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Waiting Until Later

We are in the midst of the fastest increase in mortgage rates in history.

It was only 6-8 months ago that home buyers were financing their purchase with a 30-year fixed rate in the twos. Now they are in the fours!

We had the lowest rates ever due to the pandemic. They aren’t coming back.

It is natural for home sellers to think it might be better to wait until later – especially if they tested the market with an aspirational price, and the home didn’t sell.

But the 30-year fixed rates are heading above 5%, which won’t bode well for buyers OR sellers.

What are other alternatives?

  1. Sellers offer to buy down the interest rate for buyers (guarantee a lower rate).
  2. Sellers complete more repairs/upgrades to stand out from others.
  3. Sellers offer a larger commission to the buyer-agents.
  4. Get an adjustable-rate mortgage.

I’ve already seen adjustable-rate mortgages starting at 2.375% for ten years, up to $1,600,000 with a 10% down payment.  When buyers compare those to a 30-year fixed payment, they will be very tempted.

We don’t need the frenzy to last forever – we just need to get comfortable with a post-frenzy market.

https://www.mortgagenewsdaily.com/markets/mortgage-rates-03222022

Why Jim the Realtor?

Yesterday, I had two similar occurrences take place so it must mean I should address it!

This comment was left here on the blog:

I just wanted to thank you for your bidding war info. I have followed your blog for many years. We listed our house in Ramona last week and had open house on Fri/Sat. By Monday morning we had six offers. The highest was a very good offer and well over list. The realtor encouraged us to take that one, and said she had asked everyone for highest and best. I pushed her to counter the next two lower offers with the same amount as the first offer and gave permission for her to reveal the offer amount. She was hesitant but I insisted. Both of them came back with the same amount as the highest offer, and the highest original offer then went higher through an escalation clause. I know we don’t have the same prices as NSDCC, but the same principle applies and I wanted to give you credit. MC

MC – thank you for giving me credit!

But did you recognize that his agent’s results aren’t exactly the way I do it?

There are probably blog readers who are emboldened by what they read here. Selling homes doesn’t look that hard, and in a hot market it has to be even easier, right? After listening to me talk about it for a few weeks, it’s probably natural to think you can do it yourself, or direct your agent how to do it.

Are you guessing that MC probably didn’t get top dollar?

The other occurrence was a for-sale-by-owner who suggested he was as good as me – and insinuated that he was better. He will sell his house too, and declare it as top-dollar to feed his ego. But his listing is riddled with things I’d never do, and he’s been on the market for 2-3 weeks with no sale.

ANYBODY CAN SELL THEIR HOUSE THEMSELVES!

You don’t need me – heck, just go stick a sign in the front yard and wait for the phone to ring.

But you’re not going to sell it for the same price that I can get.

Even if you read every word on this blog, it’s not enough.  It’s because the most important part of my job is doing one thing really well:

Asking the right questions, the right way, at the right time.

Even if you had the questions, it’s asking them the right way, at the right time, that causes a top-dollar sale.

You can tell that MC was on the right track, but in the heat of the moment, his agent didn’t handle it like I do. But he’s happy, the agent is happy, and they sold it for more money than expected, so all is well.  But it didn’t sell for top dollar – which only happens when you ask the questions the right way, at the right time.

Not only will I sell your house for more money than you can, I will sell it for more than virtually all the other realtors. I’m not your typical order-taker; I’m a professional salesman who practices his sales skills daily. Those skills really pay off in the heat of the moment, when I sense that the buyer or their agent is a contender – I know how to say the right thing, the right way, at the right time to capitalize on the moment.  Who would you trust in that moment?

It looks easy, but you don’t know what you don’t know.

Wouldn’t you be better served to have Jim the Realtor in your corner?

Inventory Watch

Bill is reporting a 3.1% increase in inventory nationally, which sounds hopeful and we can only pray that it happens here. But we were really far behind after the holidays and we’re still struggling to catch up:

NSDCC Inventory:

March 15, 2021 – 332 Actives, 333 Pendings

March 14, 2022 – 195 Actives, 196 Pendings

The number of houses for sale between La Jolla and Carlsbad is 41% lower than last year!

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Being A Homebuyer in 2022

I guessed that we’d have 5% more NSDCC sales this year because I expected a surge of delayed sellers who would finally come to market in order to cash in on the record pricing.

But it’s not happening, at least not yet.

The number of NSDCC listings for the first two months of the year is 32% BELOW last year! It means buyers are only going to have a few shots at winning a home.

Here’s what home buyers will have to endure in 2022 to succeed:

Long Waits – Days and weeks will go by without any quality new listings to review. It makes you soft and it’s difficult to keep your chops up.

Coming Soon – Listing agents will tease you by advertising a home for sale, but you can’t see it yet. It’s not always clear when you can see it, and you better not miss the date because…..

Quick Exposure – Once the listing agent is willing to show the house, they will be overcome with the demand, and will likely hit the panic button.

Many will insist that you show them a bank statement and pre-approval letter just to see the house!  If you get an appointment, it will be limited to a 15-minute period that is convenient for the listing agent AND be subject to cancellation prematurely because they already took an offer before your scheduled time. Hopefully, you don’t have a job or other responsibilities that limit your scheduling. You will get the feeling it is best to quit your job so you can devote your entire life to home-buying.

No Transparency – If you want to buy it, then just make an offer and you will hear back in a few days.

Over Pay – Not only will you have to pay well over the list price to win, but there won’t be any recent sales to justify any of it. The logic and common sense you usually employ will be your enemy here.

Waiving the Appraisal – What was once an insider trick to improve an offer has turned into a standard on every deal. If you refuse, the listing agents will think you aren’t a serious buyer, and move on.

