necessarily need a realtor to introduce you to buyers, but that is only a very small part of the story. Just like in other contract based industries, people will always need someone to negotiate and navigate the legal ramifications for them when making such a huge purchase.

      Reply
      • KiwiKaz June 22, 2015, 11:06 pm

        Or you could just pay a conveyancer or solicitor an hourly rate to do the exact same thing. Cost would only be a few hundred dollars. Thats how its done in other countries.

        Reply
      • T-Lou June 24, 2015, 7:18 am

        In canada there are services such as “Property Guys” that for a fee of approximately $600 will list for you and take pictures and provide draft sales agreements with guidance. I’ve sold two rentals this way. Any questions wrt the offer of purchase and sale I have simply left for my conveyancing lawyer, whom I needed to hire anyways to complete the sale transaction.

        Reply
  • Michelle June 21, 2015, 9:05 am

    Congrats on the home sale! The pictures look great and that’s awesome that you added a description to each photo. Sometimes I look at homes online and have no clue what I’m looking at, when a caption would really help.

    Reply
  • bfrazier June 21, 2015, 11:26 am

    I’d challenge the assertion that you have to be in the MLS system these days to sell a home or two.

    How non-mustachian!

    Not mentioning that you can sell a house yourself (for free!) on Zillow and or Trulia was an epic Mr. Money Mustache oversight in this article. This is Mr. Money Mustache, where knowledge and self determinism are paramount, but you advocate giving away 6% to a couple of strangers with no vested interest?

    Why shouldn’t the primary goal here be to save money by educating yourself and doing the legwork yourself just like the Mustachian ethos in everything else? Are we suddenly just not smart enough? (Sorry Mrs. Money Mustache, but information is power and the days of having to have a Realtor are over… and yeah, it takes one to know one.)

    I think Mr.Money Mustache blew it out of respect to Mrs., but leaves his readers ill-informed.

    Reply
    • Mr. Money Mustache June 21, 2015, 12:16 pm

      I think you are misunderstanding what it means to list in the MLS, B.Frazier!

      There are services that allow you to list your own property for a nominal fee. If you choose not to hire a seller’s agent, you won’t be paying that particular half of the 6%.

      Secondly, while listing on Zillow, Trulia, Craigslist, etc. is great, I have found from experience (at least in the higher price market), many wealthier (maybe older?) buyers are not looking in these places. They shop exclusively with their agent.

      One compromise would be to list at a lower price on Zillow (the price you want to take home for yourself), and bump up the asking price by 3% for the listing in MLS.

      None of this has anything to do with supporting the Realtor trade – Mrs. MM and I both think it is a generally obsolete idea, and the reason she became one herself was as a way of gaining power over the entrenched system.

      Reply
  • Justin June 21, 2015, 11:33 am

    That’s pretty great. I ended up in the same situation back in 2004 and held on to my condo for a couple years and rented it out. Sold it FSBO sight unseen at asking price to a couple cashing out of the crazy California bubble market around 2006.

    Like another comment asked, I’m curious what you’ll do with the cool half million in cash? Lump sum into Vanguard 500 index?

    Reply
    • Mr. Money Mustache June 21, 2015, 12:22 pm

      Right on, Justin. Now I can see that your financial independence is based entirely on luck from the 2006 bubble real estate market!! (Just kidding)

      And yeah, this $0.56M is going straight into index funds (probably a lot via Betterment) just like everything else.

      If I hadn’t ended up with this blog, I would have bought a nice higher-end four-plex and ended up with $5000/month of rental income (about double what this inefficient house was bringing in). But now that writing and the associated fun opportunities takes so much time (and generate income), I have really been scaling back on other time commitments. At this point my retirement income will truly be 100% passive rather than 90%.

      Reply
      • Shay June 23, 2015, 1:02 pm

        Hi MMM,

        Amusing and helpful blog.

        Will you dollar cost average your 560k into vanguard, or just dump it all in? I’m sure you’re not big about timing the market.

        If you don’t dollar cost average (as maybe your current financial position affords), would you be more conservative and dollar cost average if your prior savings were less than 100k and you suddenly got a 560k windfall?

        Reply
        • chc4444 July 15, 2015, 8:53 am

          MMM could you respond to Shay on this. I have a recent chunk of money and I’m paralyzed trying to finger out if I should dump it all in or dollar cost average it in in this market where the stock market is so high. Also wondering what sort of timeframe I should use to dollar cost average it in. While I move it in slowly my cash would earn nothing (or not much). So here I sit with the money not really working while I puzzle over how to proceed. Help.

          Reply
  • Brian June 21, 2015, 11:58 am

    That’s a fantastic tip about setting a date that offers will be responded to ……. I can see how that creates an artificial demand and can’t entice people to put an offer in sooner rather than later .

    Is it safe to assume that the buyers you ended up finding came through craigslist Since they didn’t yet have a buyers agent ?

    Also would you recommend putting on the listing that you will offer a discount if they do not use a buyers agent ? Perhaps saying something about 1.5% cashback if you do not include a buyers agent ?

    Reply
  • Ellie June 21, 2015, 12:26 pm

    Good photography is A worthwhile investment. The right lens, angle and lighting can create looks that can sell a house faster than any description. Maxing out the 25 picture listing is the way to go- especially when you have a good product to show. I know when I am looking at houses I want pictures of the bathrooms, kitchen, bedrooms and if they aren’t showing one of the main rooms posted in the listing I assume it’s small, ugly or outdated. Shopping for my first house I tried to do a lot of legwork by going to open houses, but it wasn’t until I met a great agent that really knew the listing that I started seeing the better houses as they came on the market.
    One the most useful articles I have ever read. Thank you for the post and congratulations on the sale. That house is extraordinary.

    Reply
  • Bob June 21, 2015, 12:31 pm

    MMM, Wondering if you’d consider investing some of the proceeds at Realtymogul.com or realtyshares.com.? They seem to have interesting deals at attractive yields. Secured loans unlike Lending club.

    Happy investing

    Reply
  • Jake June 21, 2015, 1:23 pm

    Noob question: how were you able to sign up for automated emails that alerted you house listings and sales in your area?
    I think that would be a great way to get a grip of my own local areas RE market but a quick Google search didn’t produce results.
    Oh and congrats on the sale! I bet it feels good to be able to finally move on from what seems like was your biggest mistake/learning opportunity on your path to FI.

    Reply
    • Dr. FI June 21, 2015, 4:26 pm

      Hi Jake,

      You can easily set this up using Redfin or Zillow. I have it set up for my city, Newport Beach, and do exaclty the same as MMM. I get daily updtates for new, pending, sold listings so I can keep close track of what houses are selling for and what the style of the house is.

      Reply
  • Joe C June 21, 2015, 1:24 pm

    I can imagine how exhilarating it must be to finally reach a satisfactory sale after all that time. Congrats! My wife and I made the mistake of buying a doublewide home in 2007 shortly before the market crash and we’ve been faithfully paying on it since. We also did many upgrades during the first couple of years and have maintained it very well. We desperately want to get out of it and move into something that fits our family better since we have 3 young children now. Problem is that it still has not and probably will not recover the market value of when we purchased it. We are trying to decide if we would rather sell it at a significant loss and move on or do we rent it out? I’m not crazy about renting it out because some renters can do a lot of damage. Any suggestions out there?… Or insight into the best way to find a good tenant?

    Reply
    • Dr Bill June 22, 2015, 1:18 am

      I actually have recent experience with manufactured homes, my wife and I having moved into one two years ago, but by design and with intent. We’re 60+. It is a depreciating asset, even if kept up nicely and anchored to a concrete pad and with a decorative concrete apron full around. Why do such a stupid thing? Affordable single-floor living. Custom-precision manufacture. 6″ external walls, 10 – 12′ ceilings, etc. You know what post-2004 construction has been like. Quite durable.

