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Category Archive: ‘Why You Should List With Jim’

How Homes Are Sold

aussies

The purchase of Move, Inc. by News Corp could bring more change to how homes are sold in America.

Last summer, I described on camera how our market is moving towards a single-agency format, and have been mumbling about it ever since.  By the time the movie comes out, it will probably be a fait accompli.

News Corp already owns the primary real estate website in Australia, where the listing agents pay to advertise their properties on Rupert’s website, and buyers go direct.  The commission rates are 2.0% to 2.5%, and according to this article, buyer-agents are involved in only 1 out of 1,000 sales:

http://www.inman.com/2014/09/30/rupert-murdochs-australian-portal-thrives-in-country-with-no-mls-and-few-buyers-agents/

Currently we call this ‘dual agency’, where the agent has a fiduciary duty to represent the interests of both parties.  Eventually it will erode down to a ‘transactional brokerage’ format, where the agent’s role is reduced.

While sellers will marvel at the perceived savings, they won’t benefit much unless expert salespeople are manning the phones/emails/texts.  Listing agents – who now make 5% to 6% when buyers go direct – will reluctantly accept the lower commissions but won’t push for top dollar.

Why?  Because eliminating the buyer’s agent has always been the ultimate goal of listing agents, and the reward was double commission.  When the extra incentive is gone, it will feel like working for half price, and, as a result, agents will mail it in.

In this format, the most important ingredient when hiring a listing agent will be how they handle the inbound inquiries from the buyers directly.  Test them by calling their number – do you get a receptionist?  Voice mail?  Assistant?  Or the actual listing agent?

I answer my own phone, and I’m pushing the product – your home!

Posted by on Oct 2, 2014 in Jim's Take on the Market, Listing Agent Practices, The Future, Thinking of Selling?, Why You Should List With Jim | 13 comments

Wholesale-To-Retail Spread

Are you thinking of selling your home, and wondering how to go about it?

How you sell your house has an impact on the price, which is driven by the comfort level of the buyer.  There is typically as much as a 10% swing in pricing within the same neighborhood, depending on location in the tract, condition of the home, and how the house is sold.

Here is a general guide to sales-method-to-achieve-desired-price:

WHOLESALE PRICE – Stick a sign in the yard, and someone will come along.

WHOLESALE-PLUS – Stick a sign in the yard and an ad on Craigslist.

AUCTION – Hard to know if you’ll get wholesale or retail due to the limiting factors.  Qualified buyers may be turned off by their perception of the potential reserve price, the buyer’s premium, or slick-talking auctioneers.

RETAIL – You do your homework and hire an experienced, competent agent to sell your above-average home with good curb appeal in a popular area.  You agree to an attractive list price, and the agent conducts a mass-marketing campaign that generates an offer or two during the first week on the market.  You negotiate in good faith, and together you find a way to the finish line.

RETAIL-PLUS – You do your homework and hire an experienced, competent agent to sell your above-average home with good curb appeal in a popular area.  You agree to an attractive list price, and the agent conducts a mass-marketing campaign that generates multiple offers during the first week on the market.  Your crafty agent pits them against each other, and the ensuing bidding war causes an above-market sale.  But without a frenzy to drive the sale, buyers are more cautious, and look for any reason to cancel and get back on the fence, hoping prices come down. Here are the potential hurdles to closing a Retail-Plus sale:

  • Inspection reveals defects – The defects give the buyer a reason to try and clawback some of that retail-plus price.  How your agent handles this critical juncture will determine whether the retail-plus price – and sale – sticks.
  • Appraisal is a challenge – Your agent has to know the comps, and can present a compelling case that convinces an anonymous appraiser of the value.
  • Other agent is a ding-dong – The good buyer’s agents have already talked their buyers out of paying this high of a price, so you are left with the inexperienced/desperate realtors who don’t know, or don’t mind if their clients pay too much.  Somehow your agent has to find a way to get them to the finish line, usually in spite of the buyer’s agent.

You don’t need an agent to sell your house - and you could take a chance on beating the odds by short-cutting this list and still move up a notch.  But now that the frenzy is over, buyers are reluctant to throw crazy money at houses any more – unless you get great help!

Posted by on Sep 28, 2014 in Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 0 comments

Mortgage Rates and Selling Now

While we’re talking about when to sell, let’s note the impending rise in rates.

While it seems likely that the Fed will hold steady in the short-term, at some point they will make their move.  From the WSJ:

http://blogs.wsj.com/economics/2014/09/19/feds-fisher-would-like-to-see-rate-move-early-next-spring/

An excerpt:

Federal Reserve Bank of Dallas President Richard Fisher said Friday he’d like to the see the U.S. central bank begin to raise rates early next year, in an interview on Fox Business Network.

