My wife and I have been playing around on Redfin and visiting a few open houses each week. We aren’t really actively looking for a new home but we find the exercise to be valuable. By visiting open houses, we get a better idea for how much house we can buy, what we like and dislike about various houses, and a look at how life might be in a larger home. Most of the homes we look at are within 15 minutes of where we live now, since we love the area, and we only go to the homes that have open houses.

When it comes to open houses, there is definitely a right way and a wrong way to go about it. Since I’ve never had an open house, I don’t know what or how much advice real estate agents give but there is tremendous variance in the quality of an open house. Having gone to at least a dozen, here are a few ideas for those of you looking to hold an open house.

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If you were only looking at some property tax assessments, you might not get the idea that the housing market recently crashed. Many counties continue to value homes at what they used to be, before we saw a drastic drop in home values. While this isn’t true for all localities, you might find that your property tax assessment is higher than you feel it should be. Especially if “market value” has changed in your neighborhood.

Obviously, because you pay property taxes based on what the county (or city or state) says your home is worth, the higher your assessment, the more you owe. If you feel that your property tax assessment is too high, you can challenge it, saving yourself some money if the assessment is adjusted downward.

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For the last few months, my wife and I have batted around the idea of buying a new home. There’s nothing wrong with our current home but we’d really like a place that had some character to it. A place that was slightly bigger and one that wasn’t quite cookie-cutter (we’re in a townhome now, so we’re identical to everything around us). We love our current house, so we don’t have a big reason to leave, and with her focus on school and mine on work, it’s one of those passive searches.

We use Redfin to do the searching because their technology is by far the best of any I’ve seen. The integration with Google maps, the search capabilities (you can search on the type of home, type of listing, whether it has a view, garage, etc.), regional sales data ($ per square foot, charted by date in a particular city), ability to save listings, and it’s ease of use make it perfect for house searching. My wife and I share the same account and save listings we like to show one another. You can search within some of the most convenient geographic restraints too – city, county, university, etc.

Their claim to fame though, is the fact that they refund half of the buyer’s agent’s commission (more on their commission refund). They pay their agents a salary, not a commission, so you pocket those savings at 1.5% the purchase price of the house, with a minimum commission of $5,500.

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There are two parts to any investment – cash flow and equity appreciation. Cash flow refers to how much money the investment generates and equity appreciation is how much the investment itself grows in value. When you look at real estate, cash flow refers to any rents you can earn and equity appreciation refers to any increase, or decrease, in the property’s value.

In the last few years, real estate has taken a huge hit because prices simply grew too quickly, financially incapable people were given loans they couldn’t afford, and the myth that “buying a home is the best investment ever” was finally revealed to be the result of incredible anecdotes and not a statistical look at historical home values.

I’ve never liked the idea of real estate as purely an investment for a variety of reasons.

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Every year, Remodeling Magazine publishes a list of home projects, their estimated costs, their resale values, and how much you can expect to recoup whenever you sell your home. I wouldn’t use the list to decide which home remodeling projects to start but if you have two you like equally, their information might present the tipping point.

I looked at Remodeling’s Best Home Renovations list in 2007 (and in 2006) when the housing boom was still happening. Now that we’re in a recession and the value of homes falling, how does the list compare?

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This is a guest post from Ramit Sethi, the founder of iwillteachyoutoberich.com. His new book, I Will Teach You To Be Rich, will be published on March 23rd.

A few weeks ago, I got an email from a reader named Dave:

A few months back I was looking to buy a home in Houston. During my search I decided to look at this builder because of the “incentives” they were offering. Well, I soon found out that these “incentives” were nothing more than a bait and switch tactic.

Anyhow, a couple of days ago out of the blue I received the e-mail below, and couldn’t believe what I was reading. With all of the unfavorable economic conditions we’re facing, home builders continue to send out this garbage.

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When it comes to making money, I’m all for capitalism. I like a free market and you can try to make money from as many means as possible. However, do you really need to be a vulture and swoop in on a foreclosure? There may or may not be a family living in that house but if you wanted to make money, do you want to use a service that preys on the misfortune of others?