      You can recover some of your mortgage costs when you sell, unlike had you rented. It is REMOTELY possible that you can recover most, but the neighborhood has to look safe, sound, and reasonably-cared for, or you have a UNIQUE characteristic that sets it apart. If you have good neighbors, they can positively impact the desirability of your (manufactured) house, and if the inventory is tight.

      I agree renting isn’t too viable a plan, unless a trusted family member or friend knows someone whom you can visit and check out how they take care of what they currently have. Remember also, you bought your home largely to get good price per square foot values, and that will be your future buyer’s desire. Mortgage rates are always about 1/2% higher on these structures, (and might now be in the low 5-s, which caps the price on your house as well. Remember who normally buys these: low down-payment buyers looking to build wealth or to keep within a budget.

      For us, any house, even if rented, is just a set of chores to fall behind doing, so it’s not a priority for us to have a REAL nice full-up house as we enjoyed for 35 years as we moved around some. Our double-wide is especially well-suited to us.

      For us, we know this to be our last house, so it goes into the estate when we’re both done here, and the kids can decide how they want to divvy it up. Heck, if our mountain town burns down (it almost did two months before we bought ours), or if the kids move to another part of the state, we can move what we’ve bought to another acre-size plot of land–talk about low cost recovery……

      One last thing: You can expand your double-wide by a third at a fraction of the cost of selling and buying a larger place. Unless your self-esteem demands you get out of a manufactured home–check your original home builder and see what they can do for you–even if it’s just space with little in the way of special features. heck, you might even be able to trade-in what you have and get a larger replacement for the same property, saving thousands in utility setups and the like.

      Reply
    • chacha1 June 23, 2015, 4:52 pm

      I agree with Dr. Bill – you should consider renovating or adding-on, if that’s even possible where your home is anchored.

      My father worked for a manufactured-home company in the 70s. When he left the company, part of his severance agreement was a doublewide home. We lived in that from the time I was 8 or 9 until I moved out for my senior year of college; my parents actually continued to live in it for a few more years.

      The house was originally placed in a “trailer park.” Not long after, Dad bought some acreage and the house was moved out there. Gradually he did renovations, starting with a permanent foundation; then a wraparound porch and new roof; then closing in half of that porch to make a new dining room & office. It was a two-bedroom, two-bath house and was plenty big for a family of four (my sister and I shared the second bedroom).

      Anyway, the newer homes are infinitely better quality than those built in the 70s. If your community allows it, I recommend building on versus selling at a loss OR becoming reluctant landlords. Good luck!

      Reply
  • B G June 21, 2015, 1:33 pm

    I am considering building what will be my second house and appreciate modern styling, like many of the details found in this home. One thing I didn’t see mentioned is the capital gains aspect to this and taxes? I haven’t looked into it too much, but when I eventually sell my first house (currently renting it) one strategy to minimize loss of profit is for me to move back into it for two years, making it my residence, before selling, helping retain more of my profit. Is this something you considered?

    Reply
  • kurt June 21, 2015, 2:46 pm

    Being from Australia and hence having to real idea about the American real estate market – were you tempted to hold onto the property a little longer to see if the market continues to go up? I noticed that a few years back you thought you could get 650,00 for it.

    Reply
    • Mr. Money Mustache June 21, 2015, 4:54 pm

      I like to answer questions like that in the following way: In my current situation, would I BUY a house for $565,000 in hopes of it appreciating even more? Definitely not.

      Of course, I could ask myself the same question back when the house was worth $450k and I would have still said no. And yet I still kept it like an emotional fool, wanting to recoup my initial investment.

      Looking back, I would have made MUCH more money even if I had dumped it in 2009, and bought index funds instead. And saved several hundred hours of work.

      Reply
      • KeithTax June 22, 2015, 10:26 am

        I see your attitude toward rental real estate a lot in my office. I’ve owned more than a few rentals and can tell you how good it felt as the last 10 were heading to someone else’s portfolio. For me, I burnt out from the work load (buying way too many.) It is emotional all too often and other investments many times outperform real estate.

        That said, you should have learned a lot. You get multiple college educations when you manage/own/landlord real estate. Once you have the education in real estate you can handle just about anything. Now you can apply the experience to any business venture.

        Another issue is taxes when you sell a property. The long-term cap gain rate also presents an Alternative Minimum Tax issue for a few people. LTCG rates are 22 1/2% if you are hit by AMT, not the standard 15% max. If you have a tax guy it is a good time to ask him to review your tax situation with the real estate sale.

        Tax calculators can help. I think if you click on my name you are taken to my website. (If this is too spammy, please delete the post, MMM.) Under the “Tax Center” tab is a link: “1040 Tax Calculator”. There are several financial calculators that can help under the link. Warning: tax calculators are at best an approximation. I know it’s self-serving to say, “Get a tax guy to review your tax situation,” but it is usually money well spent in these types of situations. Form 4797 can be a headache.

        Hope this helps you real estate guys (and gals).

        Reply
      • Bryan June 22, 2015, 10:50 am

        I too had a similar experience with selling a property in the SF Bay Area. The market there is very hot right now and who knows what I could have sold it for a couple more years from now? But then who really knows what the market will do 2 years from now? I was ready to sell since overall it was a poor investment compared to an index fund. I also did not consider doing a 1031 exchange since I really had no profit to defer or offset.

        I own rental properties in southern Colorado that are not experiencing the kind of market you are seeing in the general Denver area . It just goes to show how important timing and location are in the equation. Not discounting your property or the work you put into selling it! :)

        Reply
  • The Bearded Dragon June 21, 2015, 3:15 pm

    The tip about the photos is so, so key. We just bought our house in March of this year and I can tell you that the available photos of the house made a HUGE difference in how we felt about the properties we looked at. Even if you go to a space and it’s nicer than the photos, 19 times out of 20 the first impression has already been made via the posted pictures. Sounds like the process was about as painless as it gets.

    A few other people have mentioned this, but I also wanted to add that the house looks great! We’ve gotten snippets before but seeing so many high quality photos really gives a nice impression of the space.

    Reply
    • Darrell June 22, 2015, 6:44 pm

      When I bought my house, they did the complete opposite of everything MMM did. I was a no-go on the house, but my wife kept it on the list. She was able to “see through the mess.” I remember my 1 year old crawling on one of the floors and when he got up, his pants were black with dirt. It was gross. Weird colors…trash on all counters, awkward furniture set up, messy beds, clothes on the floor, sink full of dishes…etc. It was nasty. As we looked, they dropped the house $20k…and we ended up getting it for a steal. Properly staged…that house would have gotten $50k more than it did. I feel very lucky for that. So for Mustachian Buyers…remember to “look past the mess!”

      Reply
      • Good point Greg June 22, 2015, 7:48 pm

        Good point. for optimal outcomes, Mustachians should stage properly while selling, and “look past the mess” when buying.

        Reply
  • Tenzing Thinley June 21, 2015, 3:18 pm

    Great post Mr Money Mustache, I am grateful for your website and the information you share. During our recent visit to Malaysia I thought I met you but it must have been your twin, I asked him if it was you and he replied in French and in a confused state.

    We have been traveling as a family (2 children, wife and myself) for 17 months. I am quite a bit different in my investment style than you but I find great valuable information in your posts. Thanks for that. We sold everything we own to start our journey and that included our house. We didn’t have any money to pay for our travels except the equity in our home, I wasn’t willing to tap into my retirement investments, so we invested what we received from the sale of our house into the stock market and the gains have comfortably paid for our travels and has actually increased our total wealth by approximately 20% so far. Our main goal was to get out of the societal traps and create a future on our terms.

