bubbleinfo.com

Hat tip to profhoff for sending this in from wsj.com:

For some home sellers, it was a long summer without a home sale. That means this fall, some buyers — smelling the desperation — may be able to cut a better deal.

“Sellers who had their homes on the market all summer are anxious to move on, especially before the holidays hit,” says Bill Golden, a real-estate agent with ReMax in Atlanta. The closer it gets to the holidays, the more anxious unsuccessful sellers can become, he says.

Other sellers will choose to let their listings expire and try again next year. They, too, may be willing to make a deal in order to sell their properties, even if they’re no longer actively trying to sell their place, says Patrick Carlisle, chief market analyst for Paragon Real Estate Group in San Francisco.

The key to making an aggressive “lowball” offer on a home is to start by finding properties that have languished on the market for a long time. The softer the market, the more likely the strategy will work, Mr. Carlisle says.

But buyers can get tripped up. Here are six things you need to do when making a lowball offer.

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If you’d like Jim the Realtor to help you buy a home, and want some assistance in previewing properties, there are two options available for you:

1. Video tours of specific properties of interest.

You don’t have to drop everything and come running to the hot new listings – I’ll preview and send you a video tour.

2. A video library of home tours.

While you are waiting for the perfect home to hit the market, you can keep your chops up by watching videos of other tours on the password-protected website.  The video production is similar to what you see at bubbleinfo.com (it goes in spurts), but includes more commentary about the particular house, and its price.

Here’s a sample.  Most would probably rejected this house after a quick look at google maps, but it might be worth reconsidering once you’ve seen it here:

Last week we mentioned the new Redfin feature that exposes the sales counts for each agent:

http://www.redfin.com/real-estate-agents/search-scouting-report

They have unleashed a treasure trove of information, but, they don’t talk about how to use it effectively.  Let’s examine!  Here are some general thoughts, feel free to comment!

1.  Number of sales.

An agent needs to be experienced in today’s market if they hope to bring quality help to the table.  If they are consistently selling at least one home a month, then they must be creating some value – but you still need to figure out what it is, and if it is what you want/need.  Is their 12-month number greater than their 36-month average?  If so, they are getting better at handling today’s market.

2.  Do agents report sales individually, or as a team?

Check their website for team members, and if you see 10-20 people, then you know that everyone has their role, and they probably report as a team.  If they list the names of individual agents, check their stats to confirm.

General guide:

0-60 sales per year: individual agent reporting

60-150: team reporting

150 and up: Flipper or REO listing agent reporting

Try not to make assumptions if you can help it.  An easy way to check is to act like a buyer and call for the lead agent, to see if you can get him or her on the phone.  Not everyone is available at every minute, but at least you’ll be able to judge what kind of operaton they are running.

3.  How did they do on price?

For seller-sales:  When a potential listing agent tells you a price, you want to know if they are accurate, or high-balling you just to get the listing.  The average days-on-market stat is unreliable, due to “refreshing” – agents cancelling their old listing, and re-inputting to create new urgency. 

Instead, check their solds for prices changes/refreshes.   If they are taking several price reductions and 6-12 months to sell the majority of their listings, they don’t appreciate how stale listings get hammered on price these days.  Ideally, hire an agent who is consistently selling their listings in less than 60 days.

Also – judge their photos and descriptions on their listings – are they what you want for yours?

For buyer-sales:  You can compare recent sales prices to zestimates, but it looks like Zillow is updating zestimates immediately after a sale.  Look at the agent’s sales in areas where you know the comps well – how did they do? 

Also check to see if the agent is selling quality homes, in quality areas – can they grab the hot buys?  In a close bidding war, it’s the little things your agent does, and their reputation in general, that will make the difference.

4.  Do they sell houses similar to the one you are selling or buying?

Does the agent have experience is evaluating the quality of upgrades properly?  Can they discuss the costs of repairs or improvements to homes in your price range?  It’s not imperative, but helpful if they can, and a way for them to add value. 

