Selling your home – try, try, again

selling your home
Why your home didn’t sell (infographic from househuntnetwork.com

If your home didn’t sell this spring, it’s ok.  Rocky never quit when he lost, and neither should you.  No one said selling your home was easy.  Take stock and plan for your next sale.

If your home didn’t sell, you’re not alone.  Consider that April’s existing home sales dropped 2.3 percent, according to the National Association of Realtors May 24th press release (nar.realtor).  NAR Chief Economist, Lawrence Yun, stated that the April slide was “expected” because March sales were very strong.  Additionally, he pointed out that new and existing inventory is not meeting demand.  Many prospective home buyers are frustrated because there is not much of a choice and they are not finding the homes they want.  When selling your home, does it have features that buyers want?

Pending home sales also declined in April.  Based on contracts signed, the forward looking indicator suggests additional decreased sales in the months to come.  Yun also attributes the prospect of future decreased home sales to low housing inventory. He stated that the inventory of existing homes for sale decreased about 9 percent from the same time last year.

When selling your home, consider that the appearance of a brief period of slow sales is not necessarily a warning sign of an impending housing crisis.  Instead, a slower sales trend may be considered part of a normal economic cycle after a breakthrough sales year.  It is a sign of a healthy market seeking balance.  The cycle is caused by home buyers and sellers struggling to find equilibrium.

If your home didn’t sell, you may have a better chance in a few months when the cycle changes.  However, before going with the same strategy, try to analyze what happened during this listing period.  You may find interesting and revealing information, about your home and your agent, that could help you the next time.

First, talk to your listing agent.  If they were active in marketing your home, they should have a wealth of information.  Start by asking them about showings.  The number of showings determines buyer interest in your home.  If you had few visits to your home, it could mean the price is too high.  It could also be a result of low quality MLS pictures and information.  Buyers start with the MLS listing to determine if the home is worth a visit.  However, if you had plenty of buyer visits but no offers, there may be other issues that need attention.

Check with your agent for feedback.  Agents often communicate about their visits to homes.  Home buyers who attend open houses also provide feedback.  Skip over the positive feedback because agents and home buyers often offer positive feedback just to be polite, even if it’s not warranted.  Look toward critical reviews for help to improve your home presentation and marketing.  If the same item is mentioned multiple times, you should take that as an indicator and begin there.

When selling your home, price, presentation and marketing are relatively easy to adjust.  However, your home’s condition could be a deterrent.  Buyers in the current market are very demanding and selective.  They want a turn-key home that has the recent updates featuring the newest technologies.  Even though housing inventory is low, many home buyers will not settle for any house.  If your home is not updated relative to the top sales in your neighborhood, you may have to consider a major price adjustment.  If your home’s condition is holding back a sale, do a cost-benefit analysis.  You may discover that selling for less could net you more than if you spent tens-of-thousands on renovations.

Copyright© Dan Krell
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Gonzo home sales and prices

gonzo home sales and prices
Gonzo Home Sales and Prices? NAR Housing Expectations 2017 infographic (from realtor.org)

Everyone seems to be excited about this week’s Case-Shiller home price numbers reported for February.  Even the title of the April 25th press release sounded a little giddy: “The S&P Corelogic Case-Shiller National Home Price NSA Index Sets Fourth Consecutive All-Time High” (spindices.com).  Yes, the Case-Shiller 10-city and 20-city composite indices are close to the 2007 level.  But before you become intoxicated by reports of gonzo home sales and prices and run off to sell your home, here’s more to the story.

Gonzo home sales and prices

Gonzo home sales and prices depend on the market.  According to the recent Case-Shiller release, Seattle, Portland, and Dallas topped the charts with annual index gains of 12.2 percent, 9.7 percent, and 8.8 percent respectively.  Not surprisingly, Seattle and Portland have been the hottest real estate markets over the past year.  Tampa’s and Cleveland’s housing markets are at the opposite end of the spectrum with decreases of -0.5 percent, -0.3 percent during February; while Miami’s home price index was unchanged.  Washington DC reported an annual gain of 4.1 percent, with a 0.2% gain reported in February.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices stated:

“There are still relatively few existing homes listed for sale and the small 3.8 month supply is supporting the recent price increases. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.

