home seller Archives - Page 11 of 31 - Real Estate News and Commentary

March 22, 2018November 23, 2021

Negative equity stats likely erroneous

Before the Great Recession, there was the foreclosure crisis of 2007. That was the year that the housing bubble popped and home negative equity soared. Many home owners negotiated with their lenders to keep their homes, while others lost their homes to foreclosure. The Mortgage Forgiveness Debt Relief Act of 2007 was one of the first measures to assist distressed homeowners during the financial crisis. The Act initially was to end in 2009 but has been extended annually. The Act was recently retroactively extended for 2017.

The purpose of the Act was to address tax liabilities that distressed homeowners faced when they tried to save their homes. Because debt forgiveness is typically considered taxable income, a mortgage balance reduction via mortgage modification or short sale would have resulted in a tax bill to a homeowner who was already experiencing a financial hardship.

Recent home equity gains in the housing market should help many home sellers who would have otherwise needed a short sale. Highlights from CoreLogic’s Q4 2017 Home Equity Report (corelogic.com) indicated that about 4.9 percent of mortgaged homes have negative equity (which is a huge improvement from the almost 31 percent reported in 2012 by Zillow’s Negative Equity Report). Additionally, CoreLogic reported that the national average of home equity gained by homeowners over the past year was in excess of $15,000. However, there is disparity in home equity growth by region.

Dr. Frank Nothaft, chief economist for CoreLogic stated:

“Home-price growth has been the primary driver of home-equity wealth creation. The CoreLogic Home Price Index grew 6.2 percent during 2017, the largest calendar-year increase since 2013. Likewise, the average growth in home equity was more than $15,000 during 2017, the most in four years. Because wealth gains spur additional consumer purchases, the rise in home-equity wealth during 2017 should add more than $50 billion to U.S. consumption spending over the next two to three years.”

The National Association of Realtors testified on March 14th to the U.S. House Ways and Means Subcommittee hearing on “Post Tax Reform Evaluation of Recently Expired Tax Provisions” to make the Mortgage Forgiveness Debt Relief Act permanent. In his testimony, Realtor Barry Grooms discussed the plight of many homeowners who are surprised to find that they are upside-down on their mortgage despite national home price gains.

Grooms made an argument why the Mortgage Forgiveness Debt Relief Act should be permanent. The Act has been retroactively extended each year in recent years leaving many short sellers “sweating it out” until the end of the year. Part of the decision-making process for a short sale is a potential tax liability. Many home sellers take the chance that the Act will be renewed retroactively. But others do not want to take the chance of incurring a large tax liability.

Negative equity statistics are likely to be erroneous. The number of homes with negative equity is probably under-represented due to deferred maintenance.

Yes, home prices have significantly increased, which has grown home equity. But the statistics for home equity assume that all homes are worth “retail value.” The retail value of a home is the full price a home can sell. In today’s market the home must be in better-than-average to excellent condition to sell for retail value. We don’t know the real value of any home until it’s sold.

In his testimony, Grooms touched upon a number of issues why homeowners are selling for less than they owe. However, not addressed by Groom is the number one reason why homeowners are under-water and why many home sellers need to sell via short sale. Property condition. The property condition crisis was highlighted in a February 2013 article by the Harvard Joint Center of Housing Studies entitled “The Return of Substandard Housing.” The lack of updates and/or deferred maintenance in a home can significantly decrease its value.

By Dan Krell
Copyright © 2018

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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.

February 22, 2018November 23, 2021

Home selling basics

It’s that time of year again. Many home owners, just like you, are getting ready to put their houses on the market. One thing I’ve learned over sixteen-plus years of home selling is that there are different strategies to achieve the same result. Basically, there is no “one way” to sell your home. But, if you look beyond the gimmicks and tactics promising to sell a home faster and for more money, the basics are essentially the same. In other words, focus on home selling basics to increase home buyer traffic and possibly get a better price.

