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Category Archive: ‘Thinking of Selling?’

Did She Say Lower Prices?

sean

From PropertyRadar (ForeclosureRadar):

“Earlier this year we accurately predicted that 2014 would be a year of lower sales volume and flat prices because home prices rose too far too fast,” said Madeline Schnapp, Director of Economic Research for PropertyRadar.

“That’s exactly what’s happened and hopefully by next spring, prices will be more in line with what prospective homebuyers can afford.”

Read full report here:

https://www.propertyradar.com/reports/real-property-report-california-october-2014

Posted by on Nov 19, 2014 in Market Conditions, Thinking of Buying?, Thinking of Selling? | 3 comments

Giveaway Meter

giving it away

We’re in agreement that the local market has seen all its biggest price gains.

You’ve patiently waited until there were a couple of good comps nearby, and you’ve agreed to list for an attractive price – within 5% of the last sale.  You’ve spruced up the home, and are ready to hit the open market.

You understand the logic about taking advantage of the urgency early on, but you don’t have to sell - and you’re not going to give it away!

How will you know?

Here is my Giveaway Meter:

1. Multiple offers the first couple of days: You hit the jackpot, and it was probably more due to your home’s higher quality and lack of good inventory nearby, rather than you under-pricing your home.  Don’t panic, and don’t raise your price.  Thankfully, you have hired an agent who has legitimate bidding-war strategies – let him do his thing!  P.S. Spreading the offers out on the table is not a bidding-war strategy – though it is the standard answer when you talk to realtors.

2. One offer the first couple of days: Drag your feet to see if anything else comes in – and threats of offers don’t count, unless they come from a great agent who might deliver.  Wait until the offer is about to expire, and counter-offer to buy three more days.

3.  Offer comes in on Day Four:  The fourth day is peak urgency - if the offer is full-price or better and the other terms are acceptable, sign it.  Sellers and agents are highly resistant to not countering – but if you get your price, don’t rock the boat.  Three thoughts:

a.  You have a second negotiation coming over repair requests, and buyers who get worked over in the beginning are more likely to exact their revenge after the home inspection.

b.  Buyer’s remorse starts setting in the minute a buyer signs a full-price offer, and they get indignant if you don’t agree.  They might walk out over the smallest counter-offer, so don’t risk it if the price is right.

c.  Happy buyers are more likely to close escrow.

4.  Offers After Day Four: Tread carefully, because your urgency is completely drained by Day Seven.  You’re not giving it away, and appreciate that you have properly tested the market.

5.  You don’t get any offers:  Lower your price 5% to keep the urgency higher.  After 30 days on the market, buyers will already be pricing in a 5% to 10% wrong-price factor, so you might as well stay ahead of them.

You can spend a million dollars on advertising and do open house every day, but if the price isn’t right, the home won’t sell.  Once you have accepted that fact, and realize that you and your agent are conducting a search for what the market will bear, use the Giveaway Meter to guide you.  Yes, there is always a chance for a lucky sale, but if you go that route, you should list in short spurts (1-2 months) so buyers won’t see a long stretch of failed listing period on your record.

Posted by on Nov 16, 2014 in Bidding Wars, Jim's Take on the Market, Thinking of Selling?, Why You Should List With Jim | 6 comments

First Offer Is Best Offer

Zillow and other internet tools are helping to generate maximum urgency early in the listing period.  But the industry doesn’t do a great job of educating - and sellers can be surprised to see an offer in the first few days.  There is temptation to wait for the two in the bush.

There is an old adage that the first offer is the best offer.  But that sounds like sales talk, and is easy to shrug off.

Let’s change it to the first BUYER is the best BUYER.

The old adage makes it sound like you have to accept the first offer, but even the most motivated buyer wants a deal and will offer less than they might pay.

Sellers should recognize that anyone who makes an offer in the first few days must be on high alert, and is ready to buy.  They have probably made offers on others, and lost out or couldn’t come to terms. Frustration is creeping in, and they want to get it done – these are the folks who pay top dollar.

Here are some qualifiers:

1.  Timing is the key. If the market is hot and prices are trending higher, then it might get better, later.  Generally, San Diego’s pricing trend is flat today.

2.  Is it a clean offer?  Be cautious about offers that are contingent on selling another property, or have other complications.  They are worth considering, but drag out the negotiations to see if anything better comes along.

3.  The motivated buyers have been in the game for a while, and have seen the comps.  They will pay a fair price, or maybe a little more.

If your house is super spectacular, then a higher bidder might come along later – those are the houses that are the hardest to find.  But if yours is a regular offering, get it done early while you have urgency on your side!