When it comes to making the first move to lift interest rates off of their current near zero levels, Mr. Fisher said “I personally expect it to occur in the spring rather than the summer, but we will see.”

Mr. Fisher was speaking in the wake of this week’s monetary policy-setting Federal Open Market Committee meeting. At that gathering, the Fed continued to signal that it would be some time before it began to raise rates, although it emphasized any decision would be driven by incoming economic data.

Mr. Fisher dissented against the FOMC’s decision because he believed rates would likely to rise sooner than most of his fellow central bankers believe. Philadelphia Fed leader Charles Plosser also dissented on similar grounds.

Two concerns here for home sellers:

1. The Fed doesn’t control mortgage rates – banks determine their own rates as they see fit.  It is similar to gasoline prices too – anytime there are headlines that give permission for higher rates, the banks are usually happy to oblige.

2. The Fed is paranoid about tipping their hand, so there won’t be advance notice of the actual change in Fed policy. You’re not going to know when rates rise – it will be a surprise.  By the time you get your house on the market, we’ll be at stall speed, because the ensuing panic among sellers should flood the market with listings – and we’ve already been overdue for a “flood”.

Higher rates made buyers jump last summer, but that was when home prices were lower than today. By the time we get to 2015, buyers will be looking for any reason to wait-and-see, and if rates popped a half-percent or more, only the best houses with the most attractive prices will be selling.

Do you think the Fed will have to wait until 2016 or longer?

They just might, but they have been winding down the QE just like they said they would.  If the Fed decided to bump rates one time as a trial or to send a message, it would have all the effect needed – sending home buyers to the cautious pit, and making sellers panic about losing a couple of points off their 20%+ gains over the last two years.

If you have some good comps around you today, and little or no competition, you might as well sell today while it’s predictable.

Posted by on Sep 19, 2014 in Jim's Take on the Market, Why You Should List With Jim | 2 comments

Sellers Deserve the Truth

Let’s expand on yesterday’s post.

Why does it matter if the media keeps missing the story?  They keep insisting that home sales have slowed due to issues on the buyer-side of the equation.  But that isn’t what you see on the street.

Here’s what we keep hearing over and over:

1.  Credit is tight – hard to get financing.

2. Low inventory – not enough houses for sale.

3. Prices have risen to unaffordable levels.

4. Wages aren’t rising.

5. No high-paying jobs available.

6. Buyers are confused/don’t understand mortgage options.

7. Bubble is forming.

But ready, willing, and able buyers just see over-priced turkeys everywhere they go.  By the time you get to September, all that is left are the most outrageously priced homes, making you want to pack it in until next year.

The media’s one-sided message reinforces why they should quit.

Yes, we have lowly-motivated sellers who will wait for their price. We will always have those listings – I’ve had them myself – and sometimes the market catches up, or you get lucky and somebody overpays.  But it’s clear that the market has flattened, and wait times are longer – and may never bear fruit.

Sellers who want/need to move now, deserve to know the truth.  The reason nobody is looking at your house isn’t because of 1-7 above; it’s because your price is too high.  There are plenty of qualified buyers in the marketplace; they just won’t pay what you are asking – and your price isn’t close enough to have them make an offer.

Here are reasons why sellers should know the truth:

1. The longer you sit on the market unsold, the more likely to be lowballed.

2. The market could get worse next year.

3. Your actual value might be way below what you think.

If the media reported that the problem is optimistic pricing, it would instead make sellers think about sharpening the pencil.  Those who need to move could/would take proactive steps to solve their problem – but instead they just sit and wait.

This is typical for this time of year too – any seller who was close on price has sold by now.  If sellers were properly educated and kept their pricing sharp, we could have a more balanced market throughout the year. Instead, the market goes dormant for 4-6 months, and then both buyers and sellers go nutty during the “selling season”.

Sellers – try a price reduction, they work!

Posted by on Sep 18, 2014 in Jim's Take on the Market, Why You Should List With Jim | 5 comments

More on the Wait-It-Out Plan

Easing up

I just noticed this article from Friday’s latimes.com:

http://www.latimes.com/business/realestate/la-fi-home-prices-20140912-story.html

An excerpt:

Silva said some of his clients are receptive to the idea of cutting prices to sell their homes. But some sellers — those with less motivation to move now — are pulling their homes off the market, said Steve Shrager, an agent with Coldwell Banker in Studio City.

