Archive for June 2011
Financial Analysis on an Oil Corporation Takeover
June 27, 2011 | 
Author 
Gulf Oil Corp.–Takeover
Summary of Facts
o George Keller of the Standard Oil Company of California (Socal) is trying to determine how much he wants to bid on Gulf Oil Corporation. Gulf will not consider bids below $70 per share even though their last closing price per share was valued at $43.
o Between 1978 and 1982, Gulf doubled its exploration and development expenses to increase their oil reserves. In 1983, Gulf began reducing exploration expenditures considerably due to declining oil prices as Gulf management repurchased 30 million of their 195 million shares outstanding.
o The Gulf Oil takeover was due to a recent takeover attempt by Boone Pickens, Jr. of Mesa Petroleum Company. He and a group of investors had spent $638 million and had obtained around 9% of all Gulf shares outstanding. Pickens engaged in a proxy fight for control of the company but Gulf executives fought Boone’s takeover as he followed up with a partial tender offer at $65 per share. Gulf then decided to liquidate on its own terms and contacted several firms to participate in this sale.
o The opportunity for improvement was Keller’s principal attraction to Gulf and now he has to decide whether Gulf, if liquidated, is worth $70 per share and how much he will bid on the company.
Problems
o What is Gulf Oil worth per share if the company is liquidated?
o Who is Socal’s competition and how are they a threat?
o What should Socal bid on Gulf Oil?
o What can be done to prevent Socal from operating Gulf Oil as a going concern?
Competition
Major competitors for obtaining Gulf Oil include Mesa Oil, Kohlberg Kravis, ARCO, and, of course, Socal.
Mesa Oil:
o Currently holds 13.2% of Gulf’s stock at an average purchase price of $43.
o Borrowed $300 million against Mesa securities, and made an offer of $65/share for 13.5 million shares, which would increase Mesa’s holdings to 21.3%.
o Under the re-incorporation, they would have to borrow an amount many times the value of Mesa’s net worth to gain the majority needed to gain a seat on the board.
o Mesa is unlikely to raise that much capital. Regardless, Boone Pickens and his investor group will make a substantial profit if they sell their current shares to the winner of the bidding.
ARCO:
o Offer price is likely less than $75/share since a bid of $75 will send its debt proportion soaring, thus making it difficult to borrow anything more.
o Socal’s debt is only 14% (Exhibit 3) of total capital, and banks are willing to lend enough to make bids into the $90′s possible.
Kohlberg Kravis:
o Specializes in leveraged buyouts. Keller feels theirs is the bid to beat since the heart of their offer lies in the preservation of Gulf’s name, assets and jobs. Gulf will essentially be a going concern until a longer-term solution can be found.
Socal’s offer will be based on how much Gulf’s reserves are worth without further exploration. Gulf’s other assets and liabilities will be absorbed into Socal’s balance sheet.
Gulf Oil’s Weighted-Average Cost of Capital
o Gulf’s WACC was determined to be 13.75% using the following assumptions:
o CAPM used to calculate cost of equity using beta of 1.5, risk-free rate of 10% (1 year T-bond), market risk premium of 7% (Ibbotson Associates’ data of arithmetic mean from 1926 – 1995). Cost of equity: 18.05%.
o Market value of equity was determined by multiplying the number of shares outstanding by the 1982 share price of $30. This price was used because it is the un-inflated value before the price was driven up by the takeover attempts. Market value of equity: $4,959 million, weight: 68%.
o Value of debt was determined by using the book value of long-term debt, $2,291. Weight: 32%.
o Cost of debt: 13.5% (given)
o Tax rate: 67% calculated by net income before taxes divided by income tax expense.
Valuation of Gulf Oil
Gulf’s value is comprised of two components: the value of Gulf’s oil reserves and the value of the firm as a going concern.
o A projection was made going forward from 1983 estimating oil production until all of the reserves were depleted (Exhibit 2). Production in 1983 was 290 million composite barrels, and this was assumed to be constant until 1991 when the remaining 283 million barrels are produced.
o Production costs were held constant relative to the production amount, including depreciation due to the unit-of-production method currently used by Gulf (Production will be the same, so depreciation amount will be the same)
o Because Gulf uses the LIFO method to account for inventory, it is assumed that new reserves are expensed the same year that they are discovered and all other exploratory costs, including geological and geophysical costs are charged against income as incurred.
o Since there will be no more exploration going forward, the only expenses that will be considered are the costs involved with production to deplete the reserves.
o The price of oil was not expected to rise in the next ten years, and since inflation affects both the selling price of oil and the cost of production, it cancels itself out and was negated in the cash flow analysis.
o Revenues minus expenses determined the cash flows for years 1984-1991. The cash flows cease in 1991 after all oil and gas reserves are liquidated. The cash flows derived account for the liquidation of the oil and gas assets only, and do not account for liquidating other assets such as current assets or net properties. The cash flows were then discounted by net present value using Gulf’s cost of capital as the discount rate. Total cash flows until liquidation is complete, discounted by Gulf’s 13.75% discount rate (WACC), come to $9,981 million.
