Real Estate News and Commentary

December 11, 2015August 17, 2019

Short sale marketing strategy

According to the Corelogic Insights blog, the volume of distressed home sales is declining. Consider that during the peak of distressed sales, which occurred in January 2009, the volume of distressed sales nationally comprised 32.4% of total home sales. Compare those figures to Corelogic’s December 2^nd report, which indicated that nationwide distressed sales volume accounted for about 10% of all home sales during September 2015. However, distressed sales volume varies from state to state; Maryland recorded the highest volume of distressed sales (20.7%) among all states during September.

Distressed home sales include bank owned properties (REO) and short sales. It’s important to note that prior to the housing bust in 2007, nationwide REO sales were below 6.2% of all sales. September nationwide REO’s accounted for 6.4% of all sales; while short sales accounted for 3.3% of all sales, and have maintained below the 4% level for over a year.

The plateau of short sales may be due the many home owners who remain underwater. In a June 11^th press release, Zillow announced that the slow pace of increasing home prices are leaving many home owners underwater. The nationwide rate of negative equity among mortgaged home owners was 15.4% during the first quarter of 2015 (which is down from 18.8% a year ago); the negative equity rate in the D.C. metro area was reported to be 17.2%. For about half of all underwater home owners, home prices would need to increase 20% or more for them to break even (zillow.com/research).

If you are underwater on your mortgage, check with your lender, they may have some options to help you. However, if you are planning a move, a short sale may also be an option. Simply put, a short sale is asking your lender to take a lower payoff and “forgive” the difference.

If you decide to go through the short sale process, you should know that your sale will be subject to your lender’s approval. The lender will decide if they will accept the buyer’s offer based on the home’s “fair market value.” Many lenders use broker price opinions to assist them in determining a sale price; however some lenders may use other avenues.

You should be aware of a recent trend used by some lenders, which is bypassing the short sale process and forcing home sellers to list short sales on auction websites – even if there is an existing contract of sale! The given rationale is that the internet auction process provides a fair market value for the short sale. However, this stance by some lenders may lead some home sellers to breach of contract. In a recent conversation with several local (Maryland) state regulators, the present consensus is that “…they are aware of the situation, but there is nothing they can do about it;” however, they welcome consumer complaints: MD Commissioner of Financial Regualtion and Consumer Financial Protection Bureau.

Even though the concept is straightforward and the government has provided lenders guidance on short sales, the process can still be lengthy and full of surprises. The process does not guarantee a sale, and the lender could still foreclose if you stopped paying the mortgage. Additionally, the short sale may negatively affect your credit; and there may be legal liabilities to consider. So, before you embark on a short sale, you should consult an attorney about all of your options (which may include and is not limited to a loan modification, deed-in-lieu, or bankruptcy).

By Dan Krell
Copyright © 2015

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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.

December 2, 2015August 27, 2019

Feng shui and your home sale

Staging a Home — From greenhomegnome.com

It didn’t seem that long ago when feng shui was important to almost every home buyer and seller. And if Google Trends is an indication of relevance, the diminishing number of searches for feng shui over the last decade indicates reduced interest. Perhaps the bursting housing bubble shifted everyone’s attention; buyers’ were determined to get distressed properties at a deal, while sellers were determined to get a model home look through staging. Although seemingly having lost significance in the housing market, feng shui is once again becoming a top concern for buyers and sellers.

If you’re not familiar with the concept, Merriam Webster (merriam-webster.com) defines feng shui as “…a Chinese system for positioning a building and the objects within a building in a way that is thought to agree with spiritual forces and to bring health and happiness.” The International Feng Shui Guild (ifsguild.org) adds that feng shui is derived from the Chinese philosophy of Taoism and has been practiced for aver 5,000 years. Furthermore, it is based in science and nature to help you live a healthy and prosperous life!

You may already be familiar with some feng shui principles, as a few basics of home staging share similar tasks. For example, de-cluttering, maximizing space and creating a “light filled home” are some of the preparations prescribed to stage a home for sale. And according to feng shui principles, these undertakings are vital in channeling a home’s energy flow. Although there may be some crossover, take caution not to confuse home staging with feng shui; staging a home is not the same as following feng shui principles.

From Realtor.org

One of the reasons for the surging focus in feng shui is the increase of home buyers from China. According to the National Association of Realtors® (realtor.org), buyers from China represented about 16% of international home buyers, while purchasing an estimated $28.6 billion of real estate in 2014.

