MONEY selling a home

Why Do I Have to Pay a 6% Commission to My Real Estate Agent?

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fotog—Getty Images

Why not 3% or a flat fee?

Selling a house can be expensive. Not only are you probably going to have to lay out some cash to spruce it up so you can get top dollar, you also have to plan on paying a real estate commission, which usually runs 6% of the sales price. On a $300,000 home that’s $18,000 — not a small chunk of change.

So why 6%? Why not 3%? Why not a flat fee of $2,500?

In the 1940s and ’50s, the National Association of Realtors required its members to set commissions at a certain level — and also required its members to either work full time or have enough customers to earn a living as a Realtor — in order to join (only members had access to the Multiple Listing Service). In 1950, the Supreme Court ruled that requiring certain rates was illegal. (After that it became a “suggested” rate, some sources say.)

How it became 6%, however, no one seems to know.

“I have been in the industry for nearly 40 years and know of no one who can say how, when or why it was established originally,” says Steve Murray, president of REAL Trends, which tracks real estate data. “I do know that we have been tracking it since 1991 on a national level (and are used as the source for such data by the Federal authorities) and it has fallen from an average of 6.1% that year to just above 5.18% in 2014. We see signs that it is continuing to decline at this time,” he said in an email.

Is the 6% Commission Outdated?

One thing to keep in mind is that real estate services are generally bundled. Services on the seller side may include marketing, advertising, open houses and help during the negotiation process. On the buyer side, real estate professionals may spend a lot of time finding and showing houses to prospective buyers, as well as helping them navigate the purchase. Similar to other bundled services, like Internet, cable or phone service, however, bundling sometimes requires consumers to purchase services they don’t need.

More and more, consumers are seeking (and finding) an “unbundling” of such services. Years ago, potential homebuyers talked to an agent, seeking advice on areas with good schools and public transportation, or low crime — now they may research it themselves. In addition, they may be checking online for homes for sale and contacting agents about a house that just went on the market, instead of looking to a real estate agent to find them a home. Furthermore, sellers may not want open houses, or to pay for services they won’t use.

Alternatives to a Full Commission

Rates can be negotiated. If you are a seller and a contract calls for a 6% commission, you can ask whether the agent will take less. “Offer 4%,” suggests Bob Nettleton, a social media editor for a natural health products website, who negotiated the commission when he used a real estate agent to sell his home. Or, he says, offer 2% if you find the buyer on your own and just need the agent to help with the standard process. He added that other factors, such as home price and how many services you expect, may also affect how much you can negotiate on the commission.

While some worry that a smaller commission gives an agent less incentive to sell the house, it may be relative. After all, a $300,000 house doesn’t necessarily take twice as much work to sell as a $150,000 one, even though it nets double the commission. If someone saw your home on the Internet and called an agent to see it, the agent may not be any less likely to show it even if the commission is lower.

Another alternative is to look into services such as Redfin, ListingDoor or local flat-fee MLS agents that don’t use the traditional commission structure. And of course, some DIYers (or FSBOs — For Sale By Owners — as they are referred to in the industry) are using Craigslist, Zillow and similar sites to market their homes themselves.

But before you automatically think cheaper is better, there can be times when you get what you pay for. Tom Scanlon, a financial advisor with Raymond James in Manchester, Conn., tells this story: “About 20 years ago, we were trying to sell our home. It just wasn’t moving. My wife suggested we drop the price $10,000 to move it. I did the math and called my Realtor. I told her I wanted to rip up our contract. I then told her I wanted to INCREASE her commission to 7%. She drove right over to our house with a new contract. Two days later, the house was sold for very close to the asking price. All of the other agents saw the 7% commission and jumped on it!”

Buying or selling real estate is a costly financial transaction, and the commission is just one part of that. Negotiating a real estate commission may pale in comparison to the extra money you’ll pay over the lifetime of a mortgage if your credit isn’t excellent. Someone with poor credit can end up spending hundreds of thousands of dollars more in interest, than someone with great credit (this tool estimates your lifetime cost of debt, based on your credit standing).

Buyers should review their free credit reports and check their credit scores several months before they start house hunting, in order to give them time to resolve any credit issues that arise. And for sellers, working with a buyer who has already been preapproved can help you avoid the headache of a deal that falls through due to financing glitches.

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MONEY home financing

3 Times to Refinance Even if You Might Move

If you can recapture the closing costs on a refinance before sell your home, you could save big.

