The Federal Reserve Board has come up with a new way to analyze pricing trends. They are emulating the Case-Shiller Index, but applying it to the list prices of properties marked pending to predict the eventual sales prices:
Abstract: We construct a new “list-price index” that accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller. Our index is based on the repeat-sales approach but for recent months uses listings data, which are available essentially in real time, instead of transactions data, which become available with signiffcant lags. Our index methodology is motivated by a simple model of the home-selling problem that shows how listings variables such as the list price and marketing time help predict the final sales price. In a sample of three large MSAs over the years 2008-2012, our index (i) accurately forecasts the Case-Shiller index several months in advance, (ii) outperforms forecasting models that do not use listings data, and (iii) outperforms the market’s expectation as inferred from prices on Case-Shiller future contracts.
The lowest inventory seen was February, 2013, and no surprise that when combined with the lowest rates ever that the market reached full-frenzy mode.
They show now that San Diego inventory is about 13% higher than last February, and the list prices have been fairly flat for the last few months. Because sellers want more than the last guy, sales prices should keep increasing, at least at a moderate rate.
In an effort to simplify the nation’s unwieldy tax code, Rep. Dave Camp (R-Mich.) is socking it to homeowners.
His proposal as chairman of the House Ways & Means Committee, The Tax Reform Act of 2014, hits first-time home buyers, jumbo mortgage seekers, homeowners who have ratcheted up big gains in their primary residence, and even homeowners who are aiming to green their homes by making them more energy efficient. Of course, the proposals aren’t law – yet— but here’s where his plan would hit home. The context is streamlined individual income tax rates and an outsized standard deduction. But if you’re a homebody, you’re likely going to be paying more in taxes.
Drastic limit to mortgage interest deduction. Today you can deduct mortgage interest on up to $1.1 million in debt ($1 million in acquisition indebtedness and $100,000 in home equity debt) on a principal and second residence, but under Camp’s tax reform proposal that is reined in big time.
The maximum amount of indebtedness on which you could take the mortgage interest deduction would be $875,000 in 2015, $750,000 in 2016, $625,000 in 2017 and $500,000 in 2018 and later. Interest paid on home equity indebtedness would not be deductible after 2014. Special rules apply in the case of refinancing as long as you aren’t taking out a bigger mortgage.
Tightening of exclusion of gain from sale of principal residence. Camp’s proposal tightens the rules for excluding gain from the sale of your home. Currently you can exclude $250,000 ($500,000 for a couple) of gain if you’ve owned and used the residence as your principal residence for at least two of the five years before you sell.
The proposal changes the rules so that it only applies if you’ve used the residence as your principal residence for at least five of the eight years prior to the sale. It also limits the exclusion so it only applies once during any 5-year-period (up from 2 years). And it phases out the exclusion by one dollar for every dollar a taxpayer’s adjusted gross income exceeds $250,000 ($500,000 for a couple).
There is an old-school habit in the home-selling business to give the seller a few days after the close of escrow to vacate. Back in the day it would accomodate the cashing of checks, and closing escrows upstream – but with today’s standard of wiring funds and concurrent closings, the extra time isn’t always needed.
But some listing agents still insist on 3-5 days of occupancy for their sellers after closing – many times without any written agreement. Usually it all goes fine, and they move out as planned – but I hate the potential liability for principals and agents alike.
Recently we had an example of what can happen when a seller doesn’t move.
An agent who works for me had a buyer who was getting their loan from an out-of-state mortgage lender (not recommended). There was a delay, and all parties agreed to a two-week extension.
As the two weeks was coming to an end, it became obvious that closing in time would be tight, and the seller was asked to sign another extension fot an extra week.
He goes ballistic, and tells his agent to cancel the transaction, and put the house back at the market – at a higher price! He thinks that, because the market is hot, he must have under-sold the property, and wants an additional $50,000.
The C.A.R. purchase contract says a seller must give a buyer a ‘Notice to Close Escrow’ that includes a time frame within which the buyer must close, or seller can cancel the deal.
He gave us one day to close escrow.
By this time, I am involved as broker/owner – all Klinge Realty agents know that I want to help determine our fate at the first whiff of a lawsuit.
I drive by the house and see that it is still occupied. If we can close in a day, we still have a problem. Miracles happen, loan docs get signed, and the lender goes to fund the loan the next day.
But the seller sends a letter to escrow demanding to stop the closing. Even though we complied with his wishes, he still wants more money.
Everyone consults lawyers, and we give him a ‘Notice to Close Escrow’ and allow three business days.
His lawyer convinces him that he has to close this deal, but there is no movement at the house. We are forced make a decision – either close with him still in the house, or cancel.