Gulf’s value as a going concern
o The second component of Gulf’s value is its value as a going concern.
o Relevant to the valuation because Socal does not plan to sell any of Gulf’s assets other than its oil under the liquidation plan. Instead, Socal will utilize Gulf’s other assets.
o Socal can choose to turn Gulf back into a going concern at any time during the liquidation process, all that is needed is for Gulf to start exploration process again.
o Value as a going concern was calculated by multiplying the number of shares outstanding by the 1982 share price of $30. Value: $4,959 million.
o 1982 share price chosen because this is the value the market assigned before the price was driven up by the takeover attempts.
Bidding Strategy
o When two companies merge it is common practice for the purchasing company to overpay for the purchased firm.
o Results in the shareholders of the purchased company profiting from the over-payment, and the shareholders of the purchasing company losing value.
o Socal’s responsibility is to their shareholders, not the shareholders of Gulf Oil.
o Socal has determined the value of Gulf oil, in liquidation, to be $90.39 per share. To pay anything over this amount would result in a loss for Socal shareholders.
o Maximum bid amount per share was determined by finding the value per share with Socal’s WACC, 16.20%. The resulting price was $85.72 per share.
1. This is the price per share that Socal must not exceed to still obtain profit from the merger, because Socal’s WACC of 16.2% is closer to what Socal will expect to pay their shareholders.
o The minimum bid is usually determined by the price the stock is currently selling at, which would be $43 per share.
1. However, Gulf Oil will not accept a bid lower than $70 per share.
2. Also, the addition of the competitor’s willingness to bid at least $75 per share drives the winning bid price up.
o Socal took the average of the maximum and minimum bid prices, resulting in a bid price of $80 per share.
Maintaining Socal’s Value
o If Socal purchases Gulf at $80 it is based on the company’s liquidation value and not as a going concern. Therefore, if Socal operates Gulf as a going concern their stock will be devalued by approximately half. Socal stockholder’s fear that management might takeover Gulf and control the company as is which is only valued at its current stock price of $30.
o After the acquisition, there will be large interest payments that could force management to improve performance and operating efficiency. The use of debt in takeovers serves not only as a financing technique but as a tool to hopefully force changes in managerial behavior.
o There are a few strategies Socal could employ to ensure stockholders and other relevant parties that Socal will takeover and use Gulf at the appropriate value.
o A covenant could be executed on or before the time of the bid. It would specify the future obligations of Socal management and include their liquidation strategy and projected cash flows. Although management might respect the covenant, there is no real motivation to prevent them from implementing their own agenda.
o Management could be monitored by an executive; however, this is often costly and an ineffective process.
o Another way to ensure shareholders, especially when monitoring is too expensive or too difficult, is to make the interests of the management more like those of the stockholders. For instance, an increasingly common solution towards the difficulties arising from the separation of ownership and management of public companies is to pay managers partly with shares and share options in the company. This gives the managers a powerful incentive to act in the interests of the owners by maximizing shareholder value. This is not a perfect solution because some managers with lots of share options have engaged in accounting fraud in order to increase the value of those options long enough for them to cash some of them in, but to the detriment of their firm and its other shareholders.
o It would probably be the most beneficial and the least costly for Socal to align its managers concerns with that of the stockholders by paying their managers partly with shares and share options. There are risks associated with this strategy but it will definitely be an incentive for management to liquidate Gulf Oil.
Recommendation
o Socal will place a bid for Gulf Oil because its cash flows reveal that it is worth $90.39 in a liquidated state.
o Socal will bid $80 per share but limits further bidding to a ceiling of $85.72 because paying a higher price would hurt Socal’s shareholders.