Are you interested in refinancing your mortgage, but hesitant to do so because you’re thinking of selling your home at some point? Believe it or not, refinancing could still make sense. Here are several reasons why you might want to consider refinancing anyway.

Your Financial Circumstances Could Change

Let’s say you plan to sell your house in five to seven years. No matter how well you plan for the future financially, things happen. Job loss, illness, death — life inevitably gets in the way of your financial plans. Focus on the here and now, as long as you can financially justify refinancing your mortgage. The longer the horizon of selling the home, the more chances life has of getting in the way. If refinancing can save you money in the meantime, it may just make sense.

Because financial circumstances can change over time, for better or worse, it can be a good idea to calculate how affordable your house really is for you. This free calculator can tell you how much house you can afford.

You Could Take Advantage of Lower Interest Rates

At publishing time, 30-year mortgage rates have edged their way up and are hovering just over 4%. The new outlook for mortgage rates points to continual increases, bringing the cost of debt up. Picture this, if you don’t sell the property or if there is a market correction — and you do not refinance for whatever reason — is your current loan rate and payment something that you can afford to carry for the long haul? If you could save money or better your financial position, it is probably worth investigating. Rates are even better on jumbo mortgage loans, as more investors are pouring into this particular market niche. So if you have a big mortgage on your home, you may want to consider refinancing.

You’re Facing a Higher Rate on Your ARM or HELOC

With the increased likelihood of interest rates going up in fall 2015, the subsequent recasting of adjustable rate mortgages and home equity lines of credit will affect millions of homeowners. Most adjustable mortgage loans were tied to the London Interbank Offered Rate, which closely trails the Fed Funds Rate, the rate at which the Federal Reserve uses to control the U.S. economy. If the Federal Reserve hikes interest rates, LIBOR will soon follow suit, and any homeowners within their adjustment period will experience a higher payment or a future higher payment when their adjustable-rate loans reset.

A home equity line of credit (HELOC) works in a similar fashion to an ARM with a fixed period for the interest rate, followed by a rate reset. For a HELOC, payments are interest-only for the first 10 years of the 30-year term. After 10 years, the loan resets, and for the remaining 20 years the loan payment is principal and interest, so at the end of 30 years, the loan is paid off in full. The payment shock will happen after the first 10 years is up.

If you have a first mortgage on your home with a HELOC, it very well might make sense even if you plan to sell the home down the road, to roll the first mortgage and HELOC into one, saving money and continuing to make a manageable mortgage payment until you sell.

Mortgage Tip: If you have not taken any draws on the HELOC in the past 12 months, you may eligible for more mortgage programs as the HELOC may be considered to be what’s called “rate and term,” which allows you to refinance up to 80% of the value of the home.

You Want to Rid Yourself of This Dreaded Mortgage Cost

The one mortgage cost consumers love to hate is private mortgage insurance. PMI is an extra portion of the mortgage payment that not only drives the housing expense higher, but doesn’t do anything beneficial for the consumer. PMI benefits the bank to protect against payment default. If you can rid yourself of PMI because you have 20% or more equity in your home, or can qualify for a special mortgage loan program such as lender-paid mortgage insurance, you’ll save money. PMI can average up to several hundred dollars per month in most instances. If you have the 20% equity needed to refinance a new non-PMI loan and are credit-worthy, but simply choose to not refinance because the paperwork is too daunting, you’re throwing money away.

If you’re not sure where your credit stands, but you do want to refinance, it’s a good idea to check your credit sooner rather than later.

How Quickly Will You Begin Saving Money?

No one should refinance unless the time frame it takes to recapture the closing costs on a refinance is sooner than the time in which they plan to sell the home. The most common form of determining how quickly you can recoup your money when refinancing is performing a “cash-on-cash” calculation. For example, if your closing costs are $2,800, and you’re saving a proposed $300 per month on a refinance, that’s a nine-month recapture. Fees divided by benefit equals recapture.

If you can benefit by refinancing by payment reduction, by cashing in on equity, or by interest savings or any combination of these benefits, remortgaging your home very well could make sense. Consider the following scenario: If you can recapture the costs of the refinance in under two years, and you don’t plan to sell for five years, you’re three years ahead, and the rewards are yours, no matter what the future holds. Ultimately, weighing out the pros and cons of a possible refinance in conjunction with selling the home is a decision for you to make. A good mortgage professional should be able to suggest mortgage options in alignment with your financial goals and objectives, which can help you make the most prudent decision.