    We sold it for sale by owner using an MLS listing service near Seattle. I would say that’s the best way to go if you want to maximize the price. This is because of the following reasons:

    1) All forms and information is currently available on line. How to sell information is also available on line for free.
    2) There is no such thing as a good agent-they are all too busy trying to make quick sales. The conflict of interest by both selling and buying agent in trying to get the sale done quickly so they can move on to the next quick commission has ruined the US market and ripped millions of homeowners. On a $450K sale, 6% goes to agents-i.e. $27,000 for what actually amounts to roughly a $500 investment by the agents and roughly 8 hrs of service at the most. Its crazy that in this age of the internet this still goes on. But people are too complacent to figure this out by themselves, just as they rely on someone else to take care of their finances and rip them off with unbelievable fees.
    3) As a homeowner, you are doing all the work-cleaning, renovations, painting, staging, etc. The agent either directs you to do so or hires a staging company-both costs to you as homeowner.
    4) You can do a better job of walking potential buyers through your house. You have to learn to project an honest vibe, be transparent and be patient. Buyers are smart people, if you say you are willing to arrange for a middle party(attorney to do the paperwork and transactions)-you can give them back some of the cost savings for doing a direct sale. Tell them you’ll give them 2% which could amount to $9000 on a $450K home, this could pay for a nice vacation and some new furniture.
    5) You can do your own home pricing by comparing home sales locally. Most of the time you know your immediate neighborhood better than the agents. Keep an eye on recent sales, attend open houses and get a proper feel of what your house should be priced at. Here again there are great website that will spit out free comparable sales within your neighborhood.
    6) A great learning experience, most homeowners buy and sell 2-3 homes in their lifetimes. This way you can get the hang of it and represent yourself the next time.

    I blogged about why we were doing a FSBO at http://tibetannomads.com/2013/10/28/house-for-sale/.

    We are traveling globally as a family and I am glad to have had something spark in me at the age of 45 (20 yrs before my set retirement date) that prompted me to quit my desk job and the pains of a hierarchal system, take full responsibility of raising my children-my son has Autism and tap into that part of us all that is born to be creative and fun but which sometimes lost in the roles we play within society.

    Reply
    • Frugal Bazooka June 22, 2015, 10:39 pm

      Great post…I’ve sold a few houses over the years and even when you know all the ins and outs of the process, it can still be nerve wracking and time consuming. It’s good to read how you have thrown off the shackles of the RE cabal. (lol, it’s funny cuz at one time – right out of college – I had my RE license but never used it once)

      Reply
  • Faith June 21, 2015, 3:49 pm

    Great article, however, I do not agree that MLS is a necessity. We had our home listed with a real estate agent for a year. We were frustrated with having to prepare our home and leave (with our five kids) for each showing only to be told they didn’t like something that they could have easily known without even seeing the house if the real estate agent did a better job of interviewing and prequalifying for more than just ability to pay. For example, the master bedroom was separated from the rest of the house by the mudroom — a great feature for a family with teens, but a negative for one with an infant or young children.

    After a year, we did not renew our contract and my husband and I listed our home on FSBO and paid a few hundred bucks and we listed on Zillow (for free), I took each call and interviewed the prospective buyers. If a couple with one kid called, I asked if they were looking for a five bedroom 3,500 sq. ft home. Nope even though this information was included on both sites. A lot people just like to look at houses. We ended up with a full price offer from the first caller after posting on Zillow. We saved almost $30,000 that we would have had to pay in commissions. I strongly recommend sellers try to sell on their own first and save thousands of dollars.

    Btw, we live in rural Vermont, in a town of about 3,000 and the home was in the upper quartile of the market. So our pool of buyers is already very small. The good news is that you only need one buyer. Just the right one, as MMM found out himself.

    Reply
  • Shelly June 21, 2015, 6:53 pm

    MMM, you mentioned email alerts about all listings and sales in your area. What do you use for this? Thanks!

    Reply
    • Cher July 5, 2015, 10:41 pm

      You can just go to your local mls website, and key in the criteria you are looking for [ie: Style, sq ft, number of bedrooms or bathrooms etc]. Automatic notifications will be sent to you. This is a great way of staying on top of sales in your local area for future comparisons. Note: you can do the same with the fsbo companies.

      Reply
  • KiwiKaz June 21, 2015, 7:40 pm

    I dont understand how you have to pay the buyers agent. If the agent is working for the buyer, not you, why do you have to pay them. I would have thought the buyer would be responsible for paying the purchase price of the house plus the agents fee. What is the incentive for the buyers agent to negotiate a better deal for the buyer if it is the seller who pays them? (PS. Not from the US so unfamiliar with using a buyers agent to buy a house, we dont (commonly) have them here in NZ or Australia).

    Reply
    • slugline June 22, 2015, 8:16 am

      The buyer’s agent commission is understood to be a cut of the total sales price of the house. If there is no buyer’s agent involved, then the seller is able to lower the price and end up with the same sale proceeds. Yes, there is a definite conflict of interest that happens because of the commission-based system. I believe it’s just a matter of time before this is overhauled.

      Reply
    • John June 22, 2015, 7:41 pm

      The seller’s agent has the contract to list the house and that contract will typical entail a 6% fee. If another agent brings in a buyer, the seller’s agent will give them a cut of the contract, this is typically one half (3%). This other agent is often called a buyer’s agent, but it is important to note who is paying them. The money is coming from the seller and they have no fiduciary duty to the buyer. If the buyer actually creates a contract with an agent and is paying them, then the agent has more responsibility to represent them and try to get the best deal. But how this affects the percentage of the sale the seller owes the seller’s agent will be up to the contract details.

      Reply
      • KiwiKaz June 22, 2015, 8:17 pm

        So the next question is, if you dont have a contract with an agent because you are selling your house yourself, how can one be forced on you by a buyers agent? You have no contract with them or made any agreement to pay a commission.

        Reply
        • Brooke June 22, 2015, 10:41 pm

          If you want the buyer to come to you, most likely through an agent, then yes you do have to pay up the commission to the buyer’s agent. If you want to go find your own buyer, though, that’s on you to do it. Essentially the buyer’s agent commission from the seller’s point of view pays for the ease and convenience of the buyer having found you, and not the other way around.

          Reply
          • Kiwikaz June 22, 2015, 11:02 pm

            Whats so difficult about looking at listings on the Internet? In every other country in the world we all do just fine not using a buyers agent to buy houses. The contracts are standard documents (you can download one online) but if you want anything different you pay a conveyancer or solicitor a few hundred dollars to alter it. And if its sold via auction, there is no contract, offer or negotiation anyway – you have to accept the auction conditions as they are and just turn up on the day and bid along with everyone else.

            I think Americans are being totally ripped off with thinking they need a buyers agent to buy a house, and paying tens of thousands of dollars just so they dont have to look at listings on the Internet themselves. Plus if the buyers agent is refusing to even consider homes being sold privately the buyers are not even getting access to the full market, just a subset of it. Double rip off.

            Reply
            • Brooke June 23, 2015, 10:14 am

              The sale of a home is so much more than having eyeballs and looking online at pics. There are so many other factors that agents help clients with. All of my first time clients tell me they would have no idea how to navigate buying a home if I hadn’t explained the process and assured them I’d be there at every step to make sure they’re getting the right property that is in good condition.

