Selling your house? Avoid these mistakes

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Selling your house? Avoid these mistakes

AMY FONTINELLE

Investopedia.com

Published Wednesday, Aug. 31, 2011 8:33AM EDT

Last updated Wednesday, Aug. 31, 2011 1:02PM EDT

Selling your home - especially if you've never done it before - can be surprisingly time-consuming and emotionally challenging. Strangers will come into your home and poke around in your closets and cabinets. They will criticize a place that has probably become more than just four walls and a roof to you, and then, to top it all off, they will offer you less money than you think your home is worth. With no experience and a complex, emotional transaction on your hands, it's easy for first-time homesellers to make lots of mistakes, but with a little know-how, many of these pitfalls can be avoided altogether. Read on to find out how you can get the highest possible price for your home within a reasonable time frame - without losing your mind.

Mistake No.1 - Getting Emotionally Involved

Once you decide to sell your home, it can be helpful to start thinking of yourself as a businessperson and a homeseller rather than as the home's owner. By looking at the transaction from a purely financial perspective, you'll distance yourself from the emotional aspects of selling the property that you've undoubtedly created many memories in.

Also, try to remember how you felt when you were shopping for that home. Most buyers will also be in an emotional state. If you can remember that you are selling not just a piece of property but also an image, a dream and a lifestyle, you'll be more likely to put in the extra effort of staging and perhaps some minor remodeling to get top dollar for your home. These changes in appearance will not only help the sales price, they'll also help you create that emotional distance because the home will look less familiar. (For more on renovations, see Fix It And Flip It: The Value of Remodeling and Five Mistakes That Make House Flipping A Flop.)

Mistake No. 2 - Not Hiring an Agent

Although real estate agents command a hefty commission (usually 5 to 6 per cent of the sale price of your home), trying to sell your home on your own, especially if you haven't done it before, is probably ill advised. A good agent will help you set a fair and competitive selling price for your home that will increase your odds of a quick sale. An agent can also help take some of the high emotion out of the process by interacting directly with potential buyers so you don't have to, and eliminating tire kickers who only want to look at your property but have no intention of putting in an offer.

An agent will also have more experience negotiating home sales than you do, potentially helping you get more money than you could on your own. Further, if any problems crop up during the process - and they commonly do - an experienced professional will be there to handle them for you. Finally, agents are familiar with all the paperwork and pitfalls involved in real estate transactions and can help make sure the process goes smoothly. (Keep reading on this subject in Do You Need A Real Estate Agent? andFinding A Listing Agent.)

Mistake No. 3 - Assuming You Must Hire an Agent

On the other hand, some people do manage to sell their homes themselves. You'll need to do your own research on recently sold properties in your area and properties currently on the market to determine an attractive selling price, keeping in mind that most home prices have an agent's commission factored in and you may have to discount your price as a result. You'll also be the one showing the house and negotiating the sale with the buyer's agent, which can be time-consuming, stressful and emotional for some people.

If you're forgoing an agent, consider hiring a real estate attorney to help you with the finer points of the transaction. Even with attorney's fees, though, selling a home yourself can save you thousands. Keep in mind, however, that the buyer's agent will expect to be compensated, so you won't be able to save the entire commission, as you'll need to pay 1 to 3 per cent of the home's sale price to the buyer's agent. (For more on this subject, see Cut Commissions With "For Sale By Owner" Sales.)

Mistake No. 4 - Setting an Unrealistic Price

Whether you're working with an agent or going it alone, setting the right asking price is key. Remember the comparable market analysis you did when you bought a home to figure out a fair offering price? Buyers will do this for your home, too, so as a seller you should be one step ahead of the game.

Absent a housing bubble, overpriced homes do not sell. Don't worry too much about setting a price that's on the low side because, in theory, this will generate multiple offers and bid the price up to the home's true market value. In fact, underpricing your home a bit can actually be a strategy to generate extra interest in your listing. (Read more about housing bubbles inWhy Housing Market Bubbles Pop and The Fuel That Fed The Subprime Meltdown.)