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MONEY buying a home

7 Ways to Avoid Real Estate Negotiation Nightmares

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Fuse—Getty Images

#3: Keep stubbornness in check

Do you squirm at the thought of negotiating with sellers at garage sales, flea markets, and antiques stores? Even if you’re pretty confident (if you do say so yourself), the process of buying a house can be filled with real estate negotiation nightmares.

Here are some out-of-the-box negotiation ideas that can help turn a possible nightmare situation into a good deal for you.

1. Don’t shy away from a challenging deal

Rachelle Schreiber, a real estate agent with Realty Group International, comes right out and discloses to potential buyers when a deal could be “challenging.”

For example: Divorcing spouses don’t always agree — on anything, but especially not selling their marital home. But that doesn’t mean you should walk away. Instead, rely on the agent to guide the process. That way, “when the sellers don’t agree on terms, we have a less painful reaction [from buyers].”

2. Be realistic about repairs

You really want to sell your house as is, but the only acceptable offer you’ve received includes making repairs — and you don’t have the time to devote to the research, vetting, and oversight those repairs require. Don’t fret. You may be able to get the buyer to do the legwork for you.

“The buyer needs to carefully calculate the cost of doing the repairs,” says Susan Naftulin, CEO of Rehab Financial Group. The seller can then offer a credit for the cost of repairs at closing instead of risking a lost sale.

As the seller, you should carefully double-check the buyer’s numbers so that you’re not reducing your price by more than is absolutely necessary.

3. Keep stubbornness in check

Sometimes egos can ruin a home sale. When that happens, take a deep breath and remember your goal.

“I just had a deal where my buyers paid $300,000 over the asking price for a single-family home,” says Roh Habibi, a real estate broker with Coldwell Banker and star of the TV show Million Dollar Listing San Francisco.

But even so, the deal almost fell through because the sellers wouldn’t include a washer and dryer in the sale.

Note: Just erase a zero (or two) from this example and you’ll see that the advice applies no matter the budget. Don’t let a small setback become a deal breaker.

4. Look at the big picture

You’ll be more likely to win a negotiation battle of wills if you’re not stuck on a specific number.

Sellers and buyers often enter a stalemate over minimal sums, says Chris Leavitt, a broker at Douglas Elliman who also stars on the TV show Million Dollar Listing Miami.

When that happens, Leavitt suggests that sellers consider the monthly carrying costs. “Do you really want to be on the market for potentially a few more months?”

For buyers, it’s about whether they really want to lose their potential new home over a small amount of money.

“Almost 100% of the time, both parties will meet in the middle,” says Leavitt.

5. Understand the difference between prequalified and preapproved

When lenders prequalify buyers, they simply estimate how much buyers might be able to borrow, and they base that figure on what buyers reveal. Being prequalified is not a guarantee that buyers will get a loan.

However, being preapproved means buyers have a loan in place that they’ll probably get if they act within a specified time.

Both buyers and sellers save time and negotiation skills when the buyer comes to the table with a preapproval letter from a lender.

6. Be realistic about short sales

Negotiations don’t work the same way when you’re dealing with a short sale. In this case, sellers are considered to be in dire straits financially, which means they can’t afford to make repairs or provide a repair credit, so that one’s off the table. These sellers also might have outstanding liens on the property that they want or need their buyer to pay.

As a buyer, you’re under no obligation to take whatever the seller dishes out. But if you still come out ahead after calculating costs of repairs and liens, then you might want to go for it.

7. Prepare to walk away

Sometimes people become unreasonable and even resort to bullying as a negotiation tactic.

“You can almost always work out an agreement, even when some part of the transaction has gone terribly sideways or down,” says Bruce Ailion, an Atlanta real estate agent.

But when someone is unwilling to engage in a civil way, Ailion says, it’s time to walk away. “Life is too short to deal with difficult people. Some transactions are just not meant to happen.”

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MONEY home improvement

8 Home Upgrades That Add Real Value

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David Papazian—Getty Images

Remember: the whole package is far more valuable than the sum of its parts.

The possibilities are endless when it comes to remodeling and upgrading your house, and deciding where to put your precious dollars can be tough. Many of these remodeling decisions can be made based on whether or not you’re planning to stay in your home long term.

Let’s take a look at the places where a $10,000 investment in your home can go the furthest.