              Reply
            • Insourcelife June 25, 2015, 8:04 am

              @Kiwikaz: 100% agree! It’s a rip off and it’s a painfully slow process for people to wake up and realize what’s going on. People get the buyer’s agent because “it doesn’t cost me anything” – what a bunch of BS! It costs you around 3% of the sales price. It’s similar to using credit cards – the merchant just marks up their product enough to cover the credit card processing fees and YOU pay for the convenience in the end. At least with credit cards you can make some money back with cashback, rewards etc.

              I bought a couple of properties without a buyer’s agent. Guess what – if you don’t bring one you can ask for 3% off right away … and that’s before you start negotiating on the asking price. Now, the listing agent does NOT have to pass the savings to the seller (per most of the contracts sellers sign with a Realtor) and I’ve had a couple that wanted to keep 6% all for themselves. WTF? They were counting on making 3% (splitting 6% with the buyers agent) and have a DUTY to watch out for the benefit of their client, so passing 3% savings to their client to get the sale done would be a no-brainer, but greed is a powerful thing. Still, every time I bought without a buyer’s agent I was able to save 3% before real negotiations even began.

              I’ve also sold without an agent and got a fair market price. Realtors will scream that they can bring in a better price but if you do some research and price your house right then that’s BS too! I always keep track of sales in the area where I sold and on a “per sqft” basis I’ve done as well or better than similar houses listed by Realtors. That means, of course, that I HAVE done better – if looking at the bottom line number – than selling with a Realtor since I didn’t have to pay their commission. I’ve literally added tens of thousands to my net worth by doing some research and leg work myself.

              I can go on and on but will stop here. It’s time to let Realtors push their message of how much value they add. Before they do – I agree, Realtors can (in italics) add value to someone who doesn’t want to be bothered. As for me, I will gladly spend several hours doing things myself to save thousands of dollars!

              @Brooke: it sounds like your clients really needed your help! I’ll gladly pull my own weeds out :)

              Reply
  • Hammo June 21, 2015, 8:15 pm

    I must start by saying, I don’t have a lot of interest in selling houses, but what you taught me in this post, time is way more valuable than we realise.

    Consider that 4 picture listing, that you’ve used as an example, then compare it to yours.

    The different to me, is you had the time to go all out, whereas the other owner is probably busting her balls on a 9-5 job and trying to make real estate investments work for her on the side. This path is definitely the long road to retirement.

    Time can make money, if you use it wisely.

    I know, you keep telling us and when your not, you kinda still are. :-D

    Reply
  • Tom June 21, 2015, 9:02 pm

    Maybe the other guy with the lazy pics is a fellow Mustachian who doesn’t enjoy staging and taking nice pictures? I thought the rule was to only do something if you would do even if it didn’t pay.

    So, would you have taken nice pictures and carefully staged the home even if you had known for a fact that it would not bring any more money?

    Reply
    • Mr. Money Mustache June 21, 2015, 10:02 pm

      I like that question too, and I was asking myself the same thing as I did all this work.

      I think the answer is yeah – I wanted the house to look good as a matter of pride in something I created. I didn’t feel right about selling a substandard product, since I’d have to remember my own lack of effort for the rest of my life.

      On the other hand, say I inherited a junky place I had never seen in a faraway state and wanted to sell it. I would probably just drop it to whatever the market price was for junky houses in that area.

      Reply
  • TomTrottier June 21, 2015, 10:03 pm

    A question – do staging companies have bigger/smaller furniture to suit different houses?

    Reply
    • Her Grace June 22, 2015, 1:54 am

      I haven’t staged houses, but I have done stage/scene dressing and have rented furniture from staging companies for theatrical/film purposes. Staging companies do have smaller furniture. In fact, most of their furniture is smaller than standard. This is a marketing trick to make the house look bigger than it really is.

      In the case of shooting a film at an interior location, the smaller furniture works not to make the room look bigger, but to make room for all the film equipment.

      Reply
  • TomTrottier June 21, 2015, 10:10 pm

    In Canada, if the purchaser pays over several years, the income is recognized in up to five years. When I bought my first house, i paid for it over five years of equal payments and the purchaser claimed 20% of the sale in each year on his income tax.

    Reply
  • Rob Jeffery June 22, 2015, 2:49 am

    Hi MMM,

    Congratulations on hitting this financial milestone!

    Would you mind sharing your thoughts on the increased volatility that will come from holding more index tracking shares? I read your article on the various layers of financial security and, while your rental house didn’t give you as much of a return as shares would have, it did at least provide you with relatively stable and regular monthly cash payments to cover your basic living expenses.

    If shares are a medium or probably long term investment, do you still plan to use these for living expenses if they take a significant tumble, or are you simply prepared to take that risk comfort in the knowledge that you already have a significant safety margin and ability to earn income should you need to. This is probably not so much of an issue for yourself now (perhaps you don’t need to rely on them at all?) but for others still approaching the threshold of savings needed to retire it probably is something that warrants some thought.

    Best,

    Rob J

    Reply
  • John June 22, 2015, 7:04 am

    thanks for this post. my wife and I just bought a house (my first buy), and we are ready to sell our current. it’s a tough process.

    Reply
  • WannaBeMMM June 22, 2015, 7:34 am

    It is so refreshing to read a blog with such straightforward facts. Real estate is often portrayed as the route to becoming rich and too many times getting rich quickly.
    The major issue in our society nowadays is the speed of information where we see so many success stories in this realm. People rarely think that these handfuls of stories are out of 100s of thousands representing fractional percentages at best. I like to compare it to playing in the NBA. Do a search on “number of players in the NBA” and click on the link that contains “unofficial-2013-nba-census” in the search results. This will show you how likely it is for you to make it. If success stories were presented such as this maybe we would not have such jaded people thinking they will be one of them. There is nothing wrong with dreaming but you better know how hard of work it takes to get there, and a little luck.
    MMM takes hold of his mistakes by the neck and owns them. He is the first to tell you how dumb he has felt along the way and even what he is still doing that defies his own philosophy. These are the types of stories people need to hear. They are inspiring and not beyond anyone’s own grasp.
    I know you may be running low on stories but please keep them coming!

    Reply
  • Mr. Enchumbao June 22, 2015, 8:21 am

    It might not work in the best interest of the seller but as a buyer, I do enjoy seeing hastily-taken pictures. It can mean less competition as long as you can read through the lines and are able to spot a gem. During the years that you owned it, what was your vacancy rate compared to the area?

    Reply
  • Stockbeard June 22, 2015, 9:36 am

    you pictures are gorgeous. When we sold our condo, the rel estate agents insisted to take the pictures themselves. The result was beyond horrible: one of the pictures was even the wrong condo!

    As you mentioned: no description whatsoever, pictures ranging from uninteresting to completely dark/blurry. It is an essential step and many people forget about making it right. Good pics can put you ahead of the pack.

    Reply
  • fiveoh June 22, 2015, 9:38 am

    I just wanted to say, AWESOME HOUSE! I’d buy it in a heartbeat.

    Reply
  • Dave June 22, 2015, 11:08 am

    I just sold my house last month and used a realtor. I asked for a 5% commission and negotiated a rebate through my bank to lessen the impact. The house sold in 2 days with four full price offers and a full back up offer offers. All the offers had buyer’s agents. The main benefit was that I went on vacation for a few weeks and didn’t have to worry about sitting around to do showings or leaving every time someone wanted to stop by. Arguably, realtors don’t do much work in relation to the compensation, but it was worth it to me to be considering fully qualified buyers from afar and using my time to do things I enjoy rather than holding open houses. I’m already FI and still made a nice profit, but if I wasn’t I probably would have at lease considered a hybrid deal (low cost broker, listing on MLS myself).

