Millionaires in the Making....

Tracy and David Seims Ages: 41 and 43 Goals: Amass a seven-figure net worth Fund college for their two kids Retire in their early sixties Assets: $300,000 in retirement accounts $200,000 in home equity $175,000 in business equity $67,000 in savings accounts Growing up working class near St. Louis, Tracy and David Seim hoped that education and hard work would turn them into millionaires by age 40. Well, almost. Now 41 and 43, respectively, they have a net worth just shy of $750,000 - not a mill, but a very respectable sum. Still, measuring themselves against their more free-spending friends, the Seims don’t feel flush. They wonder if they’ll be able to afford college for Gabi, 13, and Gracie, 9, a comfortable retirement and, as Tracy puts it, “some fun along the way.” The couple, who run a small company that sells industrial fasteners and other supplies, paid themselves $103,000 last year. They have no credit-card debt, have lived in the same house (worth about $300,000) for 14 years and don’t drive fancy cars. They’re so frugal compared with certain friends, in fact, that they wonder if they’re missing something. “Everybody’s passing us by,” Tracy says. “What are we doing wrong?” Where They Are Now The Seims have a total of $300,000 in retirement accounts, and they max out their Simple IRAs, adding $10,500 each last year. They’ve also been diligently salting away money for their daughters’ education - $52,000 so far, stashed mostly in custodial UTMA (Uniform Transfers to Minors Act) accounts, to which they added $1,200 in 2006. They also have about $15,000 in bank CDs. Like most investors, Tracy and David had some setbacks. At the advice of a financial planner, they invested a rollover 401(k) from David’s previous job as a salesman into individual stocks. That was in 2000, right before the market tanked; the account lost more than a third of its value. The Seims have since switched advisers, moved their stash into blue-chip mutual funds and recovered most of their losses. “The only one who made any money was the adviser,” David laments. What They Should Do The Seims’ financial situation isn’t nearly as bad as they seem to think, says Jim Reding, a financial planner at Paradigm Wealth Advisors in Des Peres, Mo. College and a comfortable retirement on a seven-figure nest egg are well within their grasp, as long as they take some practical steps now. Fix the investment mix. The fact that they no longer hold individual stocks doesn’t mean the Seims are diversified. To avoid ups and downs and maximize returns, Reding recommends that they add funds that hold foreign stocks, mid-size growth stocks and a few other asset classes. What’s more, between the 1 percent annual fee they pay their current financial adviser and the expense ratios on the funds they own (some top 2 percent), David and Tracy are shelling out way too much. Switching to funds with lower costs would wring more profit from their portfolio. Make college savings work harder. Reding suggests that the couple open 529 plans and put new savings there. The money will grow tax deferred, and the Seims will get a state income tax deduction. To cover 75 percent of projected tuition costs, the Seims should ramp up their current rate of saving to $235 a month for Gabi and $289 a month for Gracie. Don’t judge progress by looking at other people’s stuff. Just because a neighbor owns a vacation house or drives a Jaguar doesn’t mean he’s smarter with his money: He may be living scarily above his means. The Seims need to stick to their own plan and stop worrying about what everyone else is doing. Assuming they make the changes that Reding suggests - including increasing their retirement saving by 3 percent a year - he predicts that the couple’s net worth will hit the $1 million mark within a decade. –By Yuval Rosenberg. This article appears in the October issue of Money Magazine. For more information, visit: http://www.robertjrussell.com