Mistake No.5 - Expecting To Get Your Asking Price

Any smart buyer will negotiate, and if you want to complete the sale, you'll have to play the game. Most people want to list their homes at a price that will attract buyers while still leaving some breathing room for negotiations. This will allow the buyer to feel like he or she is getting a good value and allow you to get the amount of money you need from the sale. Of course, whether you end up with more or less than your asking price will likely depend on whether you're in a buyer's market or a seller's market and on how well you have staged your home.

Mistake No. 6 - Selling in Winter (When You Have the Option Not To)

Winter, especially around the holidays, is typically a slow time of year for home sales. People are busy with social engagements and the cold weather makes it more appealing to just stay home. Because fewer buyers are likely to be looking, it may take longer to sell your home and you may not get as much money. However, you can take some consolation in knowing that while there may not be as many active buyers, there also won't be as many competing sellers.

Mistake No. 7 - Skimping on Listing Photos

So many buyers look for homes online these days and so many of those homes have photos that you'll be doing yourself a real disservice if you don't offer photos as well. At the same time, there are so many poor photos of homes for sale that if you do a good job, it will set your listing apart and help generate extra interest. Good photos should be crisp and clear, should taken during the day when there is plenty of natural light available, and should showcase your home's best assets. Consider using a wide-angle lens if possible - this will allow you to give potential buyers a better idea of what entire rooms look like.

Mistake No.8 - Not Being Properly Insured

With the above-average number of people who will be on your property, you want to make sure you are insured in case someone has an accident on the premises and tries to sue you for damages. You also want to make sure that there are not any obvious hazards at the property or that you take steps to mitigate them (keeping the children of potential buyers away from your pool and getting your dogs out of the house during showings, for example). (For more information on homeowners insurance, see Beginners' Guide To Homeowners Insurance and Insurance Tips For Homeowners.)

Mistake No. 9 - Trying to Hide Significant Problems

Any problem with the property will be uncovered during the buyer's inspection, so there's no use hiding it. Either fix the problem ahead of time, price the property below market value to account for the problem, or list the property at a normal price but offer the buyer a credit to fix the problem. Realize that if you don't fix the problem in advance, you may turn away a fair number of buyers who want a turnkey home. Having your home inspected before listing it is a good idea if you want to avoid costly surprises once the home is under contract.

Mistake No. 10 - Not Preparing Your Home for Sale

Sellers who do not clean and stage their homes are throwing money down the drain. If you can't afford to hire a professional, that's OK - there are many things you can do on your own. Failing to do these things will not only reduce your sale price, but may also prevent you from getting a sale at all. For example, if you haven't attended to minor issues like a broken doorknob, a potential buyer may wonder whether the house has larger, costlier issues that haven't been addressed. Have a friend or agent with a fresh pair of eyes point out areas of your home that need work - because of your familiarity with the home, you may have become immune to its trouble spots. Decluttering, cleaning thoroughly, putting a fresh coat of paint on the walls and getting rid of any odors will also help you make a good impression on buyers.

Mistake No. 11 - Not Accommodating Potential Buyers

If someone wants to view your house, you need to accommodate this person, even if it is inconvenient for you. And yes, you have to clean and declutter the house before every single visit. A buyer won't know and won't care if your house was clean last week if it isn't clean when he or she views it. It's a lot of work, but stay focused on the prize.

Mistake No. 12 - Signing a Purchase Contract With an Unqualified Buyer

It's more than reasonable to expect a buyer to bring a pre-approval letter from a mortgage lender (or proof of funds for cash purchases) showing that he or she has the money to buy the home. Signing a contract with a buyer whose purchase of your home is contingent on the sale of his or her own property may also put you in a serious bind if you need to close by a particular date.