Sellers who can’t get the price they want are choosing to rent their home, or try to sell again in another year.

“They feel the price can’t go anywhere but up,” Shrager said.

Buyers are choosier too, he notes. Though price growth has leveled off, many buyers still aren’t seeing bargains. And while the selection of homes has expanded, some aren’t finding any property they really want.

Some, he said, are choosing to stay put, or maybe try the market again next spring.

“I don’t want to use the word correction, but we’re in a bit of an adjustment period right now,” Shrager said.

Waiting for the spring selling season is fairly normal behavior for both buyers and sellers, Thomas said. But after a decade of boom, bust and boom again, many aren’t sure how to react to a normal market.

“People are not used to this,” he said. “That’s why you get some panic. Eventually these houses will sell. You just have to be patient.”

Most sellers and listing agents will opt for the wait-it-out plan, mostly because they are avoiding the price-might-be-wrong conversation.

Sellers and listing agents don’t know how wrong the current price is, and they don’t WANT to know.  All they want is for some nice young family to come along and love the house and price the way they do, and pay full boat.

But the wait-it-out plan doesn’t take into consideration the potential for selling for less, later – and delays the eventual conversation about how much less.

Look how it’s working for this guy – another excerpt:

Patience and price cuts are paying off for Joseph David, an investor and rehabber who listed a blue three-bedroom Craftsman in Highland Park in late June at $624,990. When it went on the market, his agent got a lot of phone calls. Dozens of people showed up at open houses. But none of them pulled the trigger.

“We got a lot of response, but we didn’t get any offers,” David said. “There were a lot of looky-loos.”

Before long, he knocked a bit off his asking price. Then earlier this month, he cut it more sharply, to $549,000.

Interest picked up dramatically. His agent started to get a lot more phone calls, making David confident he’ll get that offer soon.

The investor here is likely to end up at $100,000 under his initial list price, and leave him wondering if he should wait too, rather than taking such a “loss”.  But it was never worth $624,990, because the market in late June was healthy enough that he would have gotten offers if the price was close to being right.

The biggest problem is that sellers and listing agents are way too optimistic in the beginning, and are unwilling to adjust fast enough to get in the game.

Here is my list-price rule-of-thumb for sellers:

If you are getting offers, your list price must be within 5% of being right.

If you are getting showings but no offers, your price must be 5% to 10% wrong.

If you’re not having any showings, your price is more than 10% wrong.

Here’s an alternative plan for those sellers caught in this dilemma.  Reduce your price once by as much as you can endure (5% to 10%), and if it doesn’t sell by Halloween, then wait until next year.

To just cancel the listing now without a price reduction doesn’t give you any price-discovery data to use when listing next year.  Don’t be surprised if next-year’s comps will suggest starting at the lower price, and leave you wondering if you should have just bit the bullet in 2014.

Posted by on Sep 15, 2014 in Jim's Take on the Market, Thinking of Selling?, Why You Should List With Jim | 4 comments

Zestimate Accuracy in SD

Anybody can evaluate a tract home with accuracy - the custom homes are much tougher, and depend more on personal visits.  If you are in a custom area, hit the open houses (sellers and buyers)! 

An excerpt from USAToday.com:

http://www.usatoday.com/story/tech/2014/09/01/zillow-trulia-spencer-rascoff-q-and-a/14703979/

Zillow employs a team of economists who contribute to the Zillow Real Estate blog and release market data that competes with similar research from Case Shiller and others.

The company makes no money off the data but does it for audience growth. “We have a $10-million-a-year expense item for all this,” Rascoff says.  “It goes much beyond PR,” he says. “This is data analytics.”

For Zillow users, the company’s trademark “Zestimate” is a way to gauge how much a home is worth. The company produces 110 million Zestimates three times a week, Rascoff says.

The margin for error can vary a lot by region and locale. In San Francisco, “we give ourselves two stars, which is not very good.”

In San Diego, “we give ourselves four stars.”

The wide range has to do with lots of different things, he says, including the quality of underlying data from county records and the like. And the data tends to be less accurate on the high and low ends of the market, because there are fewer comparison homes, or comps.

Still, he says, it’s a pretty good starting point, “considering that we have never been in the home.”