Home Pricing Strategies

Just as a football coach has a bunch of different plays to choose from and use throughout a game, you have a variety of strategies to help you determine the price of your home. No one strategy can stand alone, but used together they can narrow the best possible price for your home. Review Comparables After sizing up the landscape, comparables play the biggest role in setting the price. Considered part art, part science, "comps" are regarded as the single-best tool in determining a home's value. There are some tricks determining which comps are the best; see the article on Picking the Best Comps for help. You can view comps on your property or anyone else's on robertjrussell.com, simply by entering an address. Look at Unsold Homes Homes on the market that haven't sold yet are also a consideration, although not a strong one, since it's unproven whether the house will bring the money it's asking. But, look at the active competition. Find a home most similar to yours and find out how many days it has been on the market. You can also look for homes owned by celebrities, and benchmark against those houses. If the house has been sitting for a while (more than 30 days), you will see the market is not convinced that is the correct price for that home. Once you see the "Sold" sign, find out how much above or below the list price it sold for. This will give you a good idea of how the market is behaving and how aggressive you can be in setting a price. Use Square Foot Pricing Some neighborhoods are a mixed bag of architecture, style and size, which means if you can't find another home similar to yours, you can use square foot pricing. How? Take 3 - 5 homes as similar to yours as possible, add up the square footage and divide by the number of homes. This will give you an average per square foot for your comps. Then, add up the sold price of each home, divide by the number of homes to get the average. Lastly, divide the average sold price by the average square foot to get the average price per square foot. Once you have the average price per square foot, multiply it by your home's square footage. This is just another tool to help you price your home. Example: Step 1: Find the average sq. ft. of comps Home 1: 1,950 square feet Home 2: 2,400 square feet Home 3: 1,800 square feet Home 4: 2,050 square feet Total: 8,200 square feet 8,200 / 4 = 2,050 sq. ft. 2,050 is the average sq. ft. of your comps Step 2: Find the average price of comps Home 1: $310,000 Home 2: $410,000 Home 3: $299,000 Home 4: $325,000 Total: $1,344,000 $1,344,000 / 4 = $336,000 $336,000 is the average price of your comps Step 3: Divide the average price by the average sq. ft.: $336,000 / 2,050 = $164/per sq. ft. $164 is the average price per sq. ft. of your comps Step 4: Set the price of your home: Take $164 and multiply it by your square footage to get a price. For example, if you have a 1,975-square-foot home, multiply it by $164 (e.g., 1,975 sq. ft. x $164 = $323,900). Bingo! Your home's price: $323,900! Get a Comparative Market Analysis (CMA) If you've used the three strategies above, but still need reassurance, go to a real estate agent -- or two or three -- and ask them for a CMA. Whether you use the agent to sell your house or not, they will be more than willing to provide a CMA in hopes of getting your listing. It shouldn't cost you any money to get one. Get an Appraisal If you really need extra assurance, hire a professional appraiser. An appraiser will cost approximately $250 - $400, depending on your home size and uniqueness of the property. They will come to your home and itemize the number of rooms and amenities (e.g. swimming pool, fireplace, etc.) and will pull comps from other nearby homes that sold recently. Once they have completed their review of your home, the comps, and the market, they will furnish you with an appraisal. This will be an estimation of your property's fair market value. For more information: visit http://www.robertjrussell.com

Increasing Seller's Property Value

Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price. Some tips to achieve a positive impact on value are: Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger. Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour. Cosmetics are important. Fresh paint will always add more value than it costs. Clean or new carpet/flooring adds more value than it costs. Landscaping adds more value than it costs. At the very minimum, make the entrance area neat. If you can, add some colorful flowers and new sod. Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price. Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs. If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions. Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price. For more information visit: http://www.robertjrussell.com