Prepare for home selling

Most would be home sellers don’t realize that selling a home is a process. Preparing your home can seem overwhelming, but it doesn’t have to be. Focusing on home selling basics will not only get you excited about selling your home, but can help your home sale results.

Preparing your home to sell can be a costly endeavor, especially if your home has a lot of deferred maintenance or lacks updates. However, the obstacle of selling when your home is in need of attention can be overcome by pricing it with its condition in mind.

Regardless of your home’s condition, it should still be neat and clean. This means decluttering. Decluttering is a process of prioritizing and clearing out unnecessary items from your home. Removing unneeded items and furniture from your home will make your home feel larger and organized. You don’t necessarily have to throw out these items, you can decide to make charitable donations and/or store them until you move.

People talk about “Neutralizing” a home to take away personal affects from the home. It basically strips away the things you did to personalize your home. Neutralizing applies to paint schemes, decor, wall hangings, flooring, etc. It may sound extreme, but neutralizing your home will allow home buyers to envision how they can live there. Although your proud how to show your personal touch by displaying trophies, awards, diplomas, family and personal photos, these should be removed because they can distract home buyers’ attention.

Should you stage your home? Maybe. Staging can be another home selling expense you’re not prepared for, but it can help sell your home faster. You can hire a professional stager or interior designer for the total staging experience. However, staging doesn’t have to be expensive. Some staging or design professionals can provide you a list of recommendations for a nominal fee. If you’ve already decluttered and painted a room or two, you’re well into the first phase of staging. Although some home sellers decide to rent furniture for their home staging (which can also be expensive), it’s not an absolute. Once you remove the unnecessary furniture, the remainder may just need rearranging.

Don’t let your home’s exterior can turn away potential buyers before they get inside. Even if you spend lots of time and money on preparing your home’s interior, it may not matter if home buyers don’t make it inside. Many home buyers decide if they like a home by its exterior appearance.

Improving your home’s curb appeal is similar to preparing the interior. Take care of deferred maintenance and declutter the exterior. Believe it or not, landscaping is a key factor to attract buyers when home selling. Make sure the lawn is cut regularly, and don’t over-crowd the flower beds and shrubs. Trimming back trees will not only add to your manicured landscape, but it will also make your home easier to see from the street.

Once your home is one the market, consider having an open house. The open house is more important today than it has been in decades. Consider that contemporary home buyers are taking control over their home search. Besides searching listings on their own, many will visit open houses on their own as well. Deciding to not have an open house eliminates many potential home buyers from seeing your home.

Home selling basics is about safety too. Selling your home means having people whom you don’t know visit your home, mostly when you’re not there. Having unknown people walking through your home increases the chance of things going missing. Don’t tempt would be thieves by leaving money, jewelry, medicines, or any other valuables on display. Don’t just put your valuables away, lock them in a safe place.

But in the end, home selling basics comes down to the price. Home buyers are savvy and know value. In this market, it’s easy to get big eyes and over-price your home. Making the mistake of over-pricing your home can stretch out the days-on-market and test your nerves. Instead, decide on a list price that is consistent with recent neighborhood sales of homes that are similar in size, style and condition.

Home selling basics

Make repairs
Declutter
Improve the curb appeal
Staging
Open house
Find a buyer

By Dan Krell
Copyright © 2019

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December 29, 2017October 20, 2020

Consumers are devolving real estate

Consumers directing real estate industry (infographic from househuntnetwork.com)

The National Association of Realtors annual Profile of Home Buyers and Sellers (nar.realtor) reveals insight into consumer real estate trends. It provides an understanding into home buyers’ and sellers’ experiences and what they want. One aspect of focus from the Profile is how consumers choose their real estate agent. The survey consistently indicates that a referral from a friend, neighbor or relative plays a big part in their choice. But how do buyers and sellers view real estate brands?

