July 2004 — Q: Our family has been trying to sell our parents’ house since March, with tons of lookers but no good offers. I hired a real estate agent about a month ago and her contract expires in about a month. The house is in one of the most desirable areas in town…. We're asking $99,000. But, it's old. It needs work. We have already spent $5,000 fixing things that were absolutely necessary to sell it. … So far, STILL no luck selling it. Most of the comments are: Too much work required, or think it's priced too high. My question is: After the agent's contract expires, should I put more money and more work into the house to be able to sell it? Or sell it as is and get what we can out of it? Before Mom died, I promised her that we could get $100,000 out of the house. After we pay various bills, what's left is to be divided between kids, with my disadvantaged little brother getting the bigger part of the lump sum. It's not going to be nearly what I expected to be able to give him and, in fact, will barely allow him to pay his own bills. My sister keeps saying that the house is only worth what someone is willing to pay for it. —Denise, Wichita, Kan.
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A: Your promise to your Mom notwithstanding, there are several choices involved in trying to get the best price for a house: fix up or sell as is, list with an agent or sell it yourself, take an offer below the asking price or wait and hope for a better one.
Unfortunately, there is no “right” or “wrong” way to go. Real estate is extremely “local” — what works for your neighbor may not be right for you. Whether or not to list with an agent, for example, involves decisions about how much time you’re willing to spend and how much expertise you have vs. how much an agent can help widen your reach, give solid information about other recent sales in your area, and offer smart advice about where to spend money fixing up and where to leave things alone for the buyer to deal with. Keep in mind, there’s no “fixed” commission for agents. If you think the fee you’re paying your current agent is too high, shop around. There are lots of agents, and they won’t cut their commission until you ask.
In some ways, your sister is right: houses (or stocks or bonds or any other investment) are priced by the market. It doesn’t matter if someone assigns a “price” to a house — whether a professional appraiser or an agent’s recommendation. Unless and until a buyer comes along willing to pay that amount, it’s just a starting point.
Minor improvements can help improve the “curb appeal” of a house, but many major renovations don’t pay for themselves. So if you know you’re selling, it doesn’t make sense to put a lot of money into the house just so you can get a specific asking price. And, of course, the longer you hold out for your price, the more you’ll pay in taxes and any mortgage payments outstanding.
If your main concern is how far the money will go in supporting your brother (which it sounds like it is, as it should be), it might make sense (if you haven’t already done so) to find a financial planner or advisor who can offer creative suggestions on stretching the proceeds of the sale of your Mom’s house. Steer clear of insurance agents, stock brokers and others who sell specific financial products. Ask around for references. Many independent advisors will meet with you at no charge for an initial consultation. You may be surprised to learn how far you can make the money go.
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