Buying or selling a home is one of life's most important financial decisions. While it's often intensely personal, some essential advice often applies no matter what the circumstances. These 40 tips can help homebuyers and sellers get the most out of the transaction, work with real estate agents, and find tax deductions in their new digs.
Related: 10 Home-Buying Myths Debunked
A realistic budget can help narrow the search for a home to what's truly affordable. A comprehensive budget includes the monthly cost of mortgage payments, taxes, homeowners insurance, and home association dues (as well as premiums on private mortgage insurance, which protects the lender if the homeowner cannot or does not make payments, when applicable). There are online calculators to help buyers pin down a number.
When selling a home, create a good first impression. Touch up the paint, mow the lawn, trim the bushes, and clean the entire front yard thoroughly. Small investments such as a new mailbox, a few plants, or a bench for a front patio could also attract buyers.
Rather than settling for a real estate agent a friend recommends, or whose face is on a billboard, interview several before making a choice. Some agents specialize in buying or selling, and having one with the right expertise, as well as knowledge of the appropriate neighborhoods, can pay off.
There are some limits, but interest on mortgages and home equity loans are tax deductible, as are premiums for private mortgage insurance and mortgage points paid by homebuyers.
Is it better to rent or buy? It's an endless debate with no clear answer, as personal circumstances and geography change the equation. Consider the pros and cons carefully. The New York Times has created a calculator to help crunch the numbers.
Related: Your First House: 13 Tips for Saving and Buying
The longer a listing stays unsold, the less attractive it may appear to potential buyers. They may think something is wrong with the home or stick to lowball offers. To prevent this, prepare the home for sale, determine a realistic opening price, and be ready to move quickly once the home is listed.
Try to get a feel for a real estate agent's negotiation style and work experience during the interview. Ask how many houses he or she has sold or bought in the area and look for experience dealing with similarly priced homes.
To entice buyers, consider listing a house for slightly less than the market value. Multiple offers can lead to a bidding war in which potential buyers go back and forth increasing their offers, and the home could wind up selling for above the market rate.
Check to see if the local, state, or federal government is offering tax credits for energy-efficient improvements. If available, they may offset the cost of buying and installing solar, wind, and geothermal systems. Energy Star appliances could also qualify.
Remodeling or installing major upgrades may seem like a way to increase the value of a home, but these projects do not necessarily pay for themselves. Minor bathroom remodels and landscaping are smart moves, according to HGTV. Even if the investment is not entirely recouped, putting in time and money to modernize a home can attract more potential buyers.
Pictures may be worth a thousand words, but words still matter. Real estate site Zillow analyzed the text of ads and found that using terms such as "luxurious," "captivating," and "impeccable" (if they describe the home accurately, anyway) can increase the selling price.
Find out exactly what an agent's fees are before signing a contract. Often, the agent gets a percentage of the home price. To save money, ask if there is any possibility of negotiating a lower fee -- it could be an option for those who use the same agency or agent to buy and sell homes.
Before an open house, homeowners should clean out or spend time organizing storage areas. Try to keep things as tidy as possible, and consider buying new shelving or storage units if they will help make a good impression. To emphasize the possibilities to buyers, consider renting a storage unit and emptying closets or the pantry while showing a home.
While animal lovers consider pets part of the family, some buyers may be put off if they see a litter box or feeding dish. Pets could mean lingering smells or dander.
Homebuyers who can afford to put 20 percent down may be better off doing so. The recommended down payment can lead to lower mortgage rates and closing costs. It also lets buyers avoid private mortgage insurance.
When showing a home, emphasize the natural light. Move plants away from the windows, clean the glass regularly, and consider upgrading the curtains to draw buyers' attention.
Homeowners whose homes lose value because of a sudden, unexpected, or unusual event may be able to write off the loss. Earthquakes, fires, floods, volcanic eruptions, and tornados are a few examples. For the deduction, homeowners must subtract $100 from the value lost during each event and the remaining value must exceed 10 percent of the homeowner's adjusted gross income.
Windows might not provide enough light on their own during the winter. Turn lights on and ask real estate agents for tips on adding lighting to a room. Agents may be able to pinpoint where adding a lamp will make a big difference.