Shorten the Contingency Periods – You will have 7-10 days to sign off all contingencies. You will need to have a great home inspector on speed dial and who can schedule quickly.

60-Day Free Rentback – Listing agents demand free rentbacks whether the seller needs them or not. Those homes that provide immediate occupancy is a bonus for which buyers will pay extra.

No Repairs – Most buyers are submitting a blank repair-request form with their initial offer.

In spite of all those hurdles, there will still be stiff competition for the quality buys. Once the listing agent has collected enough offers that fit the criteria above, they will then huddle with the sellers in the back room and decide on a winner. This is where having a great agent with a good reputation in the community will pay off. Discount agents, out-of-town agents, buyers who are agents, and agents who don’t look good or don’t smell right are ignored and/or sent to the back of the line.

If you can endure that much and successfully get into escrow, you will be treated with disdain and disrespect that makes you will feel like a suspect, not a valued buyer. The contempt that listing agents have for their prey is palpable – they don’t trust that their initial mistreatment of you will be enough of a lesson, and they will keep it coming because they think that’s their job.

And get this – you will probably lose a few bidding wars before you get up to the desperation level of the other buyers.  Oh, you’re not desperate? Then this market probably isn’t for you.

Give it a try and you might get lucky. But if you want a quality home in a good area, then don’t be surprised if the desperation among the competing buyers is higher than you could ever imagine.

Two-Year Appreciation Rankings

Sure all the California-feeder towns have risen 40% to 50%, but look at those price points!  You don’t see any other city on this list with home prices as high as ours.

Of all the areas in the country, San Diego has to be one of the best places to live – and the affluent who can live anywhere have to be considering San Diego as one of their top choices.

But nobody wants to leave!  We are currently offering millions of dollars to long-time homeowners to get them to move, and it’s not working! The supply and demand has never been so out of balance.

Eventually, we could have the highest home prices in the country!

SanMo

909 Franklin St., Santa Monica

5 br/5 ba, 4,583sf

0.35-acre lot

YB: 1974

SP = $4,967,500

Several records were established here!

  • Our highest sale ever.
  • Our longest escrow ever (8 months).
  • The most times a deal was dead and needed resuscitation (50+).

Congratulations to seller and buyer (who plans a major remodel)! It took a tenacious collaboration between all parties to get this one closed!

NSDCC February Sales, Preliminary

It’s early, and the final February sales count will probably wind up around 165-170, which is in line with years prior to 2021. However, the pricing is nuts – and related to the number of homes for sale!

Year
February Listings
# of Sales
Median List Price
Median Sales Price
Median DOM
2017
395
172
$1,299,900
$1,270,000
51
2018
358
162
$1,290,000
$1,275,000
13
2019
361
174
$1,275,000
$1,275,000
33
2020
360
184
$1,434,000
$1,376,500
29
2021
313
224
$1,719,500
$1,758,000
14
2022
193
156
$2,149,500
$2,386,500
9

LAST MONTH, THE MEDIAN SALES PRICE WAS 11% HIGHER THAN THE MEDIAN LIST PRICE!

Realtor Pay

This week, the Wall Street Journal ran a story entitled, ‘How Should Realtors Get Paid’.

The author is a general freelance writer who describes herself as ‘a versatile writer with experience covering a wide range of topics. As a freelancer I contribute regularly to the Wall Street Journal, writing about personal finance, healthcare, aging and technological innovation’.  Because she isn’t a real estate expert, she relied on three college professors for content:

https://www.wsj.com/articles/how-should-real-estate-agents-be-paid-11645568774

They went off on some crazy tangents and no realistic conclusions were found, other than to note that there are discount brokers if you want to pay less.

My thought:

Would you do your job for the same pay if these were part of your job description:

  1. You invest your own time and money along the way.
  2. You don’t know when/if you will get paid, and….
  3. You don’t control the final decisions – the clients do.

There should be a hefty bonus for those factors.

That being said, I would agree that the majority of realtors are grossly overpaid, relative to the services provided.

I see it every day, and if you go to open houses, you’ll see it too. The standard agent knows how to identify each room (this is the kitchen, this is the family room, etc.) and then ask you if you have any questions. Most can complete the fill-in-the-blank contracts too.

But they aren’t professional salespeople who can deliver expert advice on the fly, recognize good and bad features and assign costs/values on the fly, and put the correct price on a home based on the complete package of home’s condition and location, market conditions, and buyer pool….on the fly.  Those are the realtors that deserve full compensation because the piece of mind delivered is worth extra.  It is a service that is more than just taking an order.

Unfortunately, the order-takers are prevailing though, because consumers don’t know the difference and we all get paid the same.  The industry isn’t motivated to disclose this to consumers because they get paid more on the lousy/inexperienced agents, so it will be up to consumers to seek out the experts in a quickie, push-button world.

Eventually, companies like Zillow will determine the values, and consumers will decide if they can live with that.  Most will – it is what they are being fed by the new-age disrupters who are advertising the most. It should be just a matter of time before they prevail, and the old guard packs it up.

There will be lower costs eventually, and virtually no good help.

Reset Your Tax Basis

When thinking about selling, homeowners (especially the long-timers) complain about paying the capital-gains tax on their net profit above the $250,000 exemption per person.  With the rapid escalation in values lately, it has turned into a six-figure tax for many!

Here’s something to think about and I’ll give credit to Doug because it’s been one of the main reasons he has wanted to move. The problem is that people don’t move enough.

Want to avoid paying capital-gains tax?

You should move every time your equity approaches the exemption amount!

The last big frenzy in the early-2000s was fueled by people taking advantage of their tax-free profits by moving repeatedly, and getting rich in the process.

It’s when I came up with my favorite motto:

Don’t Unpack, I’ll Be Back!

Of course, I think everyone should move every 6-12 months – it’s exciting! {#Dancingbanana}

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