5.  Do they need to be a specialist in your area?

Judge the area-specialist question this way.  Do you yourself feel comfortable evaluating what a home is worth using internet tools?  If so, then figure that agents who have made it through the previous 4 questions are also good at using internet resources to evaluate prices/values, even if they haven’t sold a lot of homes in your area.

While it used to be an advantage to have seen the interiors of the comparable homes sold, these days you can know too much.  Buyers feel comfortable with the internet presentations, and are making critical decisions without spending the time to see every house in person.  An agent can serve you best by knowing exactly how buyers will react to what they see on-line.

Being an area specialist usually means making deals off the grid – ones you won’t see on the Redfin Scouting Report, so you have to ask the agent directly.  If they are representing sellers without exposing the house on the open market (active on MLS for at least a few days), then they aren’t doing you a favor if you’re selling.

6.  Don’t assume.

While having more data should empower buyers and sellers to make better decisions, these sales stats are already manipulated by agents.  Now that they are out in the open, they will be pimped further – it is what agents do.  You will always be better off to meet them in person, and ask a few simple questions.  Examples:

A.  How have you handled a recent bidding war?

B.  Do you have set strategies to achieve the best results for your clients?

C.  Describe a recent negotiation where your client was well-served?

D.  Tell me about a recent problem that was solved by your innovative solution?

People rarely ask questions, but they should.  The environment gets more challenging every day – ensure that you are getting quality assistance!

Home sellers have been trained by the real estate industrial complex to think that the big splashy ads in newspapers and magazines will sell their home.  Realtors prey on the seller’s ego by promising to have their house prominently displayed all over town, and with a price that will make them proud.  Sometimes they’ll get a chuckle with their signature sign-off, “we can always lower it later”.

In 2011, those tactics are low-grade.

Yes, there is a very remote chance that some old guy sitting around the barbershop will pick up a freebee real estate magazine and become enamored with the glossy photos, and plunk down a small portion of his massive bankroll to put you out of your misery.  Very remote.

It’s much more likely that the eventual buyer will come from a thorough internet presentation that reflects reality.  Most realtors say they do video tours, but in virtually every case they are moving a camera over a still photo.  That is not a video tour.

If you are selling your house, review the internet presentations of the realtors you are considering.

1. Do they use large, clear photos that look professional?  Or did they use a camera they got out of a cereal box?

2. Do they use a wide-angle lens that captures most of the room?

3.  Are they “over-photoshopped? Improving the quality with the computer is permissible, but if they are adding enough extra mustard that it looks like a fairy-tale, it’ll makes buyers wonder, “what are they hiding?”

4.  Do they include a youtube video tour that shows a physical walk-through of the house?

The listing agents that produce a tailored, professional internet presentation of your house are the ones doing sellers a favor.  They will use these photos and videos on all of their marketing, and maximize the exposure of your home.

Both buyers and sellers should use two other simple ways to evaluate agents:

1. Check their license number – it’s on every business card now.  Agent license numbers are issued sequentially, so the lower the number, the longer they have been in business:

My license # 00873197 from 1984

Klinge Realty # 01388871 from 2003

Wifey’s license # 01889890 from 2010

The license number is just a checkpoint on experience, and not a perfect measure.  There are plenty of old guys with numbers around mine that should have retired a long time ago, and others like wifey who just got licensed but have been in the business for 12 years - she has more qualified experience than most realtors.

2.  The BEST way to evaulate a realtor is by how many homes they have sold this year.

It’ll make virtually every agent squirm, but you want to know how successful they are at navigating these waters.  The market is TOUGH, and you need quality help to succeed.  A decent, full-time realtor should be selling at least one house per month.  If they aren’t, you should ask more questions to find out why.  There are still 2,000+ sales happening month in SD County, rates are at all-time lows, and lots of people want to buy a house.  If their answer is ‘bad economy’, then you may want to keep looking.

It is nothing personal, I’m not trying to throw lousy agents under the bus – they will do it themselves.  The public deserves to know how to evaluate a realtor, in an environment where virtually nobody talks about it.