Buyers who can't afford to put 20 percent down may still have options. Government-sponsored programs for veterans, low-income families, and residents of rural areas let homebuyers put as little as zero percent down. Bank of America also announced a mortgage product recently that requires 3 percent down and does not require private mortgage insurance.
Ask a real estate agent to look at historical selling data to determine when to put a home on the market. Picking the right moment could decrease the time the house sits on the market and increase the price.
A good credit score can lead to lower mortgage rates and save buyers a lot of money over the life of a loan. Avoid applying for credit accounts such as an auto loan or credit card when shopping for a home. The act of opening the account can lower the applicant's credit score for six months to a year.
Related: 15 Things That Do Not Affect Your Credit Score
Telling neighbors before putting a home on the market could lead to a surprise sale. They have an incentive to help find buyers they know and like.
Working with a real estate agent doesn't always go well. Getting out of a contract may mean paying a termination fee, but sometimes that's the right move. Other options are to wait until the contract expires or have a frank conversation and hope both sides can walk away amicably. When working with an agency, consider asking the manager if a different agent is available.
It's best to compare loan terms and rates from multiple lenders to find the best option. But multiple hard inquiries -- when a lender looks at an applicant's credit report -- can hurt a credit score. The good news: For mortgages, credit-rating agencies count multiple inquiries within a short period as a single inquiry. The period ranges from 14 to 45 days, depending on the agency and scoring model.
To help push hesitant buyers toward an agreement, consider throwing in a little something extra. This could be a monetary offer, such as paying the closing costs, or physical goods such as the dining room set or a large TV in the living room.
Losses from a home burglary could be tax-deductible. As with damage to the home, the deduction is equal to $100 less than the value of the lost property, and only the portion that exceeds 10 percent of the owner's adjusted gross income is deductible.
The 28/36 rule refers to a borrower's debt-to-income ratio. Lenders may compare an applicant's current monthly income to potential monthly house payments, including taxes and insurance, looking for a ratio of less than 28 percent. Lenders may also compare an applicant's total debt payments with income and look for a ratio of less than 36 percent. Regardless of credit, it may be hard to get approved for a nongovernment-backed mortgage with a ratio above these limits.
Getting pre-approved for a mortgage can make the buying process easier. Sellers know it's less likely an issue will arise during the closing process, which makes pre-approved buyers more attractive. (Of course, a cash offer provides the greatest assurance, but that is rarely an option.)
A good real estate agent should get to know buyers and show them appropriate listings, but it doesn't hurt to look at the market independently. There are thousands of listings online, and professional real estate websites make it easy to narrow the options by neighborhood, price, and features.
Bad weather might keep some potential open house guests from visiting, but those who do show up may be more serious about buying. If the walkways or stairs are snowy or icy, though, it might be better to reschedule. Treacherous footing could chill some potential buyers, and a slip and fall could lead to a lawsuit.
Some home purchases are pure financial transactions, but sellers who have lived in a home for decades might have a sentimental attachment to the property. It could benefit a potential buyer to write a letter or speak to the seller about why the home is appealing. Buyers planning to flip a property may be better off staying quiet.
Homeowners can take a tax deduction for medical-related home improvements needed for themselves or their dependents. Expenses could include an installing an entryway ramp or intercom system, lowering the counter height for someone in a wheelchair, or modifying stairways. But keep in mind that such improvements may increase the value of the property, and only costs that exceed that rise in value are deductible.
In some markets, homes get snatched up almost immediately. While the closing procedures could delay a sale date, sellers should be ready to pack and move in case they have only a few weeks.
In a competitive seller's market, sellers might have a hard time moving. Make an offer more attractive by letting the seller stay in the home for an extra month or two after finalizing the sale.
After living in a home for two of the previous five years, sellers can deduct up to $250,000 in profits when selling, or $500,000 for married couples filing jointly. The deduction can be taken multiple times but applies only to primary residences owned and occupied for at least two years.
During the period between the acceptance of an offer and the closing, the buyer can pay for a home inspection. Look for an independent inspector who is licensed and insured; look over the report closely; and don't be afraid to ask questions.
When a home inspection uncovers problems, buyers and sellers may need to return to the negotiating table. The seller could complete necessary repairs before handing over the keys or lower the price to accommodate the cost of repairs. If the seller doesn't budge, the buyer must decide if the deal is still worthwhile.