Conclusion

Even if you do all of these things when selling your home, it's best to prepare mentally and financially for less-than-ideal scenarios. The house may sit on the market for far longer than you expect, especially in a declining market. If you can't find a buyer in time, you may end up trying to pay two mortgages, having to rent your home out until you can find a buyer, or in dire situations, in foreclosure. However, if you avoid the costly mistakes listed here, it will go a long way toward helping you put your best foot forward and achieving that seamless, lucrative sale every homeseller hopes for. (To read about what comes after your house is sold, seeUnderstanding The Escrow Process.)

Investors seek class action suit against Sino-Forest

Investors seek class action suit against Sino-Forest

ANDY HOFFMAN — ASIA-PACIFIC REPORTER,

VANCOUVER— From Thursday's Globe and Mail

Published Wednesday, Aug. 31, 2011 2:17PM EDT

Last updated Wednesday, Aug. 31, 2011 6:23PM EDT

Sino-Forest Corp. (TRE-T4.81----%), the TSX-listed Chinese forestry company whose shares have collapsed following fraud allegations, repeatedly misrepresented its financial statements, backdated stock options and engaged in unusual and undisclosed related-party transactions, according to fresh allegations levelled in a proposed class-action lawsuit seeking more than $7-billion in damages.

The notice of action, filed on behalf of a group of Sino-Forest shareholders who purchased shares in various offerings between 2007 and 2011, is seeking more than $6.5-billion in damages from Sino-Forest, its top management, directors, and auditors Ernst & Young LLP, as well as the Beijing office of Pöyry Consulting Co. Ltd., which published reports about the size and value of the company’s forestry assets.

A host of investment banks – including TD Securities Inc., Dundee Securities Corp., RBC Dominion Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. among others – that underwrote Sino-Forest’s equity offerings were also named as proposed defendants in the action, which seeks an additional $824-million related to the stock sales.

None of the allegations contained in the suit have been proven and the lawsuit has not yet been certified as a class action. An external Sino-Forest spokesman said the company had no comment on the matter and none of the other proposed defendants have yet had an opportunity to file documents in response.

The suit was delivered to the Ontario Superior Court of Justice on Tuesday, said Dimitri Lascaris, of Siskinds LLP in London, Ont., which filed the claim along with Koskie Minsky LLP in Toronto.

The lawsuit also accuses Sino-Forest, its former chairman and chief executive officer Allen Chan, co-founder K.K. Poon, and chief-financial officer David Horsley of participating in a conspiracy to defraud investors by overstating Sino-Forest’s profits and assets, and seeks an additional $50-million in punitive damages from these defendants.

“The defendants profited handsomely from the market’s resulting appetite for Sino’s securities. Certain of the individual defendants sold Sino shares at lofty prices, and thereby reaped millions of dollars of gains. Sino’s senior management also used Sino’s illusory success to justify their lavish salaries, bonuses and other perks,” the lawsuit says.

As well, the claim accuses Sino-Forest of backdating or mispricing stock options granted to Mr. Chan, Mr. Horsley and other insiders of the company.

Class-action lawfirms are rushing to file claims against Sino-Forest, once Canada’s largest publicly listed forestry company, boasting a market value in excess of $6-billion. Fraud allegations levelled by short seller Carson Block and his firm, Muddy Waters, which were published in early June, precipitated a collapse in the company’s shares from a peak of more than $25 to less than $5 each.

The company has denied the Muddy Waters allegations and set up a special committee of independent directors assisted by accounting firm PricewaterhouseCoopers to investigate.

Trading in Sino-Forest shares was halted last Friday by the Ontario Securities Commission, which accused Mr. Chan and other executives of fraudulent activity, engaging in related-party transactions and overstating some of the company’s timber holdings. Mr. Chan stepped down as executive chairman and CEO on the weekend. Several other executives in China have been suspended or seen their duties curtailed.

The lawsuit claims that Sino-Forest overstated its revenue from its early days after being founded by Mr. Chan and Mr. Poon and going public in Canada by way of a reverse takeover of a dormant shell company (thus avoiding the scrutiny of an initial public offering).

The suit also claims that the company made “false” statements regarding sales from a joint venture with the Leizhou Forestry Bureau in Guangdong province “as Leizhou never generated such sales.”