Feng shui is also important to Chinese-Americans, according to a recent survey conducted by Better Homes and Gardens® Real Estate and the Asian Real Estate Association of America (Feng Shui a Driver of Home Selection and Investment for Chinese-Americans; bhgre.com; August 11, 2015). The survey revealed that 76% of respondents are familiar with the principles, and half of those respondents practice feng shui, which is “…considered to dictate spatial arrangement and building design to produce a harmonious flow of energy.” When it comes real estate, consider that 81% of respondents indicated that feng shui influenced their buying decisions; and that 79% of respondents indicated that they would pay more for a home that follows feng shui principles. And if you’re selling a home, you should take notice that 75% of respondents indicated that they experienced at least one “deal breaker” conflict of feng shui principles in a home.

If your home doesn’t exactly correspond with feng shui principles, consider offering a “Feng Shui Contingency.” Such a contingency was highlighted in a 2014 Realtor®Mag article about the Seattle housing market and the high concentration of buyers from China (Why You May Need the ‘Feng Shui Contingency; realtormag.realtor.org; September 22, 2014). Much like a home inspection contingency, many buyers are including a contingency to have a feng shui master approve the house. The good news is that some conflicting elements may be remedied (such as landscaping); however, others cannot (such as the home’s physical location and direction).

By Dan Krell
Copyright © 2015

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November 24, 2015November 23, 2021

Home marketing may be limited due to agents’ personal wealth strategy

From stagingworkstoronto.ca

If you ask a real estate agent about their home sale strategy, you may get a sanctimonious presentation of the best way to sell a house. However, if you question why they advocate specific procedures over others, chances are they will answer “experience.” Even in the face of an abundance of research, many continue to hold on to old and outdated beliefs about how to sell a house. Furthermore, consider that a real estate agent’s strategy to sell your home may not necessarily benefit your bottom line.

The latest study by Allen, Cadena, Rutherford & Rutherford (2015. Effects of real estate brokers’ marketing strategies: Public open houses, broker open houses, MLS virtual tours, and MLS photographs. The Journal of Real Estate Research, 37(3), 343-369) is the most recent extension of home sale strategy research. The study reinforces the outcomes of some strategies, while shedding light on others; and asks a compelling question about agent motives.

The study looked at home sale price, time on market, and the likelihood of a sale in relation to: broker open houses, public open houses, MLS photos, and MLS virtual tours. The results indicated that all four tactics positively influence home sale price. Additionally, conducting public open houses and having MLS photos have a positive influence on time on market. However, there is little evidence that having more than six MLS photos increases that positive effect. Surprisingly, MLS virtual tours and conducting broker open houses have a negative influence on time on market. The authors conclude that as a package all four strategies may be worthwhile to consider when home sale price is the goal, even though the time on market may be slightly extended.

However, if your goal is a successful home sale, you may consider another strategy. The study concluded that the probability of your home sale success increases when you have broker open houses, MLS virtual tours, and eight or more MLS photographs. The study found that public open houses actually decrease the probability of a successful home sale.

In light of these findings about home sale price and success of sale, the authors rhetorically ask: “Why do all sellers/brokers not use these marketing strategies in every transaction effort?” They propose that, “Perhaps the answer is that brokers follow a wealth maximization strategy that may result in an agency problem with sellers.”

It should come as no surprise that there are agents who have a “wealth maximization strategy” for themselves, and place their own needs before their client’s. However, the authors’ suggestion about agent motives could be problematic with respect to the National Association of Realtors® Code of Ethics (realtor.org). For example, Standard of Practice 11-2 indicates that, “The obligations of the Code of Ethics… shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the Realtor® is an agent or subagent, the obligations of a fiduciary.”

If you’re selling your home, one takeaway you might have from this study is that you should exercise due diligence when choosing your listing agent. Consider discussing the sales strategy, and getting it in writing. Additionally, protect yourself by ensuring that your listing agreement can be terminated without penalty and within a reasonable amount of time.

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Copyright © Dan Krell

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November 19, 2015September 14, 2019

Keep calm and carry on – building a panic room in your home

There’s a mystique that many mid-century homes exudes. Maybe it’s the unpretentious architecture and retro-future feel that many people find charming. However, the homes also bring us back to a different time and place; yes, these homes remind us of the cold war era. During the height of the cold war, people went about their lives aspiring to advance in their careers, buying homes, and for many – having a bomb shelter of their own. Although building a personal bomb shelter in the back yard during the cold war may not have been as common as we are lead to believe; however, those who had a shelter of their own were most likely well known to their neighbors.