    Reply
  • Travis June 22, 2015, 11:49 am

    I would recommend DIY for home selling and if you do I would suggest shelling out $500-$1000 to get an attorney to review docs and help with the closing and other paper work.

    We did this but planned ahead and used pre-paid legal through my work so it cost us $100 after all said and done. This was great because we worked with buyers that didn’t have an agent and we as the sellers were abloe to write a seller friendly contract with the help of the lawyer.

    All in all it was a smooth process and easier than most since it was actually sold by a neighbor who directed a would be buyer our way at their garage sale…we never even officially listed the house on the market. If going DIY I would also suggest telling your neighbors about the house sale, offering them a gift card to anyone referred that goes under contract. That way they can help spread the word, they get to choose their neighbor, they get a small reward and you get more free marketing.

    Reply
  • Anthony June 22, 2015, 12:23 pm

    Agreed on the need for quality listing photos. What are people’s thoughts on the inclusion of a house map/diagram? I for one love when listings include this. Helps place where the pictures are taken as well as see the “flow” of the house.

    Reply
    • chacha1 June 23, 2015, 5:02 pm

      If I were shopping for a house, a floor plan would be a HUGE plus. I know how I use my current space, and I would not want to waste time looking at a house that would require me to take out 60% of the interior walls. Or, gourd forbid, move a bathroom. :-)

      Reply
  • Captainawesome June 22, 2015, 12:42 pm

    I bought a foreclosure back in 2012 knowing the property would be an investment. I knew once it was time to move I could easily rent it or sell it, for more than I paid. I immediately put work into it to make it modern (new kitchen, new hardwood floors, new paint etc). I know I am due to move next year and have been getting anxious regarding putting it on the market in the Spring of 2016. This gives me a good idea of things to look for and do in order to sell it fast and relatively painfree. It pains me to lower my retirement contributions temporarily to put money towards new carpets, paint, potentially a bathroom renovation etc. but I know that I stand to make at least 100k, and that would be at the low end of the market. This has definitely been an education experience, but I can’t wait to put that money towards better investment modules and go back to renting.

    Reply
  • Max June 22, 2015, 1:05 pm

    Hey there,

    You are probably already aware. But since this was a rental unit you will be required to pay back all depreciation to the IRS (whether or not you claimed it on your taxes) unless you do a 1031 exchange to purchase a new rental property. I’m sure you probably already realize this but just a heads up for those who may not be aware.

    Best.

    Reply
    • B G June 22, 2015, 1:50 pm

      This is a great tip. Thanks MMM for a fantastic post and also for all the intelligent responses it creates.

      Reply
  • Alexandre Cunha June 22, 2015, 2:26 pm

    *Are we getting betrayed?*

    I’ve enjoyed reading MMM since I accidentally found it about two years ago. It’s incredibly amusing and entertaining and tons of good lessons to learn. I have seriously changed my mindset about how to reach retirement and which purpose it serves me. I’ve become a (light) mustachian myself in the process and I have enjoyed the outcome of being one and looking forward to retire in the next few years.

    Which leads me to a big “thanks” to MMM and his wife for sharing their story and ongoing thoughts.

    That being sad….

    I have the feeling this blog is becoming a sell out and articles are full of product placements. I’m not sure the writer(s) behind this site are free from the “evil corporations” which they criticize so much.

    I’m not saying this is necessarily a bad thing. Even if MMM admits it (which I doubt he will) I might still be interested in reading future articles since I can easily filter out the ad crap. Although the opinions would be more biased and less credible.

    MMM has discussed his marketing deals openly in the past (kudos for him) but I’m under the impression he no longer does it as this must have become a very serious source of income for him. If that goes public his whole reputation goes with it. It’s like finding out the Survival guy (Discovery Channel) was sleeping in hotels between his takes…

    I know, I know, another conspiracy theory. However this is something I’ve been reading between the lines in the past year maybe and my instincts are usually right. I do hope I’m very wrong in this case…

    Apologies in advance for the stand-by mustachians…

    Reply
    • Mr. Money Mustache June 22, 2015, 3:08 pm

      Nope, everything will remain open and non-secretive as before. I have no “marketing deals” but do take advantage of affiliate links for products that I actually use and recommend: http://www.mrmoneymustache.com/affiliates/

      Maybe you are referring to the fact that I linked to my staging company and photographer in this article? They don’t even know I did it and they certainly aren’t paying me for it. I just thought they both did a great job and hoped that a link from this blog might give them a boost.

      Reply
      • Alexandre Cunha June 22, 2015, 7:59 pm

        I guess I’ll have to give you the benefit of the doubt. Although an unlikely one… As I said before, I don’t think there’s anything inherently wrong in making money out of your hard work and writing skills.

        Reply
        • Marie June 23, 2015, 1:26 pm

          Mr Mustache is ridiculously honest, initially he started this blog to help people with personal finance and had no idea it would become popular. He is a engineer and a carpenter, and a family man. I feel it’s easy to get jaded with the amount of bad ethics out there in the modern America. However, from what I’ve read MMM is the real American deal. Even if he’s Canadian. :)

          Reply
          • Alexandre Cunha June 24, 2015, 5:27 pm

            It’s really unfortunate that this old saying is more true than never: there’s no such thing as a free lunch.

            If you look around it’s everywhere, specially blogs. It’s almost ridiculous the amount of money running in the back of a popular blog while the readers keep thinking they are reading true non-biased opinions. Of course it’s in the bloggers best interest to keep things as hidden as possible.

            To be honest I don’t know if this happens with MMM blog and I overall have the same feeling you do. The possibility is there, he has ad agreements and tons of healthy readers. I’m sure he got tons of offers to sell out and we have nothing more than his own word that he didn’t.

            Let’s not take this for granted though.
            He’s just people bound to no rules or agreements so he might do whatever he feels like with this blog.

            I’ll continue to take his word for it but will keep my eyes open since a lot of his articles are convincing wealthy people to buy this or that product. At some point the products might not be in your best interest anymore but in his.

            We’ll never know when this switch will flip.

            Reply
            • B G June 24, 2015, 6:37 pm

              Nothing wrong with staying vigilant about your sources, but I read a comment like yours Alexandre, and a few thoughts come to mind: 1) did he just read the same blog entry I did? 2) can’t this guy think for himself?

              Maybe there is some other MMM blog post you have in mind, (in which case you should have commented there, and tried to stay on point) and I dont know the whole story of what you are talking about.

              Do you have a house to sell? Have you thought about the nuts and bolts of what it takes to do a FSBO? Thought about how much money goes to a realtor and how badass it would be to have that money go directly into your pocket instead?

              I have. So when I read a well thought out, badass blog post like this one, I say to myself, right on! Great ideas presented and helps sharpen a lot of what I had already been thinking about. I dont give a shit if MMM is making cash selling products. There is great content here, I know that because I used my own mind to think about it. And make my own judgements about what I read. If I see a good idea, I use it.

              If you are looking for someone to hold your hand, and you forgo your own thought, letting someone else do all your own thinking, you might as well get off the Internet now and go step in line with the long line of non-thinking masses.

              Reply
    • B G June 22, 2015, 8:25 pm

      Wow, it doesn’t take much to bring out the conspiracies. The problem with most of them is they are flat out wrong. Once one has worked in a position of authority – with full access to the entire back story – like operated a business, worked in higher levels of government, written a smart well read blog :-) or virtually any other position that gets criticized, it is almost comical to see the conspiracies people come up with.