Here are more thoughts:

http://www.chicagonow.com/getting-real/2014/09/first-offer-is-your-best-offer-fact-or-fiction/

Posted by on Nov 15, 2014 in Jim's Take on the Market, Thinking of Selling?, Why You Should List With Jim | 3 comments

Why Sell Early

Sellers expect their listing agent to toil for weeks and months searching for the right buyer for their home.  Let’s face it, that’s how other jobs work - the desired result comes at the end of the effort.

But it’s the opposite when selling a house.  The tight inventory has left anxious buyers waiting for the next new listing to come along, and when it does, they pounce on it in the first few days.

This is why Zillow has become the go-to website for buyers.  Zillow provides transparency with several great features (and the zestimate is down the list):

1.  Zillow shows how long the property has been listed for sale, and how long the property has been on Zillow.  The ‘re-freshing’ of listings isn’t fooling buyers, because Zillow divulges the truth.

2.  They track how many times the property has been viewed on Zillow, which is a secondary ‘sniff test’, much like the days-on market stat.  Once a property has been seen hundreds of times, the buyers start wondering why it hasn’t sold (much like the DOM count):

stale meter

3.  Savvy buyers know that the zestimate is a rough guess of actual value.  But Zillow backs it up nicely with three similar listings nearby, AND the last three closed sales – all on the same page!

4.  They also show how much the seller paid, and when.   Buyers will grant sellers the right to make a profit, so only the greedy are harmed here.

5.  The categories of homes for sale on Zillow are prioritized by date listed.

These data points are all in a seller’s favor during the first few days the home is on the market – use them wisely!

The best thing that could happen to the market is a mass marketing campaign by Zillow (or anybody) to explain to sellers that the urgency created in the first few days on the market should be used as a selling tool.  Then, at some point, maybe we can convert to an auction-like format to sell houses!

Posted by on Nov 14, 2014 in Auctions, Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 14 comments

Housing Costs and the Future

In the last video, the presenter speculated that prices could go up 700% by year 2027, which would make homeownership all but impossible for regular folks.

Prices seem likely to rise over the long-term – what could keep a throttle on their gains?  Building more homes could slow down prices, and this week L.A. Mayor Eric Garcetti suggested a host of ideas and changes in order to achieve 100,000 new housing units by 2021:

http://www.latimes.com/business/realestate/la-fi-affordable-housing-20141107-story.html

The two best ideas?

1. The permitting of more granny flats is a viable solution for homeowners with larger lots.  An excerpt:

Dana Cuff, director of cityLAB at UCLA’s School of the Arts and Architecture, has spent years studying so-called backyard homes — or “granny flats” — that can house a renter, an in-law or a still-at-home 20-something. They exist all over town, often illegally, and regulations make them hard to build in many neighborhoods. Permitting more could go a long way toward helping L.A.’s housing shortage, Cuff said.

“There’s a half-million single family-houses in the city of Los Angeles,” she said. “If 10% of those added a granny flat, we’d be halfway [to Garcetti's goal]. And it’s free land.”

2. The lack of available land located within driving range of San Diego is a real problem.  If there was a concerted effort by governments to make it easier to change zoning from commercial/industrial to residential, they could unlock additional parcels for development – like this one:

http://www.cbs8.com/story/26788497/upscale-residential-development-proposed-in-place-of-wal-mart-in-scripps-ranch

It’s likely that any new developments would be higher density, which would provide an interesting choice for future homebuyers. Are you willing to live like sardines to get a new or newer home, or will older homes on bigger lots be preferred – and retain their value better?

Rob Dawg said in the beginning, “Forget all previous assumptions about real estate”.  With the cost of living on the rise, will the newer, smaller, and less expensive homes topple the traditional SFR as the preferred choice of tomorrow’s homebuyer?

Posted by on Nov 9, 2014 in Market Conditions, The Future, Thesis, Thinking of Buying?, Thinking of Selling? | 2 comments

Mortgage Rates 2015

ratesoct29

With the Fed announcing the end of QE, the next concern is when they will start raising rates.  Mortgage rates are only indirectly tied to any move the Fed might make – which usually means that mortgage rates will start inching up in advance.

Here is a quote from Capital Economics about their expectations:

http://www.housingwire.com/articles/31887-qe3-ends-how-long-until-interest-rates-rise

Unexpectedly, the Fed still thinks it will be a “considerable time” before it begins to raise interest rates. Indeed, the Zero Interest Rate Policy remains in full force, as it has been since inception at the end of 2008.

