Get proactive to sell your home!

by Dan Krell © 2009

Proactive home selling

The 2008 edition of the National Association of Realtors “Profile of Home Buyers and Sellers” indicates that a home’s condition and environmental impact are important to many home buyers. In a market where home buyers are hard to come by, your home may stand out from the crowd if you can demonstrate that your home is solid and energy efficient.

Some believe home buying to be an emotional process that is rationalized by making decisions on perceived value. Conducting pre-sale inspections, such as a home inspection and a home energy audit, can not only provide home buyers with the rationale for choosing your home, the physical data may provide home buyers an additional boost of confidence that can make their decision process easier.

NAR surveys indicated that home buyers are more apt to compromise on the price than the condition of a home (NAR Profile of Home Buyers and Sellers 2008). Be prepared by conducting a pre-sale home inspection. The inspection can provide information on the general condition of the home by examining the age and functionality of the home’s major systems including (but not limited to) roof and gutters, heating and cooling, plumbing, electric, and possibly point out any visible structural defects that may need attention. Some home sellers may also decide to conduct additional environmental tests (such as radon and lead) to possibly alleviate further concerns.

As energy prices continue to rise, home buyers are increasingly aware of home energy efficiency. NAR surveys indicated that 43% of home buyers consider a home’s heating and cooling costs important factors in their home search (NAR Profile of Home Buyers and Sellers 2008). You may allay home buyer fears of purchasing an inefficient home by conducting a home energy audit. Besides revealing the energy efficiency of your home’s furnace, A/C, and major appliances, conducting a home energy audit will also provide information on the home’s efficiency of maintaining temperature. Professional home energy auditors use state of the art equipment (such as infrared cameras and blower doors) to identify often hard to detect air loss or penetration from walls, windows, and doors.

Although some home sellers have the financial resources to make major renovations to their homes to attract home buyers, most do not. The pre-sale inspections can provide you with useful information that may assist you in preparing your home prior to listing by allowing you prioritize the items that need attention. The pre-sale inspections can identify the strong and weak points of your home; you can be prepared for making repairs and/or updates of any unsatisfactory conditions that are identified. However, if you are selling your home “as-is,” the inspections can help you price your home by accounting for any necessary repairs or updates.

By proactively attending to necessary repairs, you can limit the amount of negotiating a home buyer may initiate from their home inspections; or avoid having a home buyer walk away from the deal due to an unsatisfactory home inspection. However, you must remember that although you may be enticing a home buyer by providing pre-sale inspection results, you are still required to disclose any known latent defects in your home (defects that would not reasonably be expected to be observed by a careful visual inspection and pose a health or safety threat).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 26, 2009. Copyright © 2009 Dan Krell

Pending optimism for housing market

by Dan Krell © 2009

Last week, the National Association of Realtors (NAR) announced that pending home sales are up for the seventh straight month. The October 1st press release indicated that the number of signed contracts increased to the highest level since March of 2007; the August pending home sales index is up 6.4% from July and up 12.4% from August 2008 (Realtor.org).

Not to be confused with the existing home sale index, (which calculates the actual number of closed transactions as well as median home prices), the pending home sales index reports activity that is based on the number of signed contracts in any given month; the index is used to compare monthly home buyer activity.

Alone, the pending home sales index doesn’t say much other than that home buyers are interested in getting into the market. However, when combined with the recent existing home sales index, which recently reported that August home sales slightly decreased compared to July of this year (but still remained above the August 2008 sales figures); the story that emerges is one we are not used to hearing.

Although it may be true that some home buyers are being turned down for loans due to a rapidly changing mortgage industry, however, the disparity between the indices may also indicate that the state of the present market is based on delayed home sales. Until about a year ago, it was unusual for anyone to write an offer that had a closing date of forty five days or more. During the real estate boom earlier this decade, a home seller would almost certainly pass over your offer if you could not settle in thirty days or less. However, since a large number of distressed properties have penetrated the market, multi month closing delays and even unsuccessful closings (sometimes banks foreclose before a successful close of a short sale) have become common and sometimes expected. Lawrence Yun, NAR Chief Economist, stated in the October 1st press release that, “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales…”

Pending sales are also outpacing home sales here in Montgomery County (as reported by the Greater Capitol Association of Realtors, Homes Sales Statistics for Single Family Homes; August 2009); however sales indicators show an overall increase from 2008. Home sales increased 24.8% in August 2009 as compared to August of 2008, however decreased approximately 16% from July 2009.

The missed story, however, may actually be the shrinking local home sale inventory. Although, national home inventory is slowly decreasing, local inventory of homes for sale has decreased significantly from last year (as reported by the Greater Capitol Association of Realtors, Homes Sales Statistics for Single Family Homes; August 2009). Single family homes available for sale in Montgomery County decreased about 47% comparing the inventories of August 2009 to August 2008!

Although a shrinking inventory often means increased home buyer competition, don’t expect another historic seller’s market anytime soon. An expiring home buyer tax credit combined with an expected new wave of foreclosures and a changing mortgage industry may have a significant effect on the market. But for now, pending optimism remains for a stable real estate market.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of October 5, 2009. Copyright © 2009 Dan Krell

Urban Living Makes a Comeback!

by Dan Krell
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As the real estate market struggles to find a foothold, many are already speculating on the next real estate boom. The next real estate boom will not be as widespread nor will it be all inclusive as the last market surge; however, some speculate that it will be a highly competitive market nonetheless. The next wave in real estate will be localized to the downtown districts and surrounding neighborhoods of urban centers as a result of the (seemingly) ever increasing fuel and commuting costs.