      Reply
      • Frugal Bazooka June 22, 2015, 10:53 pm

        It’s strange to me the number of people who either believe in conspiracies or are constantly looking for them in America today. What makes it strange is relying on conspiracies to explain questions with unknown answers is usually done by people who have been wronged and are looking for explanations. Why strange? Because America today is 100% better than America 50 years ago, 30 years ago and probably 10 years ago. Likewise the world is a safer and better place to live today than ever before. I now believe that conspiracy theories are more the product of boredom and too much free time. Which means that millions of conspiracy theorists need to get off their asses and either lift weights or build something.

        Reply
        • B G June 22, 2015, 11:38 pm

          Yea, it is a strange phenomenon. In my own specific experiences, the cases where I fully knew the back story, the people advancing conspiracies (on forums, comments, blogs, letters to editors, etc) clearly had no experience or insight into the details of what they were talking about.

          Reply
          • Frugal Bazooka June 22, 2015, 11:56 pm

            Some of it probably exists because the internet has created a weird information universe where all websites, theories and “facts” are relatively equal no matter how many lies are written in them.
            Then you have the instances where the gov’t DID do something stupid and that is generalized to be the rule instead of the exception (LSD experiments for example).
            Should we really believe that a gov’t that can’t create a high school level website (ACA), can capture and reverse engineer alien technology?
            Call me Occam’s Razor!

            Reply
        • Kenoryn June 23, 2015, 10:55 am

          Ha! I work in government and we are always getting these ridiculous letters we have to answer, and I joke that these people have too much time on their hands and we should write back with a list of local organizations that are looking for volunteers. Alas, that’s not how gov’t works and we have to answer their ridiculous questions. Someday when I’m Premier things will change. ;)

          Reply
          • Frugal Bazooka June 23, 2015, 1:30 pm

            lmao! Imagine if all the conspiracy folks turned that negative energy into something useful and positive??

            btw, I would like to attend your coronation!

            Reply
  • Fran June 22, 2015, 2:56 pm

    When we sold our last home, we used a discount realtor. This was a mistake because we were in an area that was off the beaten path and didn’t get much drive-through traffic. The realtor didn’t advertise the house very much. They also took very poor-quality photos. I took my own photos with my little $200 point-and-shoot digital camera. It took less than an hour of my time to take the photos, crop them, and email them to the realtor. The house didn’t sell with that realtor because they had overpriced the house (there weren’t many comparable sales in that area, so we didn’t realize it). After the contract was up, the agency wanted to renew it and list the house at a lower price. The original realtor had left the agency, and the owner said they didn’t want to reduce the price and upset us. That was a little ridiculous on their part since we had built a new house and were not emotionally attached to that one, and we had been paying taxes and utilities for 6 months along with mowing the yard. We went with a new realty agency and the lower price, and it sold immediately.

    To me there are two important points here. One is that it takes so little time to take a lot of good photos (I’m still not sure why some realtors can’t do that), that you might as well do it. It could lead to a higher sale price or a quicker sale, which is a financial benefit to the seller since that is less time that they have expenses on the house. The other point is to price your house reasonably, without emotion. Our realtor erroneously thought that we would have an emotional attachment to the original price they put on the house. Once you are ready to sell, it needs to be all business.

    Reply
    • Craig in Cary June 23, 2015, 8:32 am

      Another thing with selling real estate…always carefully read and validate the “facts” in the listing and consider “break points”. Don’t just assume the realtor got them right.

      I was selling a vacation home a few years ago, and everything looked great in the listing….or so I thought. I’m a pretty good photographer, and had provided the realtor with really nice photos to use, so no problem there. I reviewed the text of the listing and made some suggestions, so no issue there, either. I’d seen other, similar (often much older) homes *selling* for similar prices, yet we weren’t even getting viewings.

      The problem was in the numbers. The house was about 3400 sq feet, with about 1/3 of that being an unfinished basement. Since we were selling it in 2009-2010, the market wasn’t exactly kind (timing wasn’t my choice….was getting divorced), so it sat on the market for almost 2 years before finally selling….for $200,000 less than the appraisal price in 2007, when it was built. Ouch.

      About 2 months before it sold, I was reviewing the listing, and noticed that the realtor had listed it as something like “1983 sq ft finished, 1421 sq ft unfinished.” He had measured the rooms with a tape measure and added them up to that.

      Sounds pretty reasonable, right? Adds up to around the right total, so all is good, right? No. The house was *actually* something like 2142 sq ft finished (according to the actual plans, which I had provided the realtor), not 1983. Big deal, right? I mean, sure it’s just over 100 sq feet, but not *that* big of a deal, is it?

      Yes, it is. One of the key criteria potential buyers (and their agents) search by is “finished sq ft,” usually by numbers such as 2000, 2500, 3000, etc. By incorrectly listing our house at only SEVENTEEN sq ft below 2000, we had missed out on a tremendous number of potential buyers. After all, if you’re spending a half million on a lakefront vacation home, you probably want more than 2000 sq feet usable space, right? The realtor should have known to even *fudge* the numbers by such a trivial amount, knowing that his measuring wasn’t exactly scientific, and how important that 2000 sq ft threshold is!!

      I had the realtor make the correction, and within a month we had a buyer. This buyer was only the second person to ever even come to look at the property in almost 2 years. Coincidence? I don’t think so. I think it would have sold at least a year earlier and probably for more money if the numbers had been right.

      So, the lesson here is to make sure all your numbers are accurate, and consider the break points against which people search. Don’t lie, but make sure you aren’t *just* above or below one of those easy even numbers for which people search. In other words, never price a house at $301,000….you’ll miss a ton of people who put in “$300,000” as their cap.

      Hope this helps someone!

      Craig

      Reply
    • Kenoryn June 23, 2015, 10:53 am

      I am constantly amazed by the incompetence of realtors. The photos MMM put up here are absolutely fantastic compared to what you usually see – often 3 dark and/or blurry pictures clearly taken with a phone or something where you can barely make out what’s in the picture. And the information in the listing is often really sparse as well, and poorly written with typos, spelling mistakes, sometimes in all caps, etc. How hard is it to take a few photos and write a decent description, for the amount they’re being paid? We’re looking at vacant land listings now and so many have no pictures and just say something like “70 acres about 20 minutes outside of town”. No telling whether it’s woods or fields, has water or not, road frontage or not, wet or dry, exposure, etc. Amazing. Like it doesn’t occur to them someone might want to know those things.

      Reply
      • Jason June 30, 2015, 8:25 am

        It’s so funny you mentioned this, I was thinking the same thing about 50 acres of lake frontage land I sold a few years ago.

        When I purchased the land, the MLS had two hastily taken photos at dusk. After careful examination you could make out objects that appeared to be trees with something shiny (water?) in the background. Tons of typos and grammatical mistakes. Description typed in all caps. Terrible. Property had been on the market two years, go figure.

        When I wised up, decided to pursue FI, and sold my recreational land about 5 years later I took my OWN photos – 25 of them like MMM. Pictures of large oak trees and the fall color. Panos of the lake from the (freshly stained) pier. Pictures of wildlife people could expect to see (deer, fish, woodpeckers, butterflies, turtles). Google Earth photo showing arial view. Map of the overall lake copied from a website. Copy of the Survey. Topo map showing a possible 1-2 acre pond site if someone were so inclined to build one. Pictures of the nearby public boat ramp and country store that sold fishing supplies. Hand drawn map showing location of water meter, water taps, electric meter, and interior road. Pics of wildflowers. You get the…well….picture.

        My point is, the photos don’t necessarily all have to be of the actual house / land, which a lot of brokers completely miss. Features, amenities, survey, floorpans, local area attractions, etc all come into play when someone is evaluating a property.