If you are planning to sell your home within the next two years

It’s important to remember that there’s not always a direct relationship between exactly how much you put into a specific renovation project and exactly how much you get out of it.

If you consider home improvements item by item, you’ll likely conclude that undertaking almost any individual home improvement prior to the sale of your home is a losing proposition. However, when you add small improvements together with vision and creativity, you create an overall house improvement and a big return on your investment. The whole package is far more valuable than the sum of its parts!

The top six target projects

1. Kitchen. A $10,000 investment is not going to get you a full kitchen makeover and leave enough extra cash to make many other upgrades. Instead, think about upgrading tired old appliances. Cabinet resurfacing and upgrading the countertops can be very affordable and give a big splash. One word of caution: Make sure you don’t overspend for your neighborhood. Know your market.

2. Master bath. Again, here in the master bath, $10,000 will not go very far, but you can create a wow effect. Consider upgrading the shower to a frameless glass shower enclosure, adding new fixtures, and maybe a new vanity and countertops.

3. Paint. Repaint the interior of your home and keep it neutral with soft earth tones. Then make sure you pick up some fantastic pillows and accessories to add punches of color.

4. New carpet. No homebuyer wants to walk barefoot across your tired, old, stained, dirty, worn-out carpet. When you replace the existing carpet, go with a neutral shade.

5. Curb appeal. This is a low-cost no-brainer. Trim up the hedges, give the grass some TLC, plant some flowers, and give the front door a fresh coat of paint in a wonderful accent color. Create a strong first impression by adding shiny new house numbers and maybe even a new mailbox. Finally, add in some wonderful outdoor lighting, and presto!

6. Push the inside out. If there’s an existing room that looks out to the backyard, push it out! Replace existing windows with French doors and build a small deck. You’ve just increased the “size” of that room — and added value to the house for very little money.

When you’re planning to stay in your house

If selling isn’t in the cards for you and your family, you can still consider all of the tips above. You’ll enjoy living in an upgraded house, especially if you’re staying put. Additionally, think about these projects for long-term payback.

1. Heating and air system upgrades. New heating and air systems will actually reduce your monthly utility bills over time and are a great investment.

2. Going solar. In sunny climates, investing in solar technology can increase the value of your home and reduce your monthly and yearly utility costs.

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MONEY Housing Market

This Is the Best State for First-Time Homebuyers

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Thorney Lieberman—Getty Images West Virginia capitol building

According to GoBankingRates.com, the state where first-time home buyers have seen their lot improve most dramatically is...

When it comes to the nation’s hottest real estate markets, West Virginia usually doesn’t come to mind.

But for first-time home buyers it beats out bigger markets like California and Florida, at least according to banking Web site GoBankingRates.com—and it’s not just because of the majesty of its rolling mountains. The site chose New Hampshire number two and Rhode Island number three.

What makes these states stand out? Over the past decade, they’ve seen biggest growth in the number of first-time home buyers—without facing high foreclosure rates. A decade ago, just 33% of West Virginia home sales were to first-time buyers. In 2013, the latest date for which data are available, the rate had climbed to 57%. Meanwhile foreclosures have remained at 0.01%.

One factor in West Virginia’s favor: Median home prices are a very affordable $115,850. The state also boasts a program that provides up to 100% financing for first-time buyers who meet certain income requirements, GoBankingRates notes.

New Hampshire and Rhode Island saw even bigger jumps in first-time buyers—with the rate nearly doubling in both states—but both also had higher foreclosure rates of 0.05%.

Many Millennials and Gen Xers—demographics now in prime home-buying age—have been struggling to make their first purchase after seeing careers interrupted and savings decimated by the 2008-2009 recession. That dynamic has contributed to a lower homeownership rates than any time since the early 1990s, a recent Harvard study found.

West Virginia isn’t the state with the highest overall first-time homebuyer rate. That honor goes not to a state at all but to Washington, D.C., where 68% of buyers were first-timers, according to the Federal Housing Finance Agency data that GoBankingRates used.

Why not choose Washington as the best market for first time buyers? The FHFA study found that first-time home buyer rates typically fell when real estate prices rose. Washington’s real estate prices have been on a tear and median home prices now stand at more than half a million dollars. In other words, while the city may be full of aspiring first-time homebuyers, their task is getting harder, not easier.

MONEY Housing Market

Watch: This $40,000 Film Was Made Solely to Sell a House

film director and movie camera on cherry picker
Phil Hunt—Getty Images

Realtor video has bigger budget than some hit indie films.