By: Colleen May
Posted in Business | 
Tags: 30 Million, 5 Million, Arco, Boone Pickens, Development Expenses, Exploration Expenditures, George Keller, Going Concern, Gulf Oil Corporation, Kohlberg Kravis, Mesa Petroleum, Oil Prices, Oil Reserves, Petroleum Company, Principal Attraction, Proxy Fight, Recent Takeover, Standard Oil Company, Takeover Attempt, Tender Offer | 
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What is This Ugly House Really Worth? Part 2
Now that we know what the main areas of repairs and the importance of getting a good estimate next we need to know how to get “Comps” comparisons or find out how to find the Fair Market Value of a property. This is another critical area and traditionally it’s determined by a license appraiser. Even though that’s the most accurate approach it’s not necessary for us as wholesalers.
Several things we have to make sure we understand…..
We need to find out the “ARV” or after repair value of the house we’re looking to purchase. This will determine what it’s worth after repairs are completed. And that’s the value we quote to our buyer (investor). What ever you do DON’T use foreclosed homes as comparisons. Those houses reflect the low end of the market. The comps value is what we will use for our 70% rule.
Networking to get access to the MLS (multiple listing service) through real estate agents but that takes time. So if you don’t already have access, don’t worry about it right now. Instead, go to http://www.Zillow.com and get the ARV from similar properties in the area. I like to lean on the conservative side so don’t pick the highest or lowest price home but rather an average.
A quick way to get an IDEA of the value, so you can negotiate price over the phone with the seller is to go to the county appraisal district. There you will see the value that the county has for the property. Understand that this value is a conservative value estimate and in most cases less than the fair market value. But it’s a good negotiation tool. So when you ask the seller how much they want for the property you can instantly compare it with the county appraisal district.
By: Darrell Muhammad
Posted in Real Estate | Tags: Accurate Approach, Arv, Conservative Side, County Appraisal District, Critical Area, Investor, Mls Multiple Listing, Mls Multiple Listing Service, Muhammad, Multiple Listing Service, Negotiation, Networking, Real Estate Agents, Ugly, Value Estimate, Wholesalers | No Comments »
How Appraising Foreclosed Homes Works
If you intend to buy from foreclosed homes in Portland by taking out a loan or mortgage, you would need to have your target property appraised. This will allow lenders to determine if the value of the property would be able to cover the amount you plan to take out in case you default.
Appraising your target home
To have your target home appraised, you would have to tap an appraiser credited by lenders, that is, unless you are allowed to hire someone who is not. It is recommended, however, that you select an appraiser that has already worked with the financial institution you will borrow from because an independent appraiser’s findings could be subjected to a review before they are approved.
Once you have hired an appraiser, he or she will then determine the market value of your choice property from the thousands of foreclosed homes in Portland. To do this, the appraiser could compare your target home to other similar properties that were sold near its location or estimate how much it would cost to replace it entirely.
The appraiser’s evaluation will also take note of damages to the property, although not as extensive as an actual home inspection. The appraiser will then evaluate the real estate market where the home you are interested in is located to get a clearer picture of its value.
Lenders will then base how much you can borrow from them from your target property’s appraised value. If it is lower than what you intend to take out, you can order another appraisal or as for a review of the initial one to see if the appraiser missed out on some details. If any of this does not work, you can negotiate directly with the seller for a discount commensurate to the property’s assessed value or for a second mortgage to make up for the difference you would not be able to pay. In the latter’s case, the seller would have to agree to shoulder the mortgage until you are able to pay for it.
To learn more about appraising foreclosed homes in Portland visit online listings providers. They have an extensive database of all the things you would need to know about foreclosed properties.
By: Joseph B. Smith
Real Estate Trends- The Pros and Cons of Jumping into the Housing Market
It is still the American dream to have our own little chunk of land. It is estimated that more than 70 million Americans own their own home. With the growing interest in real estate, it is becoming easier than ever to be approved for a loan and move into your dream house. However, real estate isn’t just about carving out your piece of the world anymore, it is a booming business and game with advantages and disadvantages left and right.
Some growing trends in the housing industry include buying foreclosures, flipping homes, investing in new construction, taking out interest only loans and using reverse mortgages; all are increasing in popularity. The market has shifted from working for your home, to learning how your home can work for you. But, just like every genie in a bottle, there is often a catch to making your wishes come true.
These are a few pros and cons to these growing housing trends:
Foreclosures
A foreclosure is a home or property that has been repossessed by the bank or mortgage company because the previous owners could not make their payments.
Pros
Since the mortgage company would like to get rid of the property as quickly as possible often the home is sold or auctioned at a price considerably lower than it’s market value. Often the house is sold only for what is owed on it. Foreclosures often enable those who wouldn’t be able to afford the home of their dreams a chance. Sometimes you can get a great property at a great price.