        Reply
  • Cubic June 22, 2015, 9:12 pm

    Blogger doesn’t equal journalist. You don’t have to read to far to see all the bias, nepotism, and brown nosing here on MMM. None the less, MMM is a decent site. I estimate about 80% of what’s stated here is actually based in reality.

    There are a lot of things MMM never talks about:

    One being that our economy isn’t designed for everyone to have success. It’s designed for those at the top to prey on the uneducated. If everyone were successful who’d do the work? When the poor start succeeding it makes those at the top very nervous. In fact it wasn’t to long ago MMM was being targeted by others even as far as threatening legal action. Why? They don’t want sites like this teaching people how to succeed.

    One of the biggest reasons so many factories have left the USA is to keep our wages down! NOT because they couldn’t make a profit here.

    I’m sure like everyone else that dares give a dissenting opinion I’ll be torn to shreds now.

    Reply
    • B G June 22, 2015, 9:47 pm

      Torn to shreds, or just skipped over for the next, more insightful and useful comment – probably a better use of time. That said, please direct us to your site, where there is some actual “journalism.” I will be looking for your comment and link. Thank you.

      Reply
    • Frugal Bazooka June 22, 2015, 11:45 pm

      You have an interesting take on the US economy, among other things. Let’s break it down for fun and learning since I have an inordinate amount of time to waste tonight.

      1. I was a journalist for several years and I can assure you that journalist doesn’t equal journalist either so you’re point is unclear. Many internet bloggers do write like a 3 year old with a machine gun, but you have to appreciate their passion. Of course many of them have no ethics and constantly write out and out lies, but I don’t think that applies here, do you?

      2. Bias, nepotism and brown nosing? You don’t really give examples or explain what the bias and nepotism is, but since this is a personal blog I think it’s fair to expect bias on the part of the creator. The fact that a few million people share his bias more or less defines the site – is that a bad thing? As far as nepotism, he announces any friends or family that are involved with the site. Is there something I’m missing? Brown nosing as you define it, appears to occur when someone writes something you agree with and you write back to tell the person how much you agree with them. Is that a bad thing?

      3. The US Economy – your take is a fascinating socialist didactic – but more of an opinion than a fact. How did those at the top get there? Where does the top end and the middle begin? Who designed this amazing capitalist monster and how has it kept going so successfully for so long? The “poor” succeed all the time and it’s happening more and more everyday. Not all, but most who work hard, stay in school and are smart enough to get good grades can expect to earn enough money to not be poor. No one gets nervous when this happens, it’s the opposite. Wealthy people benefit much more from a happy educated richer society than an angry uneducated poor society. Ask Russia and Cuba how the uneducated poor society worked out…and China how the educated, rich society worked out.

      4. Do you really believe with all the free media avail today that anyone can “shut down” an idea like being frugal, working hard, saving your money and investing? I hate to tell you but this idea was very popular during the Roman Empire, the British Empire and the early days of colonial America. It’s only recently when many people in society believe they are owed success rather than expected to work for it. It’s only recently when people have started looking for conspiracies to explain why success hasn’t fallen in their lap – deux ex machina – instead of busting their ass and hustling to get ahead.

      5. If you’ve ever owned a business you know what a profit margin is and you know it’s getting harder and harder for small and big businesses to make a profit in the US. Large corporations that own factories have massive overhead due to labor laws, insurance costs and competition from 3rd world countries that have 1/10 of the overhead to make the same products. There are corporations that make massive profits, but they also provide massive jobs for people so they won’t be poor. No company would ever leave the US just to keep your wages down. They would leave to try and find a place where they can find cheaper labor without the legal costs and overhead that eats up profit. Remember, corporations do not exist to provide jobs, they exist to make a profit. Once that stops there will be no jobs and no corporations.

      If you want a snap shot of what that world will look like, study the situation in Greece where they no longer have a tax base that can support the welfare state.

      I hope you don’t think this reply tore you to shreds. I just happen to disagree with 90% of your premise and I have a lot of free time. When I was younger I looked at the world much like you do. Once I started working I realized that my socialist college Economic’s professors were cowardly liars. They taught me that all corporations were bad and the economic system in the US is a conspiracy to keep poor people poor. That’s a terribly evil lie because it encourages people to give up. People who bust their ass in this country can still find a way to succeed. It’s not easy and it doesn’t always work, but it can work and that’s all anyone has a right to expect from the world.

      Reply
      • Gerard June 30, 2015, 12:43 pm

        While I appreciate your defence of MMM, I’m pretty sure Cuba is not uneducated. Its literacy rate is about the same as the US, and a fair bit higher than that of appropriate comparison countries (e.g., the Dominican). Actually, if you use the Dominican as a point of comparison (another big Caribbean Spanish-speaking ex US neo-colony), Cuba’s done pretty well under communism. Not as well as socialist-lite places like Denmark or Quebec (where busting my ass *really* helped me succeed, thanks to a more level playing field). But pretty well considering where they were starting from.

        Reply
  • Brooke June 22, 2015, 11:04 pm

    I am going through the comments, and am really dismayed by how many people are just crapping on what we realtors do for a living. I’d like to give a rundown of what I do for my clients, and then you can tell me if my service is a “rip-off” or not.

    For a buy side, I always meet personally with my clients and treat them to lunch or coffee while we discuss in depth what they’re looking for, qualified for, and what their expectations are. I use all of this information to scour tons of potential listings to narrow down the best ones, and get the tax information, survey report, etc all prepared nicely for them to see. Once they’ve selected homes to see in person, I drive them there, give my honest opinions about the state of the home and what repairs might need to be done, and offer valuable insight into the neighborhood’s reputation and nearby amenities. If we go UC I thoroughly explain the contract to them and negotiate all necessary points so that they are getting the best deal possible, even in a competitive market. I set up a calendar for all of their deadlines, coordinate with their lender about making sure docs are submitted and the underwriting is on schedule, and then contact the title company to make sure there are no title issues whatsoever and get them resolved if so. I meet the inspector and any contractors necessary personally at the house to verify the quotes and that nothing is missed. I make sure the listing agent has the proper comps to show the appraiser if necessary, and as each deadline passes I check in with my client and make sure everything is smooth and no one wants or needs to back out.

    On the listing side, I personally pay for all photography and staging no matter the price point. I provide detailed comps and recommend contractors and painters if necessary, negotiating on the seller’s behalf for discounted services if possible. Once a listing is entered into the MLS it is automated to go to other sites, but I don’t stop there, I write a detailed blog post about the home and post it on my website AND pay for google ads to get it out there for buyers searching that area. I will also do a reverse prospecting function in the MLS and contact potential buyers agents directly based on that. Then I’ll hold an open house personally and invite all the neighbors individually. Before going UC I call the buyer’s lender and verify their financial status, potentially saving the seller a lot of headache. I meet the appraiser and give my own comps if necessary and allowed by that appraiser. I set up a calendar for all the deadline dates and constantly communicate with the buyer’s agent to make sure none are missed. I help my sellers organize their home documents and information into one consolidated binder to make the property disclosure smooth. If the sellers need another home, I make sure the contract is written in their best interest so they can “rent back” the property to give them plenty of time to look themselves.

    I know this is so much more that I’m forgetting because it’s late at night. It just seems to me that so many people on this site are shitting over all that we brokers do, and why? Because we live on commissions only? Yes, you can browse pretty pics online and try to draft an offer yourself, but what if you’re missing something? What if you don’t ask about certain things and get screwed over? Sure, you can hire a lawyer to look over the contract but what if you didn’t know to negotiate for certain things in the first place? You need a real-time advocate and as smart as computers are, they can’t do that for you. Yes, we are driven to do all of the above because of the money, but also because we want repeat clients and to make you happy and help you along the way in such a huge transaction.