Have you seen “9133 Oriole Way” yet? It’s a new independent film that was made in L.A. While only 4 minutes and 39 seconds long, it was put together with an impressive budget of more than $40,000, which surpasses how much it cost to make legendary full-length feature films like “Paranormal Activity” and “The Blair Witch Project.”

What really makes “9133 Oriole Way” stand out, however, is the reason it was created—not to entertain the masses, but to sell a home.

The address of the home in question is, of course 9133 Oriole Way, in West Hollywood, and the “lifestyle film” showing off the property was paid for by Williams & Williams, the real estate agency that specializes in “the most high-end properties from the Hollywood Hills to Malibu,” and works with “the cities [sic] biggest A-level actors, athletes, entertainment professionals and Fortune 100 executives.” (Apparently, they don’t work with a copy editor.)

“Regular marketing doesn’t work anymore. We’re appealing to a more sophisticated and savvy group of buyers,” Rayni Williams, of William & Williams, said to the Los Angeles Times, in explanation for why the agency made the film. “We’re taking it to a whole other level.”

According to the LA Times, Williams & Williams spent months finding a director, cast, and crew to make the promotional video. The result is something far beyond a lame slideshow or some kind of video version of the standard still photos showing off a home on a realtor website. While the entire video is set to music (“My House” by Flo Rida) and there is no dialogue, there is something of a plot, in which a handsome hotshot tears out of the home in a Corvette, leaving behind a gorgeous woman who decides to invite over four more gorgeous women to enjoy the property to its fullest. They’re seen lounging by the pool in skimpy bikinis and clinking glasses in the wine cellar in between slow crawling shots showing off the home’s massage room, fitness center, views of downtown, and other selling features.

Why would Williams & Williams fork over $40,000 to show the property off in such extravagant fashion? Well, the agency stands to take in over $1 million if and when it sells the 12,530-square-foot home, which is located in the hills near homes owned by Leonardo DiCaprio and Keanu Reeves and is listed at a cool $33 million. Watch on, and let the realtors know if you’re inspired enough to put in a bid.

MONEY renting

9 Apartment Hunting Traps to Avoid

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Tom McGhee—Getty Images

It's moving season!

Looking for a new apartment to rent? Spring and summer are moving season for many renters. It’s also a time filled with excitement and hope — the hope that the next place will be better than the last. I’ve been there.

Fortunately, a lot of the problems that plague renters can be avoided just by choosing that apartment a little more carefully. Here are nine apartment hunting mistakes to avoid while you’re looking.

1. Assuming That Moving Will Solve Your Problem

As a renter, it’s easy to get used to moving; new year, new apartment. Unfortunately, that new lease often means a new set of problems. Moving is stressful and carries a long list of expenses. Before you decide to move to where the grass is greener, consider whether you’re really that unhappy where you are. Every living space has its pros and cons. Decide whether you can live with your apartment’s drawbacks before moving on to a new set of problems.

2. Falling in Love Too Soon

These days, apartment hunting usually begins online, where you can browse through photos of apartments for rent in your area. There’s nothing wrong with doing a little previewing before you go out to view these places in person; just keep in mind that in many cases, photos tell very little. Not only will landlords do their best to make their rental units look attractive, but photos also lack a lot of detail. A rental unit that looks super cute and cozy in a photo, might turn out to be much shabbier in real life. The problem is, if the photos put stars in your eyes, you might already be in love.

3. Failing to See the Big Picture

Before you set out to look for a new apartment, think about what’s really important to you. Are you looking for a short commute to work? Proximity to certain amenities such as shopping, parks, or public transportation? It’s important to understand the big picture in terms of what you want out of your apartment, to size up each apartment as a whole. Otherwise, you’re likely to zero-in on smaller, less important details, like the size of the unit, the decor, or fantastically cheap rent.

4. Allowing Yourself to Be Wooed by Fancy Fixtures

Fancy fixtures like hardwood floors and granite countertops are great, but when you have a budget to stick to, it’s best not to be too fixated on what are essentially details. For one thing, these amenities are purely aesthetic, and will quickly lose their luster if the apartment fails to meet your needs in other key ways. Plus, in many cases, apartments in less desirable locations get the best cosmetic upgrades to entice renters. If you wouldn’t live in this apartment if it didn’t have fancy fixtures, you probably shouldn’t move in just because it does.