At this point, I haven’t met or talked to the seller – I’m discussing this with the manager of the other brokerage. He tells me that they had to throw in their whole commission to try and make this guy happy – and he still isn’t. But the message was clear – I’m on my own.
I do my best Jim Rockford impression and stake out the house.
When the seller comes back, I introduce myself and we discuss his troubles – he has work obligations. etc. The C.A.R. form used for these situations is the SIP, seller-in-possession, and I am very familiar with it because I insist it be used on any of these possessions-after-closings.
The form calls for a rent and security-deposit amounts, but no provision for what happens if the seller doesn’t move – and without a specific agreement, this guy may never move.
We agree to give him five days free rent, and no deposit. But I include a clause for holdover rent – if on Day Six the seller is still occupying, the rent is $500 per day.
Originally he objected, and suggested $200 per day. But the holdover rent needs to include a heavy penalty for not moving to ensure compliance – and it doesn’t cost him a thing, if he moves out as agreed.
I stick to my guns, and he agreed. He moved out on Day Five without fanfare, and buyers moved in.
Yesterday we saw that the San Diego Case-Shiller Index has been essentially flat since mortgage rates went up at the end of June, 2013.
Those higher rates may have tempered the frenzy around the coast too, as sales started dropping off in August. But the average pricing has kept rising, now up to $498/sf last month (a 19% increase since July’s $418/sf):
Which segment is driving the average-pricing up?
It’s the higher-end!
Below is the graph for the Under-$1,400,000 market, where pricing has been flat since August – and last month was a blip; the average for February is $385/sf currently:
The SP models at Del Sur – a limited-edition collection of elegant estate-caliber homes enhanced by generous interiors and expansive outdoor spaces. The Mello-Roos ranges from $6,600 to $7,200 per year, depending upon purchase price and square footage. They have three canyon-front houses for sale currently, all in the $1,220,000s:
For the analytical folks, compare the December 16th data to today’s numbers. On 12/16/13, the two middle categories had the exact same number of active listings. Today, the red-hot $800,000 – $1,400,000 category has 11% fewer listings than on December 16 (though the average LP/sf dropped 6% too), and the $1.4 to $2.4 category has the same number of listings as on December 16th. The potential for frenzy looks limited to just those on the lower end:
North SD County’s Coastal Region (La Jolla-to-Carlsbad)
You’ve probably seen realtors who install their for-sale signs well before inputting the listing onto the MLS. Their intent is to hoard both sides of the commission, not to sell for top dollar.
The ‘pre-marketing’ of a home diminishes the urgency, which is the vital ingredient to selling for top dollar.
To create maximum urgency, surprise the marketplace with a hot new offering that is decked out, priced right, and easy to see.
Urgency is a selling tool – it gets buyers to make a decision now, instead of hesitating. But any premature leaking of the opportunity drains the urgency. Why? Because there is no fear of loss.
If the home isn’t on the MLS/open market, then buyers won’t feel like they have to decide today. Given the chance to hesitate, buyers almost always will. If they don’t, it’s because the price is less than top dollar.
Other ways to stick a dagger in a top-dollar sale:
1. Letting buyers see the house while under construction. Buyers are looking for ANY reason to pay less, and they focus on everything that isn’t fixed. In addition, the house won’t have the ‘clean’ smell.
2. Not having a specific price. If you are vague about price, buyers will hesitate. If they do offer first, it will be their price, not yours, and one that makes them comfortable.
3. Bluffing about the comps. The most-motivated buyers are experts on recent sales nearby – and have probably seen more of them than you.
4. Not paying a commission. Always offer to pay a full commission to the buyer’s agent. Why? Because if they have an agent, then it doesn’t get messy for the buyers to figure out how to include them. If they don’t have an agent, then it gives them an obvious amount to discount off the price. Buyers want to offer less, but are typically unsure of an exact amount. Giving them an easy way to knock off a little is smart, especially if it doesn’t affect your bottom line (you already added the commission on top of your price, right?).
5. Letting them leave the house. If you are pre-marketing the home, both sides figure that the decision-making will be sometime in the future. Buyers will either cool off, or disengage altogether as time goes on. If you hear yourself say, “Let me know if you have any questions”, then you know top dollar just flew out the window.
Yes, there is a chance that this buyer defies the odds and pays top dollar anyway, just like there is a chance you might win the lottery. But how do you even know if you are asking top dollar?
There is only one way to know for certain that you sold your house for top dollar: Have your house in top-notch condition, make it easy to see, and have a great agent maximize the urgency and work the fear-of-loss in your favor.
Mortgage rates moved up significantly last week. Will rates continue to rise? Expect mortgage rates to go up this week closer to 3.1%. Freddie Mac will release the 30-year fixed mortgage rate tomorrow morning. Stay tuned.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!