Housing’s strength and home building are important contributors to the economic recovery. Housing starts bottomed in March 2009 and, with a few bumps, have advanced over the last eight years. New home construction is now close to a normal pace of about 1.2 million units annually, of which around 800,000 are single family homes. Most housing rebounds following a recession only last for a year or so. The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”

Gonzo home sales and prices are dependent on local real estate.  It’s true, housing inventory is lacking.  At a time when homes should be coming to market for the spring season, the Greater Capital Area Association of Realtors Montgomery County single family statistics for March 2017 indicated that there were -1.8 percent less new listings compared to the same time last year.  And the total number of active homes for sale are -16.4 percent less than the same time last year.  Although June is usually the peak time for home sales and prices in our area, home sales increased 17.9 percent month over month, and is 11.7 percent higher than the same time last year; while average home sale prices increased less than 1 percent (gcaar.com)!

Holy shades of 2005, Batman!

Housing stats sound eerily like those before the housing bubble crash.  But this market is different in many respects.  Consider that housing speculation is not as prevalent as it was at that time; homes are not being flipped in a matter of days in most areas.  And home buyers are more sophisticated and savvy than they were in 2005; home buyers are more demanding, as well as sensitive to home condition and price.

Yes, it’s true that house values are increasing.  Yes, home sales are breaking records.  But not all homes sell.  You should realize that that home sale stats includes data of homes that sell.  Homes that don’t sell are not included in the numbers of closings, nor are they included in home sale prices.

Homes that don’t sell tend to be overpriced for the home’s condition, or neighborhood.  Sometimes, the physical location of the house is not ideal; for example, situated next to train tracks.  If you’re selling your home this year, don’t get greedy.  Get a professional opinion on pricing your home correctly; over priced homes tend to not sell quickly, or not at all.

Pricing your home may not be as easy as you think.  Empirical research has confirmed that there are many variables that affect sales price.  Factors that impact home sale price include the home’s location, condition, amenities, and market timing.

If you want to sell your home quickly and capitalize on home sale trends: consider repairing deferred maintenance issues, making updates, and don’t take home buyers for granted.  When making repairs and updates, don’t go for the cheapest quote because it will likely show.  Also, make sure your contractors are licensed.

Home buyers are just as savvy as you, so any attempt to deceive will backfire and hurt your sale.  Focus on broadening your home’s appeal.  Consider making your home turnkey, since most home buyers are looking for a home they can move right in and without making immediate repairs and updates.

For a guide on a successful home sale, take a look at “The magic of 4 to sell a home

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Curb appeal can boost home sale price

curb appeal
Curb appeal (infographic from nar.realtor)

If you want to increase the sale price of your home this spring, you will no doubt focus on the interior.  But how does the home’s exterior look?  You’d be surprised about the amount of necessary cleaning, decluttering and repairing around the exterior of your home.  But don’t skimp on the exterior home preparations before your sale – research conclusively shows that improving your home’s curb appeal can increase the sale price by as much as 8 percent!

An empirical study conducted by Chen, Evans-Cowley, Rutherford, and Stanley (An Empirical Analysis of Effect of Housing Curb Appeal on Sales Price of Newer Houses. International Research Journal of Applied Finance. 2013, Vol. 4 No 11, p1407-1419) was the first to demonstrate the relationship between a home’s sale price and curb appeal.  The authors also discussed how home buyers’ preferences in a home’s exterior influence the home’s sale price.  Besides curb appeal, they suggest that the home’s architectural elements could also be important in the final sale price.  The idea that today’s modern designs are more desirable, and likewise costs more money, is only transitory; such that today’s designs could become trite and tired in twenty years.

The study used a seven-point “attractiveness” scale to determine how respondents viewed the attractiveness of a home’s exterior.  They concluded that there is a relationship between a home’s exterior attractiveness and the home’s sale price.  In fact, they reported that a one-point increase in their scale corresponded to an 8 percent increase in the home’s value!

Home buyers make assumptions about your home’s interior based on the appearance of the exterior.  An unattractive exterior can repel home buyers before they even see the beautiful and updated interior.  Attract home buyers and boost your home sale price by focusing on cleaning, repairing, and “finishing” your home’s exterior.

Basic landscaping can make a huge difference in your home’s attractiveness.  Having too many plants, or letting them grow too much can make the home’s exterior appear crowded and unkempt.  Make sure your lawn is full but manicured throughout your listing.  Properly trimmed trees not only look tidy, but allow home buyers to see your home from the street.  Appropriately placed and trimmed shrubs and flower beds can accent the home’s architectural design.

Check your home’s siding.  Replace and repair any missing or broken siding pieces.  Freshen up siding by power cleaning, or painting.  Even if your home has artificial materials as siding, inspect window frames and fascia boards; these areas are often neglected and may need urgent repair.