Cons
Sometimes, especially at auctions, foreclosures are sold “site unseen.” Which means you could be buying a home with a serious number of problems. And in the end, the money saved getting the property could easily be spent in repairs. This brings us to our second point. Often those being evicted know they are being kicked out of their home and destroy the place before they leave, which could create many fixer upper projects for the new owner. If the address or neighborhood information is available, do a little research. Sometimes the house is worth less than the amount of money owed. Beware of liens on the property, such as unpaid property taxes. Consider if the previous owner was unable to make the house payment; it is likely they were unable to make other required payments. If there is a lien on the property, the new owner may be expected by the state or county to pay these fees.
House Flipping
Flipping is old as real estate itself; however, with the astronomical rate that property values have grown to in the last 10 to 15 years, many amateur investors have gotten in on the flipping game. Often an investor will buy a rundown or foreclosed home and provide it with some much needed TLC. They will renovate and remodel, upgrading kitchens, bathrooms, floors and landscaping often in a short period of time. Then they will turn around and sell the house for a considerable profit. However, this is a risky business and there is huge window for failure. Just like gambling there is potential to win big, but there is also opportunity for great loss.
Pros
If done correctly a lot of money can be made very quickly. Sometimes investors bankroll two or three times what they originally put into the property. There is great potential for learning how real estate works and thus, some become experts and in some cases make a fulltime job of house flipping.
Cons
This is a high-risk endeavor. Sometimes the cost of renovations, mortgage and time ends up costing more than your eventual profit margin. Frequently these homes need a lot of work. For the best returns, kitchens, bathrooms and floors all need to be replaced. Some can get away with splashing on a coat of paint and calling it good, but these are not the people rolling in the dough. Know if you can afford the property in advance. It doesn’t do any good to buy a house and sit on it for several months if you can’t afford to make the payments not only to the bank, but to your contractor, landscaper and real estate agent. Make a plan before ever spending a dime. Most flippers buy homes that are several years old and often they have unanticipated problems lying under the surface such as foundation cracks, termites or mold. Have a back up budget just in case renovations do not go as smoothly as planed. Usually the investor has to pay the buyer and seller realtor commission. Flipping a home too quickly may result in a tax audit. If the money made off a house flip does not immediately roll into a similar investment, ie. another house flip, your profit may be subject to a capital gains tax.
Buying a Newly Constructed Home
Although the concept is old, it seems many rural farmers are selling their land to large contracting companies. Newly constructed homes in newly developed subdivisions are a popular choice for those with children or starting families.
Pros
Everything in the house is new. Since no one has used the appliances, walked on the rug, or tampered with the hot water heater, everything is still shiny and in top-notch shape. Everything in the neighborhood is new. Newly developed subdivisions usually imply that new parks, schools and shopping centers will soon be built to create an all-inclusive community. New homes are typically larger than existing homes. They have more bedrooms, bathrooms and square feet. Contractors allow future owners to customize many amenities like countertops, flooring or stainless steel appliances. New homes usually appreciate faster than existing homes.
Cons
Everything in the house is new. Unfortunately, newer isn’t always better. Sometimes new products don’t work as well, there are bugs and kinks even the manufactures and contractors are not aware of, and new owners are the ones writing nasty letters about how easily their new dishwasher clogs or how quickly the basement floods in a heavy rain. New homes cost more. Although new homes are usually larger than existing ones, they also have a higher price tag than their existing counter parts. Not only are you paying for the lot and construction of the house, but the price usually includes subdivision development costs like water, sewer and roads. Usually the finishing touches like landscaping and basements are left unfinished.
Interest Only Loans
With an interest only loan you only pay the interest on your home for the first five, 10 or 15 years of the loan, thus creating lower payments for the first few years you’re in the home. This often allows people to get into homes they typically wouldn’t be able to afford with a traditional mortgage loan.
Pros
Payments are significantly lower in the first few years of ownership. Therefore, you can afford a more expensive home at a cheaper price. Your payments are 100% tax deductible for the term of your interest payment. Paying lower payments early can free up money to invest and place into the home later. If you are able to sell the home within your interest period, usually five or 10 years, and the home has appreciated, there is the possibility of getting a return on your investment.
Cons
After your interest period is over your house payment could double once you start paying the principal. There is the possibility of being upside down on your home if it doesn’t appreciate or the market levels out. Then you owe more than the home is worth. The technicalities of the loan could be confusing for the average, everyday person. There are a lot of details and loopholes that favor the bank or mortgage company, not the homeowner.