    Reply
    • Kiwikaz June 22, 2015, 11:58 pm

      In Australia we have people called conveyancers – all they do is prepare documentation for the sale and purchase of a house. And all the pre-contract stuff (like the offer document, checking title, council documents etc) is all done for FREE! They only charge for post-contract work – the actual settlement work and preparation of the legal documents and land transfer. Costs about $500-$600. I personally don’t think real estate agents should be doing anything with legal documents unless you are a fully trained para-legal such as a conveyancer or an actual lawyer. Talk about what if things go wrong! For everything else ,you get a professional builders report done ($600) and the financial stuff is managed by a mortgage broker (who also works for FREE). You pretty much buy a house for under $1-2k in costs.

      Reply
    • B G June 23, 2015, 9:02 pm

      I’ll speak for myself. I have no doubt some realtors work as hard as you say, and for many sellers and buyers, it is a good value.

      But I personally dont represent the average seller or buyer. I built my own house. And by built I mean I bought the lot, did the dirt work (minus sewer and water connections), poured footers and slabs, framed, etc etc. I encountered new construction questions virtually every day. Most of my evenings were spent on the Internet learning for the next day. The Internet, what a beautiful thing.

      So, if I decide to sell, or, rather, when, I will be doing my own selling as well. I am not intimidated by learning new processes and can read through legal documents and reach out to people that know way more than me. For me to pay a realtor would feel like a complete waste of money. I get the sense there are many other readers of this blog that have similar get-it-done attitudes. So I am not sure if people are dismissing what you and other realtors do, but I get the sense many here feel they could do it as well, and make/save a hell of a lot of money doing it.

      Furthermore, last Wednesday, I purchased another building lot, in a different town. There was absolutely no way I was going to pay a realtor for anything if I could help it. I went on NOLA, printed off a contract, the seller and I filled it out accordingly, we paid Stewart title to handle closing ($400) and all paperwork (what a deal), the seller agreed to pay title insurance, and we closed on Wednesday. Granted, a building lot is not as complicated as purchasing a house, but it was a great lesson on buying and selling real estate.

      What you might be seeing, Brooke, are a lot of smart people that have access to amazing Internet resources. Pre-Internet, Realtors might have had buyers and sellers in their noose, but not anymore…

      Reply
      • Kiwikaz June 23, 2015, 9:30 pm

        Its not that hard. I bought my current house over the Internet – sight unseen as I was living in another country. I had my parents do the open for inspection, then a friend of their’s did the building inspection, negotiated price via email, signed a standard sale contract with no conditions (but would have had a lawyer insert them if required) and then appointed a lawyer to handle the settlement. It was a piece of cake.

        All I needed was good photos of the property on the Internet, Google Street View, the online Council documents for the property (available for free), the floor plan, and friends and family willing to take a couple of hours out of their weekend to go look at houses for me.

        Seems to me you are simply paying an agent because you are too lazy or insecure to do your own thinking and are reluctant to learn how to do something new. Which wouldnt be a problem if it was a few hundred dollars and they saved us that amount in time and energy. But its not, its tens of thousands of dollars you are wasting – just to have someone hold your hand and reassure you. Us Mustachians are quite happy to Google “How to Buy/Sell a House” on the Internet, do some reading, and then get out there and do it for ourselves. Becoming immeasurably richer for having done so.

        Reply
      • Insourcelife June 25, 2015, 8:42 am

        @BG – Exactly! Wrong audience here. I bet if a car dealer stopped by in the comments section to explain all the benefits of buying new over used they would get a similar treatment.

        @Brooke: The point is – your profession IS a good fit for a client that regularly requires a “catheter and a bedpan” as described in this excellent post: http://www.mrmoneymustache.com/2012/09/18/is-it-convenient-would-i-enjoy-it-wrong-question/

        Intelligent DIY-type people can do everything a Realtor can do and much more, simply because ALL of their skin is in the game, not just a percentage. Incompetent Realtors also don’t help the cause at all. I track real estate for fun (and sometimes profit) and it’s amazing how many houses go on the market overpriced only to be “Reduced!” a couple of months later. A Realtor will get a seller to list with them by throwing out high numbers and then come back a few months later “we need to reduce the price, the market is a little soft right now because of (A, B, C, D)”. And you don’t even need to have access to the MLS to get the pricing right with the sites like Zillow, among many others.

        I also agree with Kiwikaz – a real estate attorney should be the one that does all the paperwork. I’ve never paid more than $400 to get the deal done by an experienced real estate attorney who handled every legal aspect of the deal. I know where to drawl the line on my DIY limits and this is definitely one of them!

        I’ve posted a couple of other personal RE anecdotes a few comments up if you care to read it…

        Reply
    • ickabug June 30, 2015, 9:59 am

      When we bought our house we used a realtor. She was excellent in her knowledge of various neighborhoods in an area that was new to us. She actually talked us out of a house that we liked because the neighborhood wasn’t so good. In hindsight she was spot on. Ultimately she took us to a house that was a brokers open house. The place wasn’t even listed yet. We were late to the open house, but she talked our way in anyway. We loved the place. It filled all of our requirements. We made an offer. We were up against two other offers and our realtor sold our offer against the other two. We didn’t enter a bidding war. The transaction went smoothly and both parties were happy at the end. We still live in the same house and despite looking around, we have never found a better place to live. Yes, it’s easy to find houses on the internets. Yes, there’s all kinds of info available to us and we can learn anything. But it can also pay to find a skilled expert when you have only your limited experience to rely on. Not to mention, some places never show up on the internets.

      Reply
  • Florida Mike June 23, 2015, 7:00 am

    No one commented much (or I missed it) on the cost of insurance and property taxes along the way for rentals. I know you can’t do much about property taxes but how do you handle the cost of insurance for these renatl properties?

    Maybe its just becuase I live in Florida where insurance companies fear hurricanes that only happen once a decade but all the properties I have ever owned cost me a fortune in homeowners insurance (i.e. a 1,500 sq ft ranch home built in the 80s-90s runs about $4-5k a year) And forget about owning anything in the flood zone as now those costs are killers with reform to the NFIP.

    I know its part of the cost of doing business but its hard to rent that same home for over $1,200 per month to be able to cover all the costs AND turn some profit.

    Anyone else faced with this?

    Reply
    • Mr. Money Mustache June 23, 2015, 7:32 am

      I think the solution is “Don’t be a landlord in Florida.” Or do VRBO/AirBnB to get higher rates.

      There are places with low taxes and insurance where you can rent out a house for over $2000/month. Or others where you can buy a $60k residence which fetches over $1000. Or apartment buildings. Those are the places to own!

      Reply
    • saladman8283 June 23, 2015, 3:04 pm

      I am a landlord in Washington DC – I rent out a house I used to live in. The insurance pretty much stayed the same. The premium for the liability coverage increased (as it should – there is a greater risk when the owner does not live in the house) but there is no coverage for contents or alternative living expense (ALE) – those are the tenant’s responsibility and are covered under their renter’s policy (which is a bargain and very affordable).

      I am also in the insurance business and am well-aware of the high costs of wind insurance in Florida. And, the price of NFIP coverage is going up. Maybe the lesson is, don’t own an investment property in a wind- or flood-prone area.

      The property tax rate did go up – the rate for investors is higher – and we can no longer take advantage of any homestead exemptions. However, property tax is part of the cost of being a landlord, and consequently, you can write it off.

      Reply

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