A 1998 Brookings Institute and Fannie Mae study projected that urban living will attract more residences to the downtown areas. The study projected growth through 2010 in twenty-four cities around the country and used a very conservative definition of downtown (usually the financial districts) and did not include the surrounding neighborhoods. It was projected that some cities will have modest growth while other cities will have explosive growth (Baltimore’s downtown population was projected to increase 5.8%, while Cleveland’s downtown population was projected to increase 228.1%).

The economics of energy is not only affecting grains and food prices, it is influencing real estate trends as well. The recent sharp increase in gas prices and road congestion are making many re-think their home location. Suburban home owners as well as home buyers are looking to move closer to their jobs and save possibly thousands of dollars per year. A National Association of Realtors study reported that 28% of home owners surveyed indicated that high fuel costs were a decision to sell their home, while 40% of home buyers surveyed indicated that high fuel and commuting costs offset the higher home prices closer to the city center. Based on the Washington Metropolitan Area Transit Authority cost calculator (WMATA.com), eliminating a drive of 15 miles round trip can save over $500 per month or $6,000 per year (the figure is based on the GSA reimbursement rate).

Not everyone who is moving “inward” is doing so for work. Many moving closer to downtown areas are expressing the desire to be able to walk to stores and entertainment, while others are drawn to the unique architecture of the older homes.

Local downtown areas have been undergoing urban renewal for years. Large renewal projects that include modern amenities have been designed to draw commercial activity as well as attract residences. With a vision of the future, builders have planned and designed high density developments as well as many mixed use (residential and commercial) urban projects to keep up with the anticipated demand for urban living.

Although not everyone wants to live close to the urban centers and downtown areas, home builders did get the message that many do want to live close to amenities. New suburban communities are designed around existing or new town centers that include shopping, entertainment and access to mass transportation (or are close to metro stations).

If you are considering moving closer to (any) downtown area, don’t let the home prices discourage you. If you consider your commuting costs (including gas, parking, time in traffic) from the suburbs as well as proximity to amenities, your urban home purchase may be more attractive.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 5, 2008. Copyright © 2008 Dan Krell.

Trapped and Pigeon Holed

by Dan Krell

A May 13th 60 Minutes piece that aired nationally attempted to portray a balanced view of how online brokerages have been chipping away at “standard” Realtor commissions. If you missed the segment, it was a story about the success and battles of an online brokerage called Redfin. (Interestingly, there was a similar story in the Washington Post almost a week later).

The story appeared to be an underdog piece about how Redfin is pitted against a real estate industry that is against change. Everyone loves an underdog, right? Although the story attempted to offer both sides of the story, 60 Minutes decision to interview a top real estate agent in the Seattle area made for sensationalism but little for advancing the truth and facts.

The agent interviewed was clearly not representative in income or business methods of an average Realtor. It appeared that the agent’s comments fed into the stereotypes being portrayed by her comments when challenged to lower her commissions as well as comments about home buying not being high tech.

The facts are that according to the United States Department of Labor Bureau of Labor Statistics, the average licensed real estate agent income was $35,670 in 2004. The average agent earned between $23,500 and $58,110 a year. Only the top ten percent earned more than $92,770.

Additionally, the real estate industry has embraced technology to assist in change as can be witnessed by the explosion of internet listings and computer based real estate applications. Many home buyers search for homes online before going to see the home in person. In fact new technology has allowed much of the process to become remote and impersonal; contracts and mortgage applications can be completed and signed and delivered via email. The truth is that the industry is very high tech and the National Association of Realtors is committed to technological advancement (www.realtor.org/technology/index.html).

As a Realtor in the trenches, I can tell you that commission structures have been changing for a while, however not because of “discount” brokers, but as a necessity of survival in a saturated industry. The recent record sellers’ market assisted in the growth of real estate business models that are based on flat fees. Online brokerages, such as Zip Realty, as well as “full service” Realtors have been offering closing credits, rebates, and low commission structures for some time.

How do you get a full service Realtor for a “discount” price? The truth is that although some Realtors are not negotiable on commission, many are. All you have to do is ask and chances are that you can negotiate a lower listing commission or a closing credit on your home purchase.

I was once told by a professor in graduate school that once others’ perceptions have you pigeon holed, you can never get out. Although the 60 Minutes story may be good for ratings, the one sided treatment and depicted stereotype of wealthy Realtors who are steadfast for the status quo did nothing to promote the facts. The National Association of Realtors has posted depicted misrepresentations as well as the correct facts on their website: (www.realtor.org/about_nar/60_minutes/NARRespondsToSixtyMinutesMain.html).

To CBS’s credit, some facts and rebuttal comments from the National Association of Realtors, as well as others, have been posted on the story webpage:
www.cbsnews.com/stories/2007/05/11/60minutes/main2790865.shtml

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 28, 2007. Copyright © 2007 Dan Krell.