Although bomb shelters are passé today, finding ways to protect yourself in your home is once again trendy, and some say may be increasingly necessary. Today’s version of the in-house shelter is called a “panic room” (also known as a “safe room”). And like the movie “Panic Room,” the room may be able to offer shelter during a home invasion; but it can also offer shelter from other emergencies such as severe weather – and possibly some acts of terror.

When you think of a safe room, you might picture an elaborate shelter with provisions and amenities that will allow you to stay put for a couple of days or even a week or two. And in fact, FEMA (fema.gov/residential-safe-rooms) describes a safe room as “…a hardened structure specifically designed to meet the Federal Emergency Management Agency (FEMA) criteria and provide near-absolute protection in extreme weather events, including tornadoes and hurricanes. Near-absolute protection means that, based on our current knowledge of tornadoes and hurricanes, the occupants of a safe room built in accordance with FEMA guidance will have a very high probability of being protected from injury or death.” FEMA offers plans and funding opportunities to build a safe room in your home.

As you can imagine, building a panic room can get expensive, especially if you are planning for long term shelter and for a variety of emergency situations. Many spend tens of thousands of dollars in designing their shelters. And even though you may not consider yourself a “prepper;” however, it is possible to create a basic shelter room with limited funds.

The Allstate Blog (Brendan ONeill; Storm Shelter? Safe Room? Build Your Own Ultimate Secure Shelter; blog.allstate.com, May 22, 2013) states that a safe room is simply “… a secure, reinforced, well-stocked room where individuals can go to avoid the risks and potential dangers that may arise in other parts of a home.” When designing a “shelter room” consider the basics. Choose a room that has no windows, impervious to flooding and is as close to ground level as possible (Allstate suggests a garage or a main level room). Consider reinforcing the room with a solid core or steel door, as well as lining the walls with plywood or other materials (some suggest metal sheathing or Kevlar). The room should be stocked with supplies that include emergency food, water, and first aid. Don’t forget communication devices, which should include a battery operated radio. A more elaborate panic room may include close circuit video monitors, a toilet and/or shower, and even a separate ventilation system.

By Dan Krell
Copyright © 2015

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November 11, 2015October 20, 2020

The open house – still important when selling a home

Have you wondered how the open house tradition evolved? Earlier this year, Realtor.com detailed its history. Apparently, the first recorded open house was over one hundred years ago and described as “open for inspection.” The inspection was held over days or weeks allowing home buyers to inspect the home’s structure, layout, and features. It wasn’t until the 1950’s when the more familiar format and term “open house” took hold (Rachel Stults, A Brief History of Opening Our Homes to Total Strangers (aka the Open House); realtor.com; April 21^st, 2015).

Transformation of the open house can be gauged along with licensing, sales and cultural trends. If you were selling your home one hundred years ago, having your home open to buyers for a week or two made sense because it allowed prospects to see what they were getting. In a time before licensed home inspectors, the internet and virtual tours; a week of inspection was an important selling tool.

Home buyers are once again taking the time to “inspect” homes through multiple visits; usually initiated at the open house. The internet has empowered buyers to be proactive, giving them the means to search on their own; often visiting open houses without an agent. Seeing a home virtually is just the first step, visiting the home logically follows. The visits give buyers the ability to view the home with their own eyes (not the camera’s); as well as being able to make the all important emotional connection – deciding if they can live in the home.

Regardless of what you hear about the effectiveness of the open house, it’s still an important sales tool. And if you’re planning on having one or several, there are a few important points to keep in mind:

Advertise. You could say… “if you advertise they will come.” Most open house advertisements have moved away from the Sunday classified section to online real estate portals. I can tell you that when I ask visitors how they found out about the open house, the overwhelming answer is that they saw it advertised online. When setting up your online open house announcement, make sure that there is an enticing and brief description of the home to grab the buyer’s attention.

Make sure the advertised times for your open are accurate. More importantly, confirm your agent is at the home on time, if not early. A common faux-pas is not having anyone at the home when the open house is planned to begin. And unfortunately, a buyer left waiting to get in will more than not move on to the next open house.

Prepare. Organizing an open house offers the opportunity for you to focus on the details. No matter how much de-cluttering you have undertaken prior to listing your home, you can always tidy-up. Additionally, pay close attention to your home’s curb appeal, as it can be the difference between buyers entering the home or driving on.

Finally, make sure your agent is working the open house to sell your home. Agents know that many buyers visit open houses without an agent. And in the past, many agents advocated to have the opens not for the seller’s sake, but instead to build their buyer pipeline. Knowing this, the Maryland Real Estate Commission reminded listing agents a few years ago of their duty to their seller, clarifying their role at the open house.

By Dan Krell
Copyright © 2015

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