How does the deck look?  Unless you maintain the deck regularly, chances are it may seem dull and tired, and may need to be re-treated.  Even if your deck is made of artificial decking, check the railings.  Hire a licensed contractor to repair and secure the deck as necessary.

How about the sidewalks and patio?  The sidewalk and patio can be easily cleaned by power washing.  Cracks in the sidewalk and patio are not only unsightly, but can be a trip hazard.  Cracks are typically caused by rain and water runoff, but can be repaired.  Consider also sealing the sidewalk and patio to prevent further water damage.

Finally, consider finishing the exterior to make your home more appealing and cordial.  Much like staging the home’s interior, you can use similar principles to increase the exterior’s attractiveness; such as placing appropriate chair(s) and potted plant(s) on the porch, deck or patio.

Copyright© Dan Krell
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Misguided house makeover

house makeover
House Makeover (Infographic by Allianz Australia Home Insurance allianz.com.au)

Do you really need to spend money to make money?  Deciding what renovations and updates to make prior to your home sale can be tormenting.  It’s easy enough to say that your home needs a facelift; but, the repairs, updates, and painting costs money – and usually lots of it.  The suggestion of making renovations and updates to your home before you sell is everywhere, it’s on TV, the internet, and magazines.  And if you ask friends and real estate agents, they will also give you a list of “must do’s.”  Regardless of how you decide to do a house makeover before the sale, chances are that you’re not doing it right.

There is no doubt that many home buyers are looking for a turn-key home.  If your home is not “out of the box brand new,” you probably need to freshen it up, as well as make some repairs and updates.  But before you embark on the house makeover by making those renovations, you need to ask yourself two important questions: “How much money can I realistically allot for a makeover?” and “How much am I expecting to net from my home sale?

Does a house makeover really get you top dollar? Spending money on renovations will certainly make the home sell faster, but not necessarily make you more money.  And there is no guarantee that the house makeover renovations you make are to home buyers’ tastes.  So if you’re goal is to get top dollar, don’t look at the sale price.  Instead keep your eye on your estimated net (the amount you’re left with after the sale minus total renovation costs).

Of course, the best way to maintain your home’s value is to perform regular maintenance.  It would certainly make the home prep easier too!  But the reality is that many home owners defer maintenance until they feel it’s absolutely necessary.  Deferring maintenance can actually cost more in repairs down the line, and lower your home sale price.  Spending money to correct all the years of neglected repairs and updates prior to the home sale won’t necessarily get you top dollar.

Not all buyers are looking for renovated homes.  One of Stephen B. Billings conclusions in his recent research (Hedonic Amenity Valuation and Housing Renovations; Real Estate Economics; Fall 2015, 43:652-82) was that during the past “healthy” housing market, there was a balance between renovated and non-renovated homes that sold.  However, he also found there was an increase in renovated home sales during the housing downturn of 2007.

Selling your home “as-is” would certainly decrease your sale price, but could net you the same or even more if weighed against extensive renovations of the house makeover.  Consider that you would only recoup a fraction of the cost of a minor kitchen and bathroom remodel; which averages about $20,122 and $17,908 respectively (according to 2016 Cost vs Value Report; remodeling.hw.net).

Concentrate on the basics of decluttering first. Decluttering can make your home look different and feel larger.  Decluttering can set the stage for fo you decide on renovations, and maybe even home staging.

If you decide on freshening up your home before the sale, start with the basics.  Focus on deferred maintenance, and make necessary repairs.  Consider a fresh coat of paint, and maybe new carpets.  Wood floors don’t necessarily have to be replaced or sanded; flooring professionals use state of the art processes to “renew” wood floors.

If you decide on a house makeover, focus first on making repairs and freshening your home. Work out a budget and get several quotes from licensed contractors.  Don’t automatically go for the cheapest quote, even if you’re on a tight budget.  Focus on quality, even if it means limiting the scope of work.  Poor workmanship can sabotage your home sale by making your home look shabby and in need of additional repairs and updates.

Copyright © Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Best home sale?

best home sale
Best way to sell a home? (infographic from keepingcurrentmatters.com)

As the housing market strengthens, consumer confidence in real estate increases.  Along with a stronger home sale market comes the increase of for-sale-by-owners (FSBO).  The obvious upside to selling a home on your own is to increase your net.  And a study conducted in 2009 may support your FSBO yearnings. But is FSBO the best home sale?