5. Going Out of Your League

Before you start looking for an apartment, you have to decide how much rent you are capable of paying. Most financial experts recommend that you spend no more than 30% of your take-home (after-tax) income on housing. Depending on your other financial obligations — and your personal financial goals — you may want to spend even less. But no matter what price point you decide on, once you have a number in mind, stick to it. And do not, under any circumstances, look at apartments that exceed your budget. Chances are they will be nicer. As a result, they will make the places you can afford look much shabbier in comparison. They might also tempt you to blow your budget.

6. Failing to Read the Rental Agreement

I once signed a rental agreement that stated that I was responsible for repainting the apartment before moving out. I was a student and had never painted anything in my life. Of course, I lost most of my damage deposit on that one. Rental agreements lay out, in legal terms, what you as a renter are responsible for. Read every word carefully and make sure you’re up for it. If you aren’t, move on.

7. Overlooking Existing Damage

Most rental agreements include a damage deposit. This is money that the landlord holds in order to pay for any damage the tenant may cause during the term of the lease. This can get tricky if you don’t document any damages that were already there when you moved in. On the day you get possession of your apartment, walk through it with your landlord and document existing damage to ensure you are not charged for them when your lease is up.

8. Not Considering Roommates Carefully

I’ve been lucky to have really good roommates, but living with other people is still hard. When you share your personal space with someone, you get to know each other on a pretty intimate level. Things can get ugly. So try to choose your roommates carefully. There are different philosophies on this. Some people think it’s best to choose a roommate who isn’t a friend. Others say it’s best to room with a bestie. Either way, make sure you get some references to ensure that your roommate has a solid history of paying their rent.

9. Not Vetting Your Landlord

Some landlords care about their properties and their tenants. They’ll take your calls and fix leaking toilets and send an exterminator in to deal with your ant problem. Other landlords treat their tenants like cash machines; money is withdrawn, never to be seen again. If you have problems with your apartment, a bad landlord can make your life hell. I once tip-toed across a bridge of soggy cardboard boxes for weeks until my landlord got around the fixing a leaking hot water tank that flooded my apartment. So, be sure to run a check on your landlord before you sign a rental agreement. Do a Google search, ask if you can contact previous tenants, and check with the Better Business Bureau to see if any complaints have been filed against the landlord or property management company. If you discover serious issues, find another place to rent. Dealing with an uncooperative landlord just isn’t worth it.

What apartment-hunting mistakes have you made? How did you learn your lesson?

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MONEY home maintenance

How Much to Tip for Home Services

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: I never know if I’m supposed to tip the various people who come to work at my house. Are there any basic rules of thumb I can follow?

A: We turned to Boston, Mass., etiquette consultant Jodi R.R. Smith to help with your question. She gave us a quick history lesson. Or perhaps it’s mythology. The story goes that “tips” is an acronym for “to insure prompt service.” That’s prompt service next time, since you tip after the fact, so it’s especially important to tip people who will be coming back again.

Tipping is never required, Smith says, but when it comes to people who are caring for your house and belongings, there are times when it’s highly advisable—and other times when workers could take offense at the offer. Here are Smith’s guidelines:

  • Don’t tip skilled craftsmen or technical specialists, such as plumbers, electricians, painters, alarm service technicians, handymen, piano tuners, or appliance repair people. “That’s like trying to tip a doctor or a teacher,” Smith says. “They are well-paid professionals, and a tip could offend them.” If you want to reward a professional who regularly provides exemplary service, give a holiday gift, such as a bottle of wine or a tin of gourmet cookies.
  • Do tip lawn-mowing crews, snowplow drivers, oil-truck drivers, and sprinkler servicers—but only if you’re dealing with employees, not the business owner, and only if you see the same guys come around every time. Don’t tip at the time of service, however. Tip once a year as close to the holidays as you can. “During the course of the year, offer a cold drink, a cup of coffee, a bathroom,” Smith says.
  • Mail carriers and UPS/Fedex drivers are not supposed to take cash, according to agency and company policies. But that doesn’t mean they won’t, and they are allowed to take small gifts.
  • When tipping more than one worker, try to have small bills so you can split the tip evenly among them. If you get caught with a large bill, hand it to one of them while everyone is present or announce that you’re giving a tip, and what amount, when everyone is within earshot.
  • How much to tip depends largely on where you live. “It’s all demographics,” Smith says. “If you live in a simple five-story walkup, giving the doorman $50 around the holidays might be appropriate,” says Smith. “In a high-rise with multi-million-dollar apartments, the norm might be $5,000.” And there’s a full spectrum in between. In general, Smith recommends giving $5 to $10 to each worker for a quick job, and $20 to $25 for bigger projects.
  • Food delivery people, however, are a special case. “I always over-tip them,” says Smith. “Give them $5 per pizza they deliver, and they’ll start coming to you first, even if you’re supposed to be last on their route.”
  • Movers are also a special case. If they load the truck one day and then deliver everything on a different day, make sure to tip them at the end of both days. “The guys who load the truck may be different guys who unload it, and they are handling all of your earthly possessions, so you want to keep them happy.”