There are reams of research about the relationship between brands and consumers. However, recent data regarding millennials suggest that brand loyalty may be changing. Jeff Fromm’s article for Forbes (Why Label Transparency Matters When It Comes To Millennial Brand Loyalty; forbes.com; December 13, 2017) points out what consumers are looking for and what they deem important. Fromm states

“If the brand doesn’t provide the information they need, millennials will look elsewhere… when millennials make purchase decisions, they’re considering more than the traditional drivers of taste, price and convenience. They value authenticity, and make decisions based on the way they perceive brands to impact their quality of life, society as a whole, and how that brand may be contributing positively to the world.”

Real estate brokers and agents should pay close attention to the new consumer research.

This evolution of brand loyalty and how consumers perceive brands may explain the growth of independent brokers. A 2015 Special Report by Inman Select (inman.com) The Shift Toward Independent Brokerages indicates that the number of real estate agents affiliating with independent brokerages (not affiliated with corporate or franchise real estate companies) grew significantly over the last decade. The percentage of agents affiliating with independent brokers jumped from about 45 percent in 2006 to about 55 percent in 2015. About 80 percent of real estate brokerages are independent. And the trend is expected to continue.

According to the Special Report, the major advantage cited for affiliating with a brand name brokerage is brand awareness. However, there may be a limit to the influence of a real estate brand. Unlike retail brands, real estate brands do not have total control over the consistency and quality of the services provided. That is left to the individual agent. Independents, on the other hand, cite the ability to quickly adjust to consumers’ needs and being focused on the local real estate market as an advantage.

Yes, the real estate industry appears to be devolving. Another example of the devolution is a decreasing reliance on the MLS for home listings. It’s not to say that home sellers are not listing their homes with agents, because an increasing number of sellers are looking to agents for their expertise. However, brokers and agents are maintaining control over their inventories through alternative means of selling homes, such as pocket listings. An increasing number of brokers are also restricting their listings from internet syndication to increase the quality of information provided to consumers. Although it may sound counter-intuitive to not widely broadcast a home for sale on the MLS or internet, however, a lack of transparency remains a problem for some real estate aggregator portals.

Are real estate brokers and agents listening? The business of real estate is changing and devolving. Control over the industry has slowly been transferred to real estate consumers. Real estate consumers are savvy and intelligent. They know if a broker/agent is really focused on revenue streams, gimmicks and salesy techniques. Real estate consumers want agents and brokers who are authentic, transparent, and provide a quality service.

Original located at https://dankrell.com/blog/2017/12/29/consumers-devolving-real-estate/

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November 30, 2017December 1, 2017

Home remodeling to stay or sell

The Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts expanded growth of home remodeling and renovations through most of 2018. That’s a good indication that the economy has picked up and the many homes that fell in disrepair after the Great recession are getting the much-needed attention to extend their functionality.

It wasn’t that long ago when Kermit Baker wrote about a crisis of the declining housing stock due to extensive deferred maintenance (The Return of Substandard Housing; housingperspectives.blogspot.com; February 27, 2013). The article written for the Joint Center for Housing Studies of Harvard University highlighted the considerable reduction of home maintenance as measured by home owner “maintenance spending” during the Great Recession. This seemed to be a low point for the country’s housing stock. The 28 percent decrease in maintenance spending between 2007 and 2011 essentially nullified the renovation spending during the housing boom.

Home remodeling activity Q3-2017 (graph from jchs.harvard.edu)

The Remodeling Futures Program releases a quarterly data for Leading Indicator of Remodeling Activity (LIRA). The LIRA is a “a short-term outlook of national home improvement and repair spending to owner-occupied homes.” The most recent data indicates that home remodeling and repair spending will escalate from the fourth quarter of 2017 into the third quarter of 2018, estimating an increase from 6.3 percent to 7.7 percent. The significant increase in home improvement spending is attributed to a strengthening economy, home equity gains, and low home re-sale inventory. Chris Herbert, Managing Director of the Joint Center for Housing Studies is optimistic about maintenance spending. Herbert said:

“Recent strengthening of the US economy, tight for-sale housing inventories, and healthy home equity gains are all working to boost home improvement activity…Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance.“

The current LIRA data doesn’t include the effects of recent hurricanes. It is expected that those recent disasters will significantly increase the anticipated projected maintenance spending.

