Going once, Going twice…sold!

by Dan Krell

When you think of a real estate auction, what may come to mind is a foreclosure sale. The foreclosure sale has been popular for many years with investors and home buyers looking for a good deal. However, auctioneers have been auctioning all types of real estate (such as commercial, residential, and land) for many years.

Real estate auctions have increased so much over the last few years, such that the National Association of Auctioneers reports that residential real estate auctions have increased 8.4% from 2004 to 2005 (auctioneers.org). The growing trend is national as well as local.

Is an auction the right tool for everyone? According to Fernando Palacios, the local representative of Tranzon, LLC (a national auction company), a real estate auction would not benefit everyone. Typically, real estate auctions have been used by investors and builders to sell their inventory quickly. However, in the present real estate market more home owners have been taking advantage of the “fast track” process so as sell their home quickly. He explains that the auction process is right for you if you want a quick sale and you can set your reserve price about 10% below the market.

Why the discounted price? Mr. Palacios explained that although the goal is to get a full retail price or higher, the reserve price is set below market value to help create a “buzz.” The buzz attracts potential home buyers to the auction.

There is a lot of activity the day of the auction as the excitement builds. Sometimes several bidders bid against each other in an effort to get the winning bid, resulting in a higher than market price. According to Mr. Palacios, this happens more often in moderately priced homes.

Mr. Palacios described the benefits of an auction as having a set sale date, maintaining privacy, selling “as-is,” and receiving a “cash” offer. Having a specific date for the sale can be helpful in planning as well as being, as Mr. Palacios states, “emotionally freeing” for the home owner. The auction has one date for prospective home buyers to present their “offers” to you via the bidding process.

He continues to explain that if sell your home through a Realtor, you must maintain your home in “showing” condition and be prepared for home buyers to come by at any time. Many times, home buyers will come when it is inconvenient such as dinner time and your kid’s bed time. The auction process helps you maintain your privacy until the date of the auction, when all registered participants can preview your home.

Another benefit of the auction process is that the home is sold “as-is;” the home buyer purchases the home without a home inspection. The home owner does not have to worry about a home inspection killing the deal, or about making repairs to the home.

Getting a “cash” offer is a basic part of the auction process, which means there are no contingencies and you can count on closing in thirty days. This is to the home owner’s advantage as the home buyer has no way out of the contract.

For more information on real estate auctions and to see if it right for you, visit the National Auctioneers Association (auctioneers.org) and the Auctioneers Association of Maryland (mdauctioneers.org).

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 7, 2007. Copyright © 2007 Dan Krell.

The Art of Pricing Your Home

by Dan Krell © 2007
Google+

As February gives way to March home buyers make their way out of hibernation, while many home owners are preparing their homes for sale. Some home sellers will list their home with a Realtor, while others will attempt to sell by owner. As the home sellers are making their preparations, one item is still undecided-the list price.

Pricing your home correctly is the key to having a successful sale and will make the difference in going to settlement in a reasonable time or having your home languish on the market for weeks and months.

Although it is true that selling a home is not rocket science; however, home pricing is a science to some and an art form to others. There is a certain knowledge and technique in home pricing as well as requiring a lot of work in the form of research.

If you are presently selling your home, (if you haven’t realized it yet) market conditions are no where near the market conditions of several years ago. Don’t expect your home to sell fast at a higher price and/or in poor condition than other homes in your neighborhood-those days are over.

The first step in pricing your home is to see what is happening in the local market and neighborhood. You can see this by getting a comparative market analysis (CMA) from a Realtor. I would ask several Realtors for a CMA as there may be differences in approach and presentation. A CMA is not an appraisal; however it is a comparison of your home to similar homes. It is important to compare your home to homes of similar style and size. Dissecting the analysis in six, three, and one month segments will show you any market trends.

When looking at the analysis, compare recent sales to currently active homes. Are the current listing prices consistent to recent sale prices and days on market? Is your competition is over priced for present market conditions, or is the market slowing down?

Look at the expired and withdrawn listings too. Try to find out why these homes did not sell and avoid doing the same mistakes. Also, look any pending sales for price reductions and seller concession as these may give you a hint to where you need to be in pricing your home.

Now that you have the analysis, it is important to know your competition first hand. Go visit your competition when they hold an open house. Compare active listings’ condition and amenities to your own home. Does your home compare; is the price reasonable; would you consider buying this home?

Be honest with yourself about your home’s condition and features. Are there amenities that will attract home buyers? Are there any problems or shortcomings that will turnoff home buyers? You will need to adjust for these items accordingly.

Home buyers in today’s market are looking for homes that show well and are reasonably priced. Additionally, many home buyers are in need of closing cost assistance. Don’t expect home buyers to make an offer just because the home is on the market-they won’t. Be realistic, as there are lots of other homes on the market that show well and are competitively priced.

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 2/12/2007. (c) 2007 Dan Krell.

Does a Vacant Home Sell Faster?

by Dan Krell © 2007
Google+

When I list a home I invariably get the question, “Don’t vacant homes sell faster than occupied homes?”