There are plenty of places you can go to make a buck, you don’t have to tempt fate by making a couple bucks off someone you have to kick out of their home. (yeah, they made mistakes, but do you want to be the person who puts the nail in the coffin… just for an extra dollar?)

In all honesty, RealtyTrac doesn’t prey on the downtrodden… but they let other people pick at the bones of the dead. Is that worse? I think so, but that’s up to you.

On the outside, it looks like graffiti-covered dump.

On the inside, 190 Bowery in Manhattan is a six-story, 72-room, 35,000 square foot single family home that is absolutely gorgeous. It was once the home of Germania Bank and was built in 1898.

Jay Maisel, a well-known photographer, bought the building forty-two years ago for $102,000 and has lived in it since with his wife Linda and daughter Amanda. When he got it, it “was knee-deep in garbage and coated in soot.” He said his parents cried when they found out and that “Every single thing that can come out of a human body has been left on my doorstep. But it was more disgusting than dangerous.”

The slideshow is a collection of eleven beautiful photographs covering every floor of the building. The home is estimated to be worth at least $30 million. There are more photos in this interview with Jay Maisel (interview).

The 72-Room Bohemian Dream House [New York Magazine] (hat tip to Kottke.org)

I have two friends who bought a half-million dollar rowhome in Baltimore, MD without a contract.

That’s right, they entered into a business transaction for a half million dollar asset with no contract, no agreement (more on this later), no nothing. Half a million bucks.

They did have what they considered an agreement and it was that they agreed to discuss what they would do with the home in three years. For three years, neither one could move out the agreement was to keep status quo for three years. It’s now three years later and one of their two roommates is moving out… and they’re not sure what they’re going to do. One guy likes the status quo and wants to get another roommate. The other doesn’t want to deal with the headache of another roommate and would prefer to eat the rent difference.

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A little over two years ago, my friend discovered that she had developed mold in her basement. It was a strain so difficult to manage that it required thousands of dollars to eradicate and she developed medical problems because of it. She had it professionally cleaned and had a ultra-violet light-equipped HVAC system installed to combat future growths. Despite all her improvements (and spore-free test results), her medical issues persisted and she was forced to move out and try to sell her home.

When I looked at the description used to explain the comforts of her home, I was aghast. The description, couched in all sorts of non-specific novelette-type prose like “quaint neighborhood” and “lovingly renovated,” did nothing to describe any non-mold related improvements. While a bit shady, I could understand not mentioning the mold related enhancements such as the UV HVAC system or the extensive cleaning of the basement; but the listing completely skipped how she replaced all her appliances with stainless steel, replaced her counter-top, and installed hardwood floors on the first floor. It even skipped on describing the renovated bathroom on the first floor.

My logic for offering as much information as possible so that buyers can make an informed decision on whether they want to tour a place stems from my experience with buying pay per click advertising. The key in any type of advertising is to lower your cost of acquisition. The cost in this case is your time. What you want is someone who is genuinely interested in your home coming to get a tour. If someone absolutely hates stainless steel appliances and doesn’t know you have them, they might be turned off the minute they walk in. You’ve just spent time showing a place with zero chance of a sale and time away from showing it to someone who would buy it.

On the other hand, if they don’t care about hardwood floors and they come, they might be pleasantly surprised but they won’t value it as much. You want the person who values hardwoods to visit because you will be paid more if that person buys. That person is more likely to answer the listing if they see hardwoods in the description. Offering as much information as possible might limit your pool potential of buyers but the probability one of them buys will increase (in pay per click advertising, you want a lot of targeted clicks, not just a lot of clicks).

I told my friend this but she was reluctant to ask the real estate agent to change the listing because she felt the agent knew best. While I have no doubt that a listing agent knows more than I do about selling homes, I find it difficult to believe that you would avoid mentioning stainless steel appliances, hardwood floors, or a newly renovated bathroom.

Ultimately my friend was unable to sell the home and is now happily renting it out. (this is more a product of the softening real estate market and the agent having too many listings to manage at the time)

Often, experts do know more than you in their domain but it never hurts to make suggestions. When you’re talking about such valuable assets and when the cost of asking is zero, it makes no sense not to ask.

(Photo: thetruthabout)