MONEY home improvement

2 Ways to Make Going Solar More Affordable

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Mischa Keijser—Getty Images

A new system can cost more than ten thousand dollars, but leasing a system or taking out a loan can lower your initial cash outlay.

The price of electricity has consistently increased for the last several years, and it’s projected to continue rising in the future. This summer, the U.S. Energy Information Administration expects consumers will spend 5.9% more on electricity than they did in the summer of 2014.

If you don’t like the sound of that, maybe it’s time to consider an alternative. Residential solar energy has grown a lot recently, and in addition to the environmental motivations for choosing that resource, using solar energy to power your home could be a big money saver. At least, that’s how proponents of the industry pitch it.

Whether or not you can power your home with solar energy depends on a lot of things, like the ability to connect solar units to the power grid (not so easy in many states), the type of property you own and, obviously, its ability to receive sunlight. The ultimate money-saver would be to buy a solar energy system and be able to produce enough energy to power your home — once you’ve absorbed the cost of the system, it’s a practically free utility (though you still have to pay a few bucks a month for the electricity delivery).

“It’s basically like switching from renting utilities to buying a utility plant,” said Alex Valdez, CEO of EcoMark Solar in Colorado. If you can’t afford to buy a system (they can cost tens of thousands of dollars, though prices vary widely by how much energy you need), you have a few options.

You Can Rent a System

When solar energy first emerged in the residential market, homeowners weren’t eager to invest thousands of dollars in an energy system they weren’t familiar with. As a result, the market started off mostly with power purchase agreements (PPAs), in which an investment bank would install a system on a home and charge the homeowners for usage, on an escalating scale as time goes on.

“If you pay 10 cents per kilowatt hour, next year it might be 11 cents per kilowatt hour; that reduces the client’s savings,” said Jonathan Caizley, chief technology officer for Sunistics in California. At the end of the agreement term, usually 15 or 20 years, the homeowner doesn’t own the system, but they can buy it.

PPAs aren’t available everywhere, but a solar lease is similar in that the consumers don’t own the systems. Terms are usually shorter than with PPAs and come with fixed payments, Caizley said. Homeowners generally still save money, compared to what they’d pay a traditional utility company, because the system owner can receive tax credits for the system, and those savings are passed on to the consumer.

This option makes sense if you have the opportunity to try out alternative energy but don’t want to pay a high out-of-pocket cost. Still, you have to have good credit to get a PPA or solar lease. Caizley said applicants must often have a credit score in the 700s, on a 300 to 850 credit score scale.

You Can Buy a System

Even if you don’t have the cash, you can buy a solar energy system for your house (assuming your house meets the criteria). Loans are becoming much more popular.

“Solar loans for a first time [in 2015] are going to be more popular than PPAs and solar leases,” Caizley said. He’s seen interest increase as consumers become more informed about solar energy as a residential resource. “They see the value of consuming the tax credit on their own. Oftentimes what it comes down to is do they want to save money on their electricity bill right off the bat or do they want to invest in the system and have a project with a high return on investment.”

For those looking for the higher return on investment, financing the system could be a great option (if you don’t have the cash, that is).

Right now, the most common option is to finance with the company that sells you and installs the system, though some big banks are moving into the solar financing space, Valdez said.

“The specific companies that are focused on solar financing have more of an idea of how to underwrite it,” Valdez said. That financing typically includes the whole thing — the system, city permits and installation. That’s not to say a home equity loan or a personal loan wouldn’t work, as well.

Valdez said consumers generally need a credit score of 660 or higher (on a 300 to 850 credit score scale) to qualify for solar financing. A few years ago, “you couldn’t touch anyone below 700,” he said.