After all, he says, “we call it a Zestimate, not a Zappraisal.”

http://www.usatoday.com/story/tech/2014/09/01/zillow-trulia-spencer-rascoff-q-and-a/14703979/

Posted by on Sep 1, 2014 in Listing Agent Practices, Why You Should List With Jim | 4 comments

More Documentary

The documentary-film production continues, with the crew of four spending two days in town this week.  Guy Mossman is the cinematographer – he also did the documentary ‘Buck’ which won at Sundance:

http://en.wikipedia.org/wiki/Buck_(film)

The video shows us trying out WeVideo, which is a mobile app that provides full video production on your phone.  It already has 3.5 million customers, and Jostein is committed to bringing it to the realtor community next:

https://www.wevideo.com/

Then the clip captures one of the few times Guy provided some direction – usually he is invisible, and just lets the action flow:

Posted by on Aug 30, 2014 in About Kayla, About the author, Bubbleinfo TV, Documentary Film, Listing Agent Practices, Why You Should List With Jim | 0 comments

Make the Deal

kalpati

Forget the price point, it’s the deal-making that is interesting about this case.  The sellers of this home just acquired it last week as part of a home swap, and before closing I had arranged for vendors to do a quick tune-up.  We hit the ground running, and $10,000 worth of new carpet, paint, and lighting got it ready for market in a week.

It listed for $398,000 on Saturday, and yesterday the model match across the street (listed for $392,000) went pending. It came back on market today, and they raised their price to the range $395,000-$405,000.

What do we do?

Lower our price to $389,000 – we want to be the next one to sell:

Posted by on Aug 26, 2014 in Bubbleinfo TV, Listing Agent Practices, Why You Should List With Jim | 1 comment

Stepped-Up Tax Basis

The other day, I used the term ‘die correctly’, which refers to those who hold properties until death, allowing those who inherit to step up the tax basis.

From wiki:

Under IRC § 1014(a) the general rule applied to property a beneficiary receives from a benefactor is that the beneficiary’s tax basis equals the fair market value of the property at the time the decedent dies. For example, Decedent owns a home they originally purchased for $35,000. Their tax basis in the home is equal to its cost, $35,000, assuming no adjustments under IRC § 1016. On the day Decedent dies, the fair market value of the home is $200,000. If Decedent bequeaths the home to Beneficiary, Beneficiary’s basis in the home will be the fair market value, $200,000.

In contrast, had Decedent given the home to Beneficiary before their death, Beneficiary would receive a carryover basis, which would be equal to the decedent’s adjusted basis in the home, $35,000.

Because of this provision, any appreciation of the affected property that occurred during the decedent’s lifetime will never be taxed. Thus, this provision provides an incentive for taxpayers to retain appreciated property until death.

As the baby boomer generation begins to expire, we should see more inventory – especially rental properties.  Any houses within a few miles of the coast are already in record territory, price-wise, and the beneficiaries would be smart to liquidate at least some of the properties while they can get top dollar.

The ones to sell would be the older homes needing more work, and/or those in inferior locations.  Keep the best, and sell the rest!

If you are thinking of selling, give me a call!

Posted by on Aug 25, 2014 in Market Conditions, Shadow Inventory, Why You Should List With Jim | 17 comments

Pricing By Zip

Isn’t it amazing that prices have kept rising without frenzy help?

We’ve had the frenzy hangover this year. Inventory is still tight, sellers confident, and buyers don’t have much choice except to pay what it takes – or to stand by.  But sales are softer – and the number of NSDCC active listings today is 7% higher than last year.

Here are the two pricing measurements for each zip code for detached-home sales between May 1st and July 31st.  Every zip code between Carlsbad and La Jolla shows a positive year-over-year increase in BOTH pricing metrics!

Town
Zip Code
Avg $/sf
Median SP
Cardiff
92007
$532/$582
$1.017/$1.075
Cbad NW
92008
$381/$434
$690,000/$721,000
Cbad SE
92009
$295/$316
$769,000/$831,000
Cbad NE
92010
$288/$321
$600,000/$668,500
Carlsbad SW
92011
$316/$347
$827,500/$855,000
Carmel Vly
92130
$373/$398
$1.025/$1.100
Del Mar
92014
$729/$805
$1.463/$1.630
Encinitas
92024
$427/$461
$860,000/$915,000
La Jolla
92037
$690/$742
$1.64/$1.75
RSF
67+91
$476/$502
$2.13/$2.27
Solana Bch
92075
$520/$733
$1.05/$1.56
NSDCC
All Above
$457/$513
$960,187/$1,010,000
NSDCC
% chg
+12%
+5%

I had to average the averages for the NSDCC $/sf, so they are probably high.

Rob Dawg said in his 2014 forecast that he thought we’d see all the annual gain happen in the first half of the year. It’s the post-frenzy soft landing!

Posted by on Aug 21, 2014 in Frenzy, North County Coastal, Why You Should List With Jim | 7 comments