Reverse Mortgages
These mortgages are only available to seniors over the age of 62 and they have to have their home completely paid off. These work like a backwards loan. The mortgage company will assess the house and pay you what it is worth in payments, a lump sum or credit. You do not have to pay it back as long as you continue to live in the home. This includes if you move or die.
Pros
There are no monthly payments to a bank or mortgage company. The loan doesn’t have to be paid back as long as you continue to live in the house. You don’t need an income to qualify. The homeowner retains full ownership of the property and can stay in the home as long as they want. No one will try to kick them out or acquire the house. The money from the house can be used to help pay for medical bills, prescriptions or property taxes. These are all necessities to the elderly, but difficult to maintain on a fixed income. If the reverse mortgage is taken out late enough in life, the equity may help pay for in-home nursing care.
Cons
This option is only available to the elderly. As the equity in the home decreases the debt increases. The loan must be paid in full when the last borrower dies, sells the home or moves. If you have to go into a long term care facility, the home would need to be sold, the loan would have to be paid back first, and whatever is left would then go to your care. Sometimes, this amount may not be enough to provide for the highest standard of living. Receiving money from the home may have tax consequences and may affect eligibility for federal or state programs. When the resident dies the loan must be repaid by the remaining family as a payable debt.
While none of these ideas are new, many are gaining momentum and becoming more popular with first time buyers, young couples and the elderly. The trick is to be careful what you wish for, because the genie’s fine print may trap you in the bottle in the end.
Resources
AARP. (2000). Be a Wise Consumer, Driver Safety, Managing Money, Home Modification – AARP. Retrieved March 9, 2007, from http://www.aarp.org/money/revmort/
Barta , P. (2005). RealEstateJournal | ‘Flipping’ Property Can Be Risky Business. Dow Jones & Company, Inc. Retrieved March 9, 2007, from http://www.realestatejournal.com/columnists/housetalk/20030228-barta.html
eHow, Inc. Use of this web site constitutes acceptance of the eHow. (2000). How to Buy a Foreclosed Home – eHow.com . Retrieved March 9, 2007, from http://www.ehow.com/how_111013_buy-foreclosed-home.html
flippinghousetips. (2006). Flipping House Tips, Ideas and Secrets. Retrieved March 9, 2007, from http://www.flippinghousetips.com/
Glink, I. R. (2006). Buy New Home or Existing Home? – Pros and Cons of Buying New Construction . ThinkGlink, Inc. Retrieved March 9, 2007, from http://www.thinkglink.com/Buy_New_Home_or_Existing_Home.htm
Lamoreaux , S. (n.d.). Using a Reverse Mortgage. Retrieved March 9, 2007, from http://www.longtermcarelink.net/eldercare/using_reverse_mortgage.htm
Max, S. (2005, March 7). The pros and cons of interest-only loans. . Cable News Network LP. Retrieved March 9, 2007, from http://money.cnn.com/2005/03/07/real_estate/financing/interestonly/index.htm
(2006, February 15). Record of Achievement – Expanding Home Ownership. Retrieved March 12, 2007, from http://www.whitehouse.gov/infocus/achievement/chap7.html
By: Erin Monaghan
Posted in Real Estate | Tags: American Dream, Bank Mortgage, Buying A Home, Chunk, Flipping Homes, Foreclosure, Foreclosures, Genie In A Bottle, Housing Industry, Housing Market, Interest Only Loans, Mortgage Company, Neighborhood, New Construction, Popularity, Price Cons, Pros And Cons, Real Estate Trends, Reverse Mortgages, S Market | No Comments »
Must Have Support for Online Business
It is kind of obvious thing that people could get more and more opportunity because of the internet actually. People could not only use the internet for the information and communication purpose only for sure. If they could utilize this opportunity, they could reach success by making kind of online business actually. But of course there is kind of a must requirement that people have to fulfill when they want to run online business. They have to make sure that their business could Accept Credit Cards Online for online transaction.
There is no doubt that nowadays there are will be more and more businesses which couldAccept Credit Cards actually and there is no exception for online business moreover. When people are confused for choosing the Best Credit Card Processing Company for makingMerchant Accounts for their online business, they absolutely could use the help from Free Merchant Account Advisor. Merchant Accounts is kind of must have item when people want to make online business. Because service becomes very important part as well, there is no doubt that people have to find the best Credit Card Processing Services.
Maybe people could use PayPal Alternative for their help to process credit card transaction in their online business.