Real Estate Pricing Checklist

You are anxious to get that sign up, but hold on! Before you set the price on your house, take a look at what's going on. Not only your perspective of things, but from the current mood of the market. The market is not sympathetic to "you need" or "must have" pricing methods. The time spent here may save certain headaches and disappointment that lay ahead if utilizing these strategies in determining your home's current value. The home is worth what a buyer is willing to pay for it in an open market. So please take some time and review the following strategies. What is your Mindset A seller's biggest advantage is time, because the more time you have, the more you can prepare and do your homework. However, if you're in a rush to sell, you're at the mercy of the buyer; you won't have the luxury of preparing or waiting for an ideal one. Do not disclose your timetable to anyone, except your agent. If you can't trust your agent don't do business with them. Your agent has a duty of confidentiality to you per your written contract and will only disclose information you as the seller give permission to disclose. A rushed seller means a bargain for the buyer and savvy buyers can smell panic a mile away. If you're planning on selling in the next 6 to 12 months, you have lots of time to prepare. As odd as it sounds, sometimes people sabotage their own intentions by being too greedy. Don't do it! As you really start looking at homes on the market, you will develop a sense about what is priced low, high, or just right. Doing your homework here will help you truly understand home values and you will be able to set a reasonable price -- a price that buyers know is just right. Tracking neighborhood values - You need to become somewhat of a snoop because you need to learn more about your neighborhood than you ever thought possible. Mood of the Market Markets have moods? They do! You need to judge whether it's a sellers' market or a buyers' market and it could vary by city, state, and neighborhood. Your interest is in your own neighborhood. And when we mention "market", we don't mean the neighborhood grocery store. The market is a catch-all term for all the ingredients that go into the mood of real estate at a given time. It can include such things as interest rates, home inventory, job forecasts, and even time of year. The market shifts constantly, so you need to raise your antennae and tune into what's going on in your neighborhood. Market Mood Checklist Inventory. How much is out there? Assess the inventory of homes in your area by driving around or use online sites to search for sale homes in your neighborhood. Also, real estate agents send out monthly mailers detailing home sales and include all kinds of information, such as number of homes that are on the market. If you live in a desirable neighborhood and there aren't many homes for sale, you will have a clear edge here. However, if you drive around and do see lots of homes on the market and they're not selling very quickly, you might have to reduce the price you had in mind. Days on the market. Review the homes in your neighborhood and their days on market (DOM). Once again, that real estate mailer that you were throwing away for all those years will now come in quite handy. Look up your ZIP code's Zindex on Zillow.com. Look at trends for the past year and assess whether homes were appreciating or depreciating (e.g. homes in your ZIP code were rising by 2% each month for the past 6 months). Unless you see a downward tick in this number, you can probably assume this will continue. If the Zindex in your neighborhood is rising, that means people are in the buying mood. If the Zindex is on a downturn, that means buyers have the upper hand. Check your local news. If Zillow does not provide a Zindex for your home (in which case, Zillow provides you with a tax assessed value), check your local newspaper's real estate section for charts or articles on sales trends in your ZIP code. Jobs, jobs, jobs. Monitor the job situation in your area. Are companies or factories closing down? Not a good sign. But, if "Major ABC Company" in your local town is expanding, kick your heels up because that means jobs, more people, and more housing will be required. This is good. Track neighborhood values. Each week, walk or drive around your neighborhood and begin collecting listing sheets -- you know, those fliers that agents create to list the facts and amenities of a home. It's amazing the knowledge you gain by tracking neighborhood home values and price points. Ideally, find homes similar to yours and pay close attention to the "action" surrounding them. Are they getting lots of traffic? As you collect these listing sheets, put them in a folder and date each sheet. Make note of the list price, sold price, and days on market (DOM). Attend nearby open houses. This is good for a number of reasons: to observe how other properties are showing and to assess their value, to chat up the listing agent (they have loads of info to share), and to feel the "mood" of potential buyers. Once you do this weekly, you will get an excellent feel for home values and what potential buyers are after. After doing this for a couple of weeks, challenge yourself by guessing what homes "go for" as you approach them for the first time. You'll be surprised at how well-trained your eye becomes with some practice and exposure to homes. Tour some homes with your agent. Get out there -- act like a buyer and see what they see! Hear other sellers make mistakes, hover over you, or talk too much or apologize for condition! Price per square foot. If you don't want to go down on your asking price, you could choose to focus on your price per square foot. Show potential buyers how your price stacks up against others in the neighborhood. Visit http://www.robertjrussell.com