The claim also alleges that Sino-Forest made misleading statements about a company it had allegedly invested in and was doing business with called Shanghai Jin Xiang Timber Ltd (SJXT). The lawsuit claims that Sino-Forest’s 1999 financial statements note a non-interest bearing loan of $796,000 (U.S.) made to SJXT, which was, according to previous statements made by the company, a related party, and therefore materially misleading and in violation of generally accepted accounting principals.

According to the claim, Sino-Forest’s 1999 financial filings said a 264-per-cent increase in sales of lumber and wood products was “largely to the increase in new business generated from our investment in Shanghai Jin Xiang Timber Ltd.”

However, beginning in 2001, despite its claims in previous annual reports of its “promising” and “very significant” investment in SJXT, any references to the investment “simply evaporated, without explanation, from Sino’s disclosure documents,” the lawsuit says.

The claim alleges that “in fact, and unbeknownst to the public, Sino never invested in a company called ‘Shanghai Jin Xiang Timber Ltd.’”

The claim also alleges that Sino-Forest’s plantation acquisitions in Jiangxi province are “far smaller than Sino has claimed,” according to local forestry bureau officials.

Sinking Sino-Forest bonds may be virtually worthless

STREETWISE

Sinking Sino-Forest bonds may be virtually worthless

BOYD ERMAN

From Thursday's Globe and Mail

Posted on Wednesday, August 31, 2011 8:47AM EDT

As Sino-Forest Corp. bonds continue their slide, one analyst is arguing debt investors may only get back pennies on the dollar should the company end up in default.

The company’s notes are now trading for less than 30 cents on the dollar, down from closer to 31 cents on Wednesday and from 49 cents last Thursday, the day before the Ontario Securities Commission (OSC) levelled allegations of fraud at the company.

When bonds trade at such distressed levels, it usually signals that investors are concerned the company won’t be able to pay them back at maturity. Instead, the focus is on trying to understand how much cash bondholders would get back in a restructuring, and whether that makes the company’s debt worth buying.

That’s a murky process because of the nature of the allegations from the OSC, which said last week that there appears to be evidence that the company’s timber assets have been “exaggerated.” There are concerns that even if the assets are there, a large portion of Sino-Forest’s cash holdings might not be available to pay bondholders.

Volume in the bonds this week has been light, traders say, suggesting that even at these prices, the debt isn’t drawing much interest from funds that specialize in distressed debt. Even buyers that are used to messy situations are leery because of the uncertainty about what they would get back should Sino-Forest end up in a restructuring.

Nomura Securities analyst Annisa Lee took a shot at answering the question and came up with an answer that will be troubling to holders of both Sino-Forest bonds and stock.

After looking at the company’s cash holdings and how fast it burns through money, and trying to find a way to get a handle on its forestry assets, she values the bonds at 17 cents on the dollar in her base-case scenario – and just 1 cent in her downside case.

That’s bad news for bondholders, but even worse for shareholders because it suggests the company’s remaining equity value would be completely wiped out.

The stock is now halted in both the U.S. and Canada following the OSC’s cease-trade order. It last changed hands in the U.S. at $1.38 (U.S.) on Friday, giving the company a market value of $338-million.

Sino-Forest had long-term debts of $1.9-billion and cash of close to $900-million as of the second quarter, which ended June 30.

Ms. Lee believes the money is there, given that the company posted bank statements to its website. But a good chunk of that cash – $287-million – is in China and subject to foreign-exchange controls. That raises questions about whether bondholders could get to it.

The cash hoard is dwindling. The company has used some to pay back bonds and make interest payments since the second quarter.

What’s more, in an average quarter lately, the company uses about $100-million or more of cash in its business, Ms. Lee said. With no access to capital markets, the company will be hard pressed to raise new money.

Ms. Lee tried to understand the company’s forestry holdings by estimating what the company has spent on them, which she pegged at $1.2-billion, rather than using the $3.5-billion valuation the company puts on them.