Posted in Business | Tags: Best Credit Card Processing Company, Business Credit, Business People, Business Service, Cards Online, Communication Purpose, Credit Card Processing, Credit Card Processing Services, Credit Card Transaction, Credit Cards, Free Merchant Account, Internet Information, Merchant Accounts, No Doubt, Online Business, Paypal, People Find | No Comments »
Mortgage Refinance or Second Mortgage
How to get a line of credit home equity
The best way to get a home equity loan, second mortgage or line of credit home equity is to go to a reputable mortgage provider. Many have multiple schemes which allow you to raise equity on the market value of your home, using the house equity as collateral against the loan.
You guaranatee that you will pay off the debt to the mortgage company by raising a loan against the home. If you fail to replay any debt raised against the property then the mortgage provider can take charge of the property and recover any money that is owing.
If you purchase a home for $300,000, and you pay a deposit of $80,000. You will have equity in the house of $80,000 with $220,000 still owing. This would be the first mortgage. If you pay your mortgage at the determined rate of say $20,000 since the purchase then you would have a debt reduced to $200,000.
If the house rises as is expected to say $400,000-$200,000 then the equity would have risen to $200,000.
The way a second mortgage works is that you raise money (line of credit home equity) against the equity that you have in the property.
The best advice is to shop around and ask a few mortgage providers for the best deals. Now is an excellent time to have a look round with mortgage rates been at the lowest they have for years, plus the values of peoples homes rising all the time giving greater equity and line of credit home equity.
By: Simon Gregson
Posted in Real Estate | Tags: Best Deals, Collateral, Equity Line, First Mortgage, Home Equity Loan, Loan Mortgage, Money Line, Mortgage Company, Mortgage Provider, Mortgage Providers, Mortgage Rates, Mortgage Refinance, Mortgage Works, Refinance Mortgage, Replay, Second Mortgage, Simon Gregson | No Comments »
The Steps To Selling Your Home Today In A Buyers Market
Selling real estate has become as sophisticated as the ballet. Home stagers are like Hollywood set designers for your home. Understanding the desires of the buyer have raised selling real estate to an art form and a science.
First get rid of the emotional attachments you have formed with your home, it’s become an asset that now needs to be sold. Selling the home you and your family occupy requires turning off your emotions and turning on your thinking cap. Start thinking about your remodeling budget and seeking the advice of a real estate professional or even a home staging consultant for optimum effectiveness.
Your house is an investment that has matured to the point where you will realize a return on your investment. Selling real estate requires a team of experienced and knowledgeable professionals who follow a well-defined procedure designed to bring a buyer and a seller together. The first step in selling your real estate is making the property impersonal.
Let’s start in the kitchen getting rid of all the clutter and personal items. Completely clean off your kitchen counters and re-grout if necessary. Only put the small appliances back on freshly detailed counter tops. This would be a good time to get rid of any rust spots or holes. Clean out all of your kitchen cabinets and drawers. Eliminate your junk drawer and if you haven’t used it in six months give it away to charity.
Prospective homeowners will always look at the kitchen in great detail opening cabinets, drawers, and peek into pantries. This close inspection gives the seller an opportunity to put something special in the cabinets, drawers and pantries. Give the prospective buyer space and get rid of your junk drawer. The first rule in selling your home is less is more. If it is starting to sound like you are going to try to make your house like a model home, you should definitely be thinking along those lines especially if you have a smaller home or another disadvantage like noise from traffic.
Create as much open space as possible by organizing your cabinets in a way that would make a food boutique owner proud. The art of organization will impress prospective homeowners making selling real estate fun and profitable. Make the space under your sink as clean as possible, limit the items to a trash can and cleaning supplies in a decorative box of course. Paint your kitchen, the cabinets and drawers inside and out if they are made of a surface that can be painted. Instead of painting your kitchen cabinets think about re-staining them.
Homeowners cluttered closets can make selling the ideal property a real estate challenge. If you think it doesn’t matter you are wrong. A cluttered closet can make a prospective homeowner think that they will have the same clutter because the house doesn’t have enough storage space. Some prospective homeowners may think the home is not going to be large enough because of the existing owners clutter.
The final word on closets is to get rid of anything you haven’t worn in a year by making your items a charitable donation of donating other items to the trash.
Selling real estate is more successfully accomplished when the rooms don’t have too much furniture in them. In other words free of furniture clutter makes selling a house easier. Visit some model homes and redefine your design vision for your house. Take lots of pictures inside and outside of the model homes you visit. Create a cork board storyboard with the photos and select the interior design theme you like the most. Seek to create a model home environment and selling your house and your house will sell faster and for more money.