As for cost, Valdez said the best offer they have is a 2.9% interest rate on a 12-year term, with the first 18 months interest-free. The shorter the loan term, the better the savings, though he said solar loans are usually 12- or 20-year terms. Caizley said their best rate is around 3.5%, but he’s seen solar loans with 6% or 7% rates. There are many factors in the pricing, not least of which is the consumer’s credit standing.

Making such a significant financial (and physical) commitment takes several months. First, you have to figure out if you can even get solar energy to power your home, then you have to get the system set up, which can take as little as a few months to as long as a year. If you’re considering an investment like this, you’ll need to know if you have a shot a qualifying for financing. To see where you stand, you can get two of your credit scores for free on Credit.com.

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MONEY home improvement

8 Mistakes Sabotaging Your Home’s Curb Appeal

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Finn O'Hara—Getty Images

The worst mistake is doing nothing at all.

When your home is on the market, first impressions are everything: An unkempt yard or peeling paint will scare some buyers away completely, while a neat, pretty exterior will bring in more potential buyers.

Escape the pitfalls of an unsightly exterior by avoiding these eight common mistakes that can sabotage curb appeal.

1. Doing nothing

“One of the biggest mistakes I see is sellers not doing anything in terms of curb appeal,” says Matthew Coates, a real estate agent with West USA Realty Revelation in Chandler, AZ.

Many sellers focus their staging efforts inside the house, but the exterior is at least as important. Spend half a day cleaning up your property to reinforce the impression that your home is well-cared-for.

2. Too much clutter

It’s one thing to have a cluttered yard most of the time, but it shouldn’t be cluttered when your home is on the market. A collection of shoes near the front door, a jumble of lawn furniture, kids’ toys — all of that should be cleared away, with only a few tasteful pieces left out to make the yard look homey and to give buyers ideas for how the space could be used.

3. Tired landscaping

Don’t go overboard and bring in a backhoe to level the lawn, but do make sure the yard is looking its best. Water the grass, trim the hedges, and put in a few perennial flowers to brighten things up.

“Adding vibrancy with fresh flowers would make a world of difference and make the yard inviting and alive,” says Coates. Backyards and gardens teeming with bright flowers are one of the main reasons the real estate market heats up in spring.

If it’s not springtime, you can still add a little color to your yard by planting seasonal flowers, sweeping up dry leaves, and making sure it’s looking its best.

4. Peeling paint

There are many theories about which renovations are worth investing in when a house is on the market. We would contend that touching up the paint on the front of your house is one of them.

New paint won’t disguise a house that’s in need of major repairs, but it will give the house a more cheerful appearance than peeling paint. It may not be practical to repaint the entire exterior, but repainting the trim goes a long way. If you can’t paint all of the trim, focus on the trim around the main door so that the buyer standing on the front porch carries positive first impressions inside.

5. Quirky art

That enormous elephant statue may fit your tastes or express your eccentric sense of humor, but you don’t want buyers to fixate on one thing that makes the house seem bizarre. Because you can’t anticipate everyone’s taste, it might be best to remove all the quirky art from your house and yard. You want to showcase your house as pretty and appealing. A trusted friend’s honest opinion will help you part with your precious treasures — even if just for staging.

6. Unusual landscaping

In some circles, front yard vegetable gardens are all the rage. You’re welcome to put tomato plants into the flower beds in your front yard — but buyers might not love the look. When you’re selling, the front yard is best served by ornamental plants only.

Similarly, the backyard should be an inviting outdoor living space. Consider removing the backyard poultry farm, the goat pen, and any other unusual pet habitats.

7. Shocking colors

Is your house locally known as “the bright purple one” or “the Easter egg house?” Bright colors are cheerful, but again, you don’t want your bold taste to scare off a solid buyer.

Consider using neutral paint colors and lawn furniture when your house is on the market. For inspiration, look around the neighborhood. Your house should complement the ones around it. Save your wildest color fancies for your next home — not the home you’re trying to pass along to its next owner.

8. Outdated fixtures

New exterior light fixtures aren’t very expensive, and they make a big difference. Not only will they give the impression that your home has been updated recently, but they’ll also cast a brighter light for evening drive-bys. Matthew Coates also recommends making sure the hardware on your front door is in working order.

“Nothing will turn off a buyer faster than if it’s a chore just to get in the door,” he says.

None of these solutions are expensive — decluttering, a bit of fresh paint, a few flowers here and there. However, all these steps will help potential buyers inside the house, where your home’s real charm will have a chance to cast a spell.

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