Here is my video on Interviewing Listing Agents: http://www.youtube.com/watch?v=N-9qpueJik8

Hat tip to DOB for sending this along from the wsj.com - mistakes when buying rental properties:

Traditional investments are delivering low returns, and home prices are at bargain levels. Is it time to consider buying some rental housing?

Investing in real estate right now can be surprisingly profitable, if everything goes well. Rents are climbing in many areas, and more properties may be coming on the market. Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s bulging inventories of foreclosed homes into affordable rentals.

Investors used to aim for rents that were 1% of the purchase price, or $1,000 a month for a $100,000 home—an annual gross return of 12%—says Michael McCreary. His firm, McCreary Realty, manages about 300 properties in the Atlanta area. Today, he says, some of his investors are getting as much as 2% of the purchase price.

In general, though, average returns after expenses are far less, more like 5% to 6% of the property value, says Ingo Winzer, president of Local Market Monitor, a real-estate forecasting firm. But that still is well above what many other investments yield.

Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges, and many investors lose money. You will want to avoid falling into one of these common traps.

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Two years ago, we covered the Five Stages of Buyers’ Grief, which garnered 62 comments on the frustrations of homebuying, plus some critiques of the 2009 market conditions: 

http://www.bubbleinfo.com/2009/06/19/five-stages-of-buyers-grief/

We’ve been following ProfHoff’s journey, and the other day she mentioned some of her frustrations/disbeliefs about the market.  I sent her the condensed version – the three stages buyers go through today:

1. I can’t believe these prices.
2. Well maybe after everything I’ve seen sell for more than I thought, I might consider paying more for less.
3. Dammit, just get this over with – pay what it takes.

Now is the time of year when the inventory is exhausted – every house has been picked over, and nobody wants them at their current list price.  Yet sellers are slow to adjust - so most buyers are waiting for new listings and/or getting comfortable with the thought of a long, cold winter.

For buyers in this position, consider these strategies:

1. Make lowball offers.  While the vast majority of sellers and realtors expect you to just pay what the seller wants, occasionally you can find some that really need to sell – but are too ignorant or hopeful to lower the price.  It is worth a try, especially with houses that have been on the market for months.
2. Focus on houses with all the upgrades.  At least if you have to pay more than you’d like, get a house in top condition, with all the extras included.  Hold out for the best location possible.
3. Work off the grid.  Make sure you are working with an agent who is searching high and low for alternatives.  Everyone is waiting for the new listings to hit, and they are very competitive.

Some of the competition should diminish here in the off-season, so keep your chops up!

I mispoke in this clip when I said $1.4 million, they only want $1,325,000 – this is the third of the four models that have gone back to the bank:

Hat tip to duncbdunc for sending this along from the Atlantic, written by senior editor Megan McArdle – who isn’t a realtor!

So since we became homeowners, I’ve become more interested in HGTV.  Not obsessively so, but I have more interested in watching programs about renovations and such.

One of the shows I’ve watched is called “Property Virgins”.  The plot is about like it sounds: first time homebuyers try to find a place.

What’s interesting is how many of the homeowners have trouble getting their offers accepted.  The shows filmed post-crash, and while it’s by no means universal, a number of the couples on the show put in an offer only to lose the house . . . and a substantial minority put in offer after offer, only to lose again and again.  And what’s really interesting is that this happens in places like Florida and California, where you would think it would be easy to find a house.

I wonder if they aren’t experiencing something like I described when we were hunting for a house.  In the neighborhoods we wanted to buy in here, there was a lot of inventory–homes that were wildly overpriced.  Those homes sat on the market for months, even years.  Meanwhile, anything that came on at a reasonable price went to contract within a week, and usually within a couple of days–we made an offer on the house we now own the day it came on the market, and this was far from unusual.  Bidding wars on these properties were frequent–universal, in the months before the first-time homebuyer tax credit expired.