Spend a considerable amount of time collecting free real estate books and visit the web sites of the advertisers to get a closer look at the interior and exterior design of the homes they are interested in selling. Seek the advice of a professional home stager and consider retaining their services for your home. Selling real estate has evolved why not use all the advances at your disposal? Making your house or real estate investment look as good as possible when you present it for sale makes good common sense. And don’t forget to clean out the garage.
By: Richard Rizza
Posted in Real Estate | Tags: Art Form, Clutter, Counter Tops, Drawers, Emotional Attachments, Grout, Home Stagers, Home Today, Junk Drawer, Kitchen Cabinets, Kitchen Counters, Knowledgeable Professionals, Model Home, Optimum Effectiveness, Prospective Buyer, Prospective Homeowners, Rust Spots, Selling Your Home, Small Appliances, Thinking Cap | No Comments »
Home Buyers – Why You Need To Price Your House Correctly When Selling
A common strategy by home sellers is to set a high asking price, and then lower the price later. Real estate experts, however, advise sellers to price their home correctly when it first enters the market. Why?
If you drop the asking price later, your best opportunity to sell for top dollar is gone. It is important to price your house correctly as soon as it’s listed. Here are some important reasons.
1. You get the best buyers when it first hits the market. When a house goes on the market for the first time, it’s new and fresh. It’s a hot listing! Buyers who are already shopping for a home will be eager to view it. Within the first 7-10 days of a new listing, there should be a lot of activity. Realtors and buyers will be anxious to view this house, as they have already seen everything else in that price range. Remember that buyers would rather make a full price offer on a home that’s priced correctly, rather than making a low offer on an overpriced home.
2. A lower priced property attracts multiple buyers “outbidding” each other. Having multiple buyers competing for your property is every seller’s dream – it puts YOU in the driver’s seat! Now with multiple buyers bidding, you can play each buyer off the other to negotiate for the highest price. And usually with multiple buyers, you’ll get a higher price, because higher demand is perceived as higher desirability. In other words, a product that everyone else wants must be a great product!
3. Overpriced listings help to sell lower-priced listings in the same neighborhood. Sometimes an overpriced house is referred to as a “switch property” because it helps attract buyers to that neighborhood, but then creates a sale for a house down the street. In other words, if your house is overpriced, buyers will conclude that the lower priced house down the street is just as nice, but they’ll get a better bargain. You don’t want to watch the best buyers purchase your neighbor’s house while your house sits on the market! And remember that “comparable” value is determined through the eyes of the buyers (not the sellers).
4. Your house develops a “stigma” after it’s been on the market for a long time. The longer a house is on the market, the less desirable it becomes to buyers, and therefore the lower the value. A stigma is a negative image that develops in the minds of buyers, neighbors, and agents. No matter how wonderful your house is, once it develops a stigma, no one will want to buy it. Buyers will ask themselves, “If it’s so great, how come no one else has bought it? Why has it been sitting on the market so long?” The longer it’s on the market, the further the value diminishes.
So what is the danger of overpricing? It will take longer to sell your house because there will be fewer buyers viewing it, and you will receive fewer (or no) offers. If you don’t price your property correctly, your house may help to sell other properties in your neighborhood!
Remember that properties priced right will sell faster and for top dollar. A new listing that’s priced slightly under market value will generate excitement! So to attract the most qualified buyers, price your house correctly at the beginning. Enlist the help of your real estate agent, who is an expert in your neighborhood, to determine and set your initial price.
For more information, visit author and real estate Broker R.P. Brown at www.RealEstateProExpert.com.
By: R.P. Brown
Posted in Real Estate | Tags: Asking Price, Bargain, Estate Experts, Home Buyers, Home Sellers, Hot, House Buyers, House Selling, Neighbor, Neighborhood, Opportunity, Price Offer, Real Estate, Realtors, Selling Strategy, Shopping, Top Dollar, Whil | No Comments »
Home Equity Loans – Things To Consider
Homeowners need to be careful when taking out a home equity loan. It is a good idea to know the value of your home’s equity before taking out such a loan or you might wind up paying back more than your home is worth. Equity is the amount your home is currently worth after subtracting the amount still owed and taking into account the increase or decrease based on current market value. For example, if you purchased your home several years ago for a price of $200,000, then your home should be worth much more than that today due to the rise in market value.
