All the banter about Fannie and Freddie is interesting but no one seems to be asking: how did the people in a democratic republic, the world’s largest economy, host to the world’s reserve currency, the only remaining super power, let their economy become solely dependent on the ability to process and reprocess debt on homes? How did we let our government legislate into being, through the GSE’s, the largest Ponzi scheme ever?

Check out the entire, excellent post: http://www.oftwominds.com/blogjuly08/alcoholic-US7-08.html

Here are my top five recommended upgrades, in order of “wow-factor bang for your buck”:

1) Faucets & Knobs
2) Light Fixtures
3) Interior Paint
4) Exterior Paint
5) Carpets

Note: counter tops and kitchen flooring would be on the list where necessary, perhaps in place of carpets or exterior paint, but I did not do those upgrades on this house.

Here are the details:

1) Faucets & Knobs – One of the cheapest and easiest ways to significantly improve the look of a house, and especially the prime “selling point areas”: the kitchen and master bathroom.

Faucets: I went to CostCo paid approximately $90 for a wonderful brushed nickel, pull-out faucet fixture for the kitchen; and then $48 for each of two sink faucets for the master bathroom. It took me about two hours to install the kitchen faucet, but only because creatures from outer space designed the existing sad excuse for a faucet, on which I had to use the equivalent of nuclear physics and laser beams to remove. After that, however, putting the new one in was a snap. The bathroom fixtures were much easier, and only took about 20 minutes each.

Knobs: I replaced all the cabinet knobs with some simple, yet fashionable ones that matched the new faucet fixtures. The matching color / material was brushed nickel, which looks simple and elegant. They were about $2 apiece, for a total of $60 for the kitchen and master bathroom.

Total Cost: $246
Total Labor: 3-4 hours

2) Light Fixtures – This is one of the cheapest and easiest ways to significantly improve the look of a house, especially if the fixtures in the kitchen are outdated or what I call “contractor crap”, which is the barely excusable poor quality crapola that contractors put in most new houses.

Kitchen: The two-bulb fluorescent light in my kitchen was dismal to say the least. A trip to Ikea solved that problem with a $40, 5-spot halogen faux track light setup (as well as a $90 dining room fixture). Talk about dismal to elegant in 30 minutes! That made an enormous difference in the ambiance as well as the utility of the room, since a Martha Stewart wannabe could finally use the counters without casting a shadow onto whatever he or she is cooking. Installation was a snap. I also replaced the breakfast table light fixture with a fruitful trip to Home Depot and $130. Again, the difference in elegance was remarkable.

Bathroom: I replaced the three-bulb junker in the master bathroom with a $50, 8-bulb vanity row that would give you a nice tan if you stood in front of it for too long. The difference all that light made in the room was awesome! It took me about 30 minutes to install the new fixture. I do suggest having someone help you because even a lightweight fixture gets heavy fast when you have to hold it up with one hand while trying to do all the wiring with the other.

Total Cost: $310
Total Labor: 4-5 hours

3) Interior Paint – If a potential buyer walks in to your house and cannot help but stare at the cracking, sun-faded, scuffed interior paint, then they may never notice your beautiful new knobs. Interior paint can be expensive to have professionally done. I chose key “impression” rooms to have the paint freshened by the pros and then just touched up other rooms myself. The areas painted were the foyer (two stories tall + stairwell), the dining room (It was eggplant purple. seriously. The previous owner had, erm, different taste), the great room (also two stories tall), two of the bedrooms, the laundry room (This one was brown and gold. See previous remarks), and various other areas throughout the house.

Total Cost: $2239

4) Exterior Paint – The exterior of the house is the first impression that a potential buyer will have of it. If the paint looks shoddy, then even the most beautiful landscaping can’t help. I used The Painting Pros for the job and was satisfied with the work, even though they ran into several scheduling problems.

Total Cost: $3756

Note: They threw in the window trim for “free” because of all the scheduling problems, which would have cost me an additional $700 or so. It is amazing what you can get sometimes with a reasonable request.

5) Carpets – I had no idea what a huge difference new carpets would make. Wow! The old carpets were pretty worn out. The house is 2550 square feet, approximately 2000 of which is carpeted. The best quality to price ratio for carpet I could find was a 32oz face weight with an 8lb pad (a thick, quality pad is important because it makes the carpet feel extra plush).

Total Cost: $4217

Before and After photos for bathroom fixtures and knobs:

This post will tell the tale of two offers, and a later post will talk about specifics that might be of interest to the budding real estate mogul or home flipper: like what I spent money on to fix up the place, and what made the biggest difference in presentation, what were the keys to giving the buyer that feeling of, “this is the right house for me.”

The Story Thus Far

Note: If you don’t care about the back story, skip down below for the tale of two offers…

I bought my house in April, 2004 with the intention of turning a profit in two years. Why two years? Because relatively new changes in federal tax law state that if you can sell your primary residence after two years and not pay capital gains tax on it. So the plan was to buy a four bedroom house, live in it myself, fill the other three bedrooms with tenants / roommates, and then sell in April 2006 and make millions. Unfortunately, the housing market tanked sometime circa, oh, April 2006. Unfortunately, there was no turning back because my tenants had already made plans to move out. The new plan: sell before the market gets any worse.

April, May, June, July, August, September…. then finally an offer came in at the end of October. It was a low ball offer, but even after the buyer rejected all counter offers, I had little choice but to accept. And besides, I would still come out profitable. After the inspection, the buyer sent over a rather ridiculous list of repairs – even as picky as tightening bolts on the attic ladder. So I spent about $1000 and many hours of my time completing a majority of the requested repairs. Then about a week before closing, it came out that the buyer had no credit history (they are evidently new to the US, and are not even citizens) and could not qualify for financing. That meant that the deal not only fell through, but I would not receive any of their earnest money.

Lessons learned: 1) Make sure that the prequalification process for a given lender includes a credit check, and 2) Be aware that a preapproval is different from a prequalification. Preapproval means that the lender is ready to make the loan, whereas a prequalification is that the lender has reviewed buyer-provided financial information and determined that the buyer will likely qualify for a given loan amount.

The good news was that the house was ready to sell. The general inspection and stucco special inspection were complete, repairs had been made, and the place was good to go.

The Tale of Two Offers

Between Christmas and New Year’s Eve, there was a small flurry of interest in the house (take note, budding real estate moguls: I surmise that each of these buyers is more serious and in more of a rush to close a deal than the buying season crowd). Potential buyer #1, who I will refer to as PB1, came to look at the house and followed up the same evening, asking to see the inspection and other paperwork — a very positive sign. They wanted to come back a couple days later, on New Year’s Eve day and make a final decision between my house and another they were considering. On that same fateful day another potential buyer called, interested in looking at the house, who I will refer to as PB2. They asked to come look at the house at 4pm. As it turns out, PB1 was delayed and could not make it at their scheduled time (2:30pm), and ended up coming to the house just as PB2 was leaving. From what I heard, PB2 really liked the house and felt flustered when PB1 showed up presenting a competitive threat for house. In the end, PB1 decided to go with the other house, but the nervous PB2 made an offer the same night – and not a bad one, at that. It’s funny the way things work out sometimes. Either way, I am thrilled to have another offer and can’t wait to close and be finished with this chapter.