It is an interesting debate in the real estate industry. Well, not so much a debate as it is a difference of professional opinion and culture. The rationale for vacating the home prior to listing it includes ease and convenience, for both the home seller and the prospective home buyer. After all, the home seller will not have to be bothered with keeping the home clean on a daily basis anticipating home buyers coming to see the home. Additionally, strangers won’t be traipsing through the home at odd times or while the home seller is taking a shower (which does happen).

For the prospective home buyer, viewing a vacant home can’t get any easier. There are no restrictions on showings; there aren’t any worries on going too late in the evening or too early in the morning. Also, there aren’t any worries on letting out pets because there are none in the home.

When the real estate market was on a run away pace, the advice of vacating a home may have been harmless as well as making some sense. The thought was, “Why not move out before listing? Some one will be moving in the home in several weeks.”

Now that the real estate market has become (or becoming) more realistic, the reality selling a vacant home is setting in. An empirical study conducted by Chien-Chih Peng and published in the June 22nd 2004 issue of the Appraisal Journal concluded that vacant homes take longer to sell as well as selling for less than occupied homes.

While viewing a vacant home, you notice traffic patterns as well as furniture footprints. If you have ever moved furniture out of a room, you probably noticed that the room looked a bit shabbier empty than with furniture because of the marks left behind from furniture and traffic through the room. You tend to notice more imperfections than if the home was furnished. Additionally, if the home is on the market for an extended period, dust buildup and an overgrown lawn becomes unsightly. Sometimes an unused toilet gets a ring that will become a home buying deterrent. If the home is not maintained on a regular basis, the vacant home looks as if it is an abandoned home that has no appeal.

Why do home builders fully furnish their models? It’s not because they want to advertise someone’s furniture, it is because they want to give you an idea of how the space can be used. Home builders know that selling a home is much more than a financial investment, it’s an emotional investment. Vacant homes are bleak and sterile, whereas a furnished home can show its warmth and connect emotionally with the potential home buyer.

Finally, savvy home buyers may look at a vacant home as a sign of a desperate home buyer in need of a quick sale. A vacant home may be an invitation to lower offers because it is thought to be a financial waste or strain on the home seller.

The message is clear. Whether or not you plan to live in your home during the sale, keep your home furnished modestly, clutter free, and clean.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally published in the Montgomery County Sentinel the week of 2/5/2007. Dan Krell © 2007.

Home Selling Tips

Because not all listed homes sell, you should be strategizing how to make the most of your sale. What to do? Here are some home selling tips .

Think about the basics that go into a successful home sale. The first is to price the home according to the comparables in the neighborhood. The second is to consider the condition of the home. The third is to have a marketing plan. And lastly, you should have a close working relationship with your Realtor.

Home selling tips

Of course your home should be priced according to the comparables in the neighborhood, and progress should be gauged with the other homes on the market in the neighborhood. That means besides pricing according to the homes that are comparable, your Realtor should expect results within the parameters based on those sales also. Regardless of what you hear, the seller sets the selling price. Your Realtor is only an advisor providing you the data and opinion.

Sale price

Comparing your home to similar homes that sold is critical in deciding a sale price. Comparables are homes that match your home in style and size. If you have a three bedroom rambler, you should compare your home to other three bedroom ramblers in then neighborhood.  Typically, comparables are restricted within a subdivision or within about 0.5 mile to 1 mile. And sales not older than six months (unless there is a lack of home sales).

Home condition

Why is your home’s condition important when deciding a sale price? If your home has deferred maintenance or hasn’t been updated for twenty years, it’s not going to get the same price as the renovated similar home across the street. Be honest with yourself about the home’s condition.  If your home is not in move-in condition, think about the cost of renovating in the price along with market conditions.  If it’s a buyer’s market, you may have to consider a lower price or the home will languish waiting for a buyer.  If it’s a seller’s market, there are more home buyers willing to buy a home with the intention of renovating it.

Marketing plan

You need a roadmap to success. If your Realtor has not yet presented you with a marketing plan, ask for one. Your Realtor should have a plan of action to sell your home. Putting a sign in front of your home and entering the information in the MLS is not typically enough sell a home. Market conditions frequently change, and your Realtor should have a concrete plan to sell your home. The plan should include not only how the home will be marketed, but how the agent will take you from contract to closing.

Your listing agent

The final aspect that is important in selling your home is the relationship between you and your Realtor. Besides having confidence in your Realtor, you should feel comfortable being honest (for good and bad).  It’s not a good sign if your Realtor is often defensive when you express concerns and needs. Your Realtor, on the other hand, should also be honest, as well as timely with information concerning your home. Besides communicating the activity of the potential home buyers, they should also keep you up to date with the neighborhood market keeping an eye on the other homes on the market.

How will you market your home and what will you do if the market changes? When you are interviewing Realtors to sell your home ask about their marketing plan. Ask about a home pricing strategy.  Ask how your home’s condition affects the price.  Ask how the agent communicates and what you should expect from them.