Some homeowners want to take out home equity loans in order to carry out home improvement projects because they believe that modernizing their home will increase its value. It is important to know however, that market equity rates are already factored into the current value of your home. Home improvements are usually a good thing, but if it is not really needed, it could cause you to go deeper in debt. You could take out a personal loan instead of a home equity loan so your home equity is not affected, but you still have to pay back the loan with interest, so it could have a detrimental effect on your personal finances to do the home improvement if you are not certain it will actually raise the market value of your home.
If you do decide to take out a home equity loan for a home improvement project, just realize that it is just like taking out a new mortgage. You must pay closing costs, fees, capital and interest on the loan. This is true for any home equity loan that you take out regardless of the reason. That is why it is very important to think things through and make sure an equity loan against your home is the wisest choice for your situation.
Consider also what might happen if you are unable to repay your loan because of illness or if you lose your job. In that case, if you have taken out a home equity loan, you risk losing your home. Laws vary by state so you should understand the laws where you live. It might be safer for you to protect your home and take out a different type of loan if you have a choice. A home equity loan could be the answer to your financial woes or it could be a financial disaster for you. That is why it is very important to carefully think things through before you act. Seek advice from a financial counselor if you need help making a responsible decision.
By: Milos Pesic
Posted in Finance | Tags: Capital And Interest, Closing Costs, Current Market Value, Current Value, Detrimental Effect, Equity Rates, Home Equity Loan, Home Equity Loans, Home Improvement Project, Home Improvement Projects, Home Improvements, Interest On The Loan, Job, Market Equity, New Mortgage, Personal Finances, Personal Loan, Risk | No Comments »
The Simple Repairs That Add the Most Value to Your Home For Quicker Sale in This Tough Market
When you put your home up for sale, you would surely try to find ways to get the highest offer with minimum investment. Home repairs add the most value to your home. This is one way of making sure your home is in good state of repair so that it becomes much more appealing on potential home buyers. Many home owners put off doing repairs because hiring contractors to do the job may cost a lot. However, there are simple and less expensive repairs you can do to raise the value of your home to make a good impression on home hunters.
An attractive view creates a good first impression. The curb appeal is one of the important things in selling a house. Many home buyers take a second look when they like what they see from the outside. Landscaping definitely raise the value of your home. Make it look freshly maintained and planted. Keep your grass mowed and replace dying grass with a new greensward. Prune the bushes and make sure walkways are clean. You may decorate conservatively depending on the season. If it is winter, make sure driveways and walkways are clear and salted and avoid excessive holiday ornamentation. You may plan ahead with lots of bulbs that will bloom and flower for spring time. Planting beds of annual flowers will surely spiff up your yard for summer. If it is fall, emphasize cleanliness by keeping leaves raked and reduce the attention to the yard work needed. Repaint all painted surfaces with neutral color. You may want to drive by your house to see if it really looks good enough from a visitor’s point of view.
Painting is another way to boost the value of your home. It is also the cheapest and easiest home improvement for home sellers. Apply fresh coat of light colored paint on rooms painted in unusual colors, or rooms that appear dark and small. Light colored paint will easily turn those areas into attractive and brighter spaces. Repainting both the exterior and interior or your home gives it a fresh feel.
When the potential buyer takes a look inside your home, make sure that the buyer visualizes the home as theirs. Keep your home clutter-free by removing anything not needed during the time your house is up for sale, especially personal items. You may consider renting a storage space for anything that doesn’t add to the d?cor.
Check doorways to make sure they are working well. Check drooping screens, cracked glass, squeaks, and aging or damaged aluminum parts.
See if there are missing shingles on the roof and have replacements installed where needed. Clear the gutters from any leaves and other debris that may have accumulated.
The bathroom is another important area that will raise your home’s equity. You may improve and modernize your bathroom by just replacing new towel racks and light fixtures. Check all faucets, including those in the laundry room. Make sure not one drips. If so, repair or replace it immediately.
Inspect decks and gates. Make sure there are no loose boards, rickety stairs, sagging gates that you have to lift in order for the latch to close. Buyers will notice these problems so get them fixed.
These simple types of repairs are relatively inexpensive, yet improve the market value of your home dramatically and increase its chances for quicker sale.
By: Alvin Clavines
Posted in Real Estate | Tags: Annual Flowers, Attractive View, Bushes, Colored Paint, Curb Appeal, Driveways, Good First Impression, Greensward, Home Hunters, Home Repairs, Home Sellers, Important Things, Many Home Owners, Minimum Investment, Neutral Color, Ornamentation, Spring Time, Tough Market, View Painting, Walkways | No Comments »