Research conducted by Hendel, Nevo, and Ortalo-Magné (2009; The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com; American Economic Review; 99:1878-98) found that homes that sold on a FSBO website sold for as much as homes that were listed in the MLS.  However, homes that sold on the MLS did so with significantly fewer days on market.  The authors also found that a significantly higher proportion of home buyers bought homes listed on the MLS.  The research concluded that “FSBO attracts a particular type of seller…” A FSBO seller is very patient to wait for someone to pay for their higher priced home.

The research conclusion about sale price is contrary to annual surveys reported by the National Association of Realtors.  For example, the National Association of Realtor’s 2015 Profile of Home Buyers and Sellers reported that the average home sale price for a FSBO was $185,000, while the average home sale price for an agent assisted home sale was $240,000.  Of course, the 2009 research indicated that homes that did not sell on the FSBO website were promptly sold on the MLS.  Besides being limited to a specific market, excluding “failed” FSBO sales from their data set could have skewed results and could explain 2009 study’s conclusion about sale prices. From NAR’s Field Guide to Quick Real Estate Statistics:

For Sale By Owner (FSBO) Statistics

  • FSBOs accounted for 8% of home sales in 2015. The typical FSBO home sold for $185,000 compared to $240,000 for agent-assisted home sales.
  • Most difficult tasks for FSBO sellers:
    • Getting the right price: 18%
    • Preparing/fixing up home for sale: 13%
    • Understanding and performing paperwork: 12%
    • Selling within the planned length of time: 3%
    • Having enough time to devote to all aspects of the sale: 3%

Going FSBO sounds simple and maybe the best home sale; but going it alone is not for everyone.  Selling a home is much more than putting a sign in the yard – especially if you are demanding top dollar.  Take your efforts up a notch to increase the probability of realizing your sales goal.  Among the many tasks that are essential for a successful home sale, consider a basic marketing plan.  Attract more buyers with professional high quality photos.  Prepare for buyers to visit your home by decluttering and making minor repairs.  You should also have a contract ready in case there is no buyer agent.  Even though you are selling FSBO, you still have to comply with federal, state, and local disclosure laws.  Be prepared for the details of the transaction, which include: negotiating home inspection repairs; providing sale comps to appraiser; dealing with the buyer’s lender and title company.

If going FSBO is intimidating, consider hiring a real estate agent that offers à-la-carte services.  The agent can assist you in many areas of your sale, only charging you for the pieces you need.  You can even pay a flat fee for a MLS placement of your sale.

If you’re like many FSBO’s, you’ll realize the value of a Realtor.  Real estate agents are housing and marketing experts that can assist you in setting a realistic sale price.  Besides freeing up your time, experienced agents can facilitate offers and are expert negotiators.  They know of latest home sale trends and are aware of any new legislation that can affect your sale.

The best home sale

You may find selling FSBO attractive.  But selling a home is in the details that are executed throughout the transaction.  The best home sale may actually be through a Realtor.  The research supports the notion that hiring a Realtor can provide a more successful and satisfying home sale than doing it FSBO.

As I wrote about FSBO’s in 2005:

How much money can you realistically save? …there as been a trend of negotiated commissions, so actual savings for a FSBO have been reduced….Additionally, FSBO’s are contracting and paying commission with more Realtors and their homebuyers in this environment of limited home inventory. In the end, the FSBO’s savings from Realtor commissions may be marginal.

… there are some real negative aspects of selling your home FSBO, such as time, expense, and contractual obligations.

How much is your time worth? Selling a home requires the application of time to tasks. Among the many tasks of selling a home, the top things that a FSBO may do include (and is not limited to) preparing the home for the open house, contacting the paper to advertise, putting up signs, meeting potential homebuyers, and negotiating contracts. The time quickly adds up.

Selling your home FSBO is supposed to save you money right? Well, there is a bit of expense that is necessary. A FSBO must have signs in the yard, as well as directionals (the small arrow signs) to point homebuyers in your direction. Additionally, you might consider paying the local paper for advertising, as well as paying for an internet advertisement (although there are many websites that will allow you to post for free). Another expense may be to have your attorney to prepare and review the contract…. It seems that the expenses also quickly add up.

…even FSBO’s are responsible to adhere to certain federal and local laws pertaining to the sale of real estate (i.e., equal housing, lead paint, Maryland disclaimer-disclosure, etc). This is the one area that FSBO’s get themselves in trouble because of the lack of knowledge and expertise. There is an increased liability potential.

Copyright © Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.