Home owners really have no choice but to spend on renovations, remodeling and repairs, especially if they are planning on selling their home. Most home buyers want a turnkey home, where the home is fresh and new and offers minimal maintenance during the first year of ownership. The desire for a turnkey home is probably why new home sales are at a ten-year high. This week, the US Census Bureau (census.gov) released new home sale data that indicates a month-over-month increase of 6.2 percent, and a year-over-year increase of 18.7 percent! To compete with other re-sales and new homes, home sellers must factor in the cost of home renovations.

There are many home owners who still can’t afford to move. The fact that many are still priced out of the move-up market has been a major issue holding back the housing market. This phenomenon is also responsible for continued low home re-sale inventories. As a result, many home owners are staying in their homes much longer than anticipated. The National Association of Realtors indicated in the Home Buyer and Seller Generational Trends Report 2017 (nar.realtor) that home buyers anticipate staying in a home about twelve years. This is an increase of about five years compared to a decade ago.

Although many home owners still can’t move, they are deciding to do home “make overs.” The make overs will give their homes a fresh look, that typically include new floors and paint schemes. Additionally, kitchen and bathroom renovations modernize the home. However, home owners needing more room, are opting to expand their homes to give them larger spaces. Some home owners are going beyond the basics and creating different spaces by moving walls.

Regardless of your reasons for home renovations and repairs, home improvement experts recommend to create a budget and stick to it, and always hire licensed contractors.

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October 15, 2017October 20, 2020

Real estate contract know-how

When I started selling homes almost sixteen years ago, a typical real estate contract (with addenda) may have been about twenty pages. My mentor used to pine about the two-page contracts he used when he started in real estate. I used to think he was exaggerating, but I found that he was actually telling the truth. It is true that real estate contracts have evolved and become quite lengthy through the years. Today, our local Realtor contract with addenda can exceed sixty pages! As much as it may sound like a chore, you should take the time to read and understand the real estate contract you are asked to sign.

In today’s world of convenience and digital everything, electronically signing your real estate contract may seem like a time saver. Real estate apps make it all too easy for your agent to email you a boiler plate contract and ask you to click the mouse to sign it. But do you really know what you’re signing? More importantly, does your real estate agent know what they are asking you to sign?

A typical Realtor contract is a legally binding contract once it is ratified and delivered to all parties. That means there are potential consequences for not doing what you agreed to do. Don’t solely rely on your agent for an explanation of the contract, they may not fully understand it or its nuances. As pedestrian as it sounds, read through the contract before you sign it. Reading the contract will inform you of the terms and conditions to which you’re agreeing, which include your obligations and contingency timelines. Reading the contract will also alert you to any errors and you need clarified.

The terms and conditions of your real estate contract are more than just the sale price and closing date. Both the home buyer and seller have obligations in our local Realtor contract. A few of the many obligations included in the terms are: settlement, obtaining financing, delivering a “clean” title, and providing access to the property.

Are there contingencies? Typical real estate contract contingencies include financing, appraisal, and various inspections. However, other contingencies may be included too, such as the buyer’s home sale, the seller finding a home, third party approval, or even reviewing the county or city master plan. The contingencies you choose may vary depending on your situation. Contingencies are time limited. The contract describes how each contingency is met as well as timelines for completion and description of giving notice and responses.

Although the Realtor contract has become increasingly lengthy, it has become more standardized (at least in my area). In the past, local agents needed to know or find out the contract and addenda requirements for multiple counties and cities, much of the time falling short. Today, the Realtor contracts and addenda we use in Maryland are mostly consistent with each other, making it easier to put together and understand.

Make sure you are comfortable with the real estate contract you are signing. You should ask your agent to take the time to sit with you and review the contract before you sign it. If you’re a first-time home buyer or seller, getting the one-on-one review will allow you to ask questions about your obligations and the process. Even if you have bought or sold a home in the past, reviewing the contract with your agent will make you realize how times have changed. Since the contract is a devise, always consult with an attorney for legal advice.

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