“We didn’t expect that language to be dropped at this meeting given there is no scheduled press conference, but we wouldn’t be surprised if it is changed at the upcoming December meeting,” Capital Economics said. “Overall, we still believe that the Fed will begin to raise rates sooner than generally expected, with a March 2015 hike the most likely outcome.”

If the Fed adjusts their statement in December, expect mortgage rates to get a jump on any potential rate increase.  Buyers have been cautious for months, and we will probably see a couple more negative readings of the local Case-Shiller Index by next year.

If mortgage rates bump back above 4%, and maybe into the mid-4%s, they won’t kill the 2015 market.  But if you are thinking of selling your house after another 5% to 10% increase in value, you might be in for a long wait.

Posted by on Oct 30, 2014 in Interest Rates/Loan Limits, Jim's Take on the Market, Thinking of Selling? | 3 comments

Who’s Selling?

Yesterday we wondered if there was a possible threat of a baby-boomer liquidation sale in the coming years, and we had a load of comments – thanks for participating!.

Can we get a feel for what’s happening now?  Here’s a check of the 67 NSDCC houses that have sold between $750,000 and $1,000,000 in the last 30 days.

These are the years when the sellers purchased:

Years Purchased
Number of Sellers
1965-1980
8
1981-1990
4
1991-2000
12
2001-2007
23
2008+
20

Only a couple sold for less than the price they paid, and there were 3 short sales too (no REO listings).  The newer homes in Carmel Valley bolstered the more-recent stats too.

About 36% of the sellers bought their home prior to 2001, and are probably baby-boomers (or older). Most will at least be empty-nesters by now, and could be candidates for the ‘downsize and travel’ crowd. If their numbers increased, they would most likely be offering older fixers upon which flippers can feast, and eventually be sold to those looking for a substitute for new homes, which are in short supply.

Posted by on Oct 24, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling? | 16 comments

Be Sharper on Price

Wendy Lari in her new home. After buying the home in Mission Viejo, husband Thomas Lari wanted to rent out the old family home of the past 12 years. But Wendy wanted to sell the old home so the family would have enough cash to fix up the new one. They reached a compromise: Give me 60 days to get it in escrow, said Wendy Lari. If it doesn't sell by then, we'll rent it out. The home went up on the market in late April for $850,000. As time began to run out, Wendy Lari decided she had to drop the price.

Nobody is dumping on price – just be reasonable. From the ocregister.com

http://www.ocregister.com/articles/price-637201-home-percent.html

Thomas and Wendy Lari made a pact.

Thomas wanted to rent out their old home. Wendy wanted to sell it so they’d have money to fix up their new one.  So he gave her two months to sell it. If she failed, they would become landlords.

In the end, she met the deadline – just barely. But it took two price chops totaling $15,000.

“I was a little bit disappointed,” Wendy Lari said of the final price of more than $800,000. “We knew that (our original price) wasn’t overly realistic, but we thought we’d give it a shot.”

Reality is setting in for home sellers across Orange County.

Rather than holding out for the big price gains seen a year ago, most sellers are cutting their prices to get their homes sold.

The average price cut for homes under $1 million was $15,500 this summer, according to figures from Brea housing consultant Pat Veling of Real Data Strategies. A year earlier, the typical price cut was under $3,000.

Put another way, buyers are paying 97 percent of sellers’ original asking prices this year, vs. 99 percent – almost full price – in the summer of 2013.

“It seems like 80 percent to 90 percent of the sales are reductions,” said Bart Smith, an agent with Evergreen Realty in Orange. “(Sellers are) overpricing them. They’re looking at listings and not at closed sales.”

Wendy Lari thought she was in the ballpark when she priced her home at $850,000 last April. A similar home in the area had sold for $844,000 two months earlier.

Time was running out to find a buyer when she got an offer for $828,000. That deal fell through.

But just as it did, a real estate agent made an offer equivalent to $835,000. The agent wanted to pay $814,500, but would forego her $20,000 commission. That deal closed.

“I was a little bit bummed, but it wasn’t horrible,” Wendy Lari said. “If you go in thinking that you’re going to get 3 percent to 4 percent more than the last sale, that’s not going to happen.”

She listed April 29, 2014 for $850,000, and opened escrow on July 2nd for $814,500 with no commission to buyer’s agent?  She didn’t give it away! (she had paid $460,000 in 2002).  P.S. the realtor who bought her home has it for rent on Zillow, asking $3,500/month.

Read full article here:

http://www.ocregister.com/articles/price-637201-home-percent.html

http://www.zillow.com/homedetails/27822-Trellis-Way-Laguna-Niguel-CA-92677/25552229_zpid/

Posted by on Oct 6, 2014 in Market Conditions, Thinking of Buying?, Thinking of Selling? | 4 comments