Bondholders might not be able to get to all those assets either because of the company’s complicated structure and many subsidiaries. Ms. Lee estimates that the bondholders would be able to access half at best, or about $600-million.

Ms. Lee estimates that bondholders would get a recovery of 30 cents on the dollar, but it might take years. For that reason, she puts the current value of the bonds at 17 cents.

The downside case, she said, if nothing goes right for bondholders, is a recovery of 2 cents on the dollar. In that case, the bonds are only worth 1 cent today.

How Canada Escaped Global Recession - an Interesting Read

http://mises.org/daily/5583/How-Canada-Escaped-the-Global-Recession

A plain-vanilla correction? More like a rocky road

DAVID ROSENBERG

A plain-vanilla correction? More like a rocky road

DAVID ROSENBERG | Columnist profile

From Wednesday's Globe and Mail

Published Tuesday, Aug. 30, 2011 6:03PM EDT

Last updated Tuesday, Aug. 30, 2011 6:26PM EDT

This month’s sharp selloff has raised a lot of questions about whether the latest stock market downturn was just a severe correction that is already beginning to pass or the start of a bear market that will continue to maul portfolios over the year to come.

The answer depends on whether the economy – the U.S. economy, in this case – is still growing or sliding into recession.

When the economy is growing, market corrections typically last only about three months and inflict losses of 10 to 20 per cent before stocks start to head up once again. This was the case in 1966, 1987, 1994, 1998 and 2010. (Although the 1987 plunge was much more intense, it was only so in magnitude, not in duration.)

But a stock market downturn accompanied by a recession is far more serious and far more long lasting. These bear markets tend to last 16 months. Losses can be severe: 57 per cent in 2008-09, 49 per cent in 2001-02 and 48 per cent in 1973-74.

Given the dramatic difference between a plain-vanilla correction and a recessionary bear market, investors are sitting on a knife’s edge. If the most recent downturn was just a plain-vanilla correction, then a buying opportunity is at hand. Indeed, a lot of investors seem to think so, judging by stocks’ rebound over the past couple of weeks. But if the U.S. economy is about to enter a recession, then there will probably be another year of market weakness to endure, as well as the possibility of further losses.

Unfortunately, the signs aren’t encouraging: This patch of market weakness is going on four months old, and has taken stocks off almost 20 per cent from their nearby peak. There have only been three other times in history when the S&P 500 fell as much as it did this time around without a recession following.

If we are headed into recession, a quick turnaround for the stock market is unlikely. History shows that stock prices do not begin to reflect the inevitable ray of light that follows every recession until we are about 70 per cent of the way through an economic downturn.

Alas, that may very well be a story for the fourth quarter of 2012. U.S. real GDP has contracted in four of the past six months, household employment is contracting, and the Economic Cycle Research Institute’s weekly leading economic index just turned negative for the first time this year. GDP forecasts are coming down and it is only a matter of time before earnings do as well.

The fundamental problem is that economic growth never really emerged from the last recession. Creating the illusion of prosperity is different than creating prosperity. In the U.S., U.K. and euro zone – which combined represent nearly 60 per cent of the global economy – a more serious downturn was prevented only by government bailing out the debt-burdened financial and household sectors. Most of the bad debt was simply transferred from one part of the economy to the other.

The burden of excessive debt is still with us today. Government stimulus programs were not properly designed – the multiplier impacts that were supposed to amplify the impact of government spending never kicked in. So we can’t “grow” our way out. Instead, governments around the world are tightening their fiscal belts.

The debt-plagued U.S. economy displays little or no organic strength. Once policy stimulus wears out, the economy sputters – that has been the lesson of the past two years.

The Federal Reserve is important, but its power is limited. Ben Bernanke cannot add empty housing units to the Fed’s balance sheet. He does not have the power to cut tax rates or pass legislation that would make it easier to extract natural gas. He can’t unveil a national jobs training program.

What he is likely to do – and what he reiterated at Jackson Hole last week – is to use what is left in the Fed’s arsenal. The problem is there are no bullets left, not even firecrackers.