This sort of rapid-fire bidding is bubble behavior; it’s not supposed to characterize a normal market. While well-priced houses always sell faster, this level of bifurcation is extreme (or so my real-estate agent mother assures me).  She also assures me that putting things on the market high, and then lowering your price if it doesn’t sell, is lousy strategy–once something’s been on the market for a while, it’s damaged goods.  Price reductions don’t get the same enthusiasm as new listings, so if your house is wildly overpriced, you’re going to end up selling it for less, not more.

But this bifurcated market makes sense in the context of the housing crash.  It even makes sense that I’m noticing the phenomenon in places where housing prices have fallen the furthest: states like California and Florida, and beginning-to-gentrify neighborhoods like mine, which got bid up at the height of the bubble, and then fell by around a third.

Those are, of course, the places where homeowners are most likely to be upside down on their mortgages.  But that doesn’t really explain the phenomenon–if you need to sell, then arrange for a short sale or give it back to the bank, while if you don’t, why put it on the market at a price that no one will take?  And why do a surprising number of the homes that come on the market languish for so long without a price reduction?

Because prices are sticky, and they are stickiest where the needed reduction is largest.  The owners of these houses simply cannot bring themselves to believe that they took a loss.  They will instead drop their house on the market 20-30% too high, or more.  Even when it’s obvious that no one is going to buy at their price, loss aversion prevents them from admitting that it isn’t going to happen–either by dropping the price, or taking the thing off the market.  The result is that a normally-sized population of buyers gets compressed into the relatively small number of houses that are a) coming on the market at b) a price that recognizes that it’s no longer 2006.

This suggests that even as housing demand recovers, it’s going to take a while for the markets to follow suit.  A lot of the stock isn’t even coming on the market; a lot more isn’t priced to sell.  Until circumstances force a sale–or the buyers bid up that limited turnover to 2006 prices–those houses will sit there.  Meanwhile, frustrated buyers will feel like it is 2006–as they lose house after house until they manage to make the first offer.

School is getting ready to start, or has started around North SD County.

We’ve discussed school districts before and their importance to the homebuying equation – whether you have kids or not. Let’s revisit the scorecard. 

I know a couple of people who were at the freshman orientation for San Marcos High School last week.  The principal announced to the crowd that their API scores were going to ‘rock the county’.

I don’t know if he was referring to the current scores, future scores, or just optimistic in general.  But San Marcos HS has been working its way up the charts, and recently announced that they were going to re-build the school too.

Here are the latest scores:

With both SDA and CCA having to conduct lotteries to determine enrollment (there are 200 kids on the waiting list at CCA, allegedly), is it worth considering other areas outside of the prime San Dieguito High School District?

You can purchase a similar home in San Elijo Hills/Rancho Carrillo and attend San Marcos HS, or live in 92127 and attend Westview HS, and save six-figures over what it would cost you in the nearby prime areas within the San Dieguito High School District.

Is it worth it to take a flyer on the up-and-coming high schools?

When looking at all the ingredients, could schools be one for compromise, given that Torrey Pines and LCC appear to be human after all?  Prices in Carmel Valley have been holding up, and if you could get a deal on a house outside the 92130, it might be worth considering.

Bubbleinfo.com is undergoing change!

Reader no-techie saw that we are trying to implement a new feature above to use with mobile phones.  The intent is to enable you to input an address of a house you see, and be able to check the listing, or zestimate, with one click.  Of course the listing side didn’t go smoothly, so it’s still under construction, but try the zillow button if you like – you have to include the zip code too.

Secondly, we have Rick Campbell’s market report linked in the right column now. 

Click on “San Diego Monthly Report“, under Real Estate Advice  >>>>>>>>>>>

In the top left corner of his report, you can adjust the markets to your preference.  The large graph shows the active inventory over time, which helps illuminate why the market isn’t tanking – there aren’t enough people who want to sell at today’s prices.

He also carries this graph below of 12-month moving averages, which will be very interesting to watch now that you can get 30-year mortgages in the low-4% range: