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February 18, 2019November 23, 2021

Home sale choices

Having a choice is good. For many, have having a choice represents freedom. For others, choice creates angst out of fear of making the wrong selection. Dr. Barry Schwartz wrote about this phenomenon in his book The Paradox of Choice. Dr. Schwartz describes that having too much choice can create negative well-being. This phenomenon also exists in real estate. There are many home sale choices!

Consumers have more home sale choices today than ever before. However, choosing the best option for you can be confusing. Making the wrong selection can result in remorse. How do you choose between a full-service agent, a limited service broker, à la carte broker, private placement broker, or sell by owner? How do you know decide among your home sale choices?

Recently published research further supports the value of hiring a full-service real estate agent. A study conducted by Rutherford, Rutherford, Springer, and Mohr (Limited Service Brokerage: Positive Broker Intermediation?; Journal of Real Estate Research: 2018, Vol. 40, No. 4, pp. 551-595) compared the outcome of using a limited service brokerage to a full service real estate agent. The results indicate that although the limited service brokerage time on market is similar to the full-service agent, your home sale price is likely to be less with a limited service broker.

Although there have been conflicting studies in the past, Rutherford’s recent study confirms that using a limited service brokerage is likely to sell your home for less. The authors concede and discuss other factors that may influence results, such as housing market conditions. Studies that reported positive outcomes of limited service brokerages may have occurred during the go-go market prior to 2007.

How much commission should you pay?

Conventional wisdom says that full service agents are “full-price” (whatever that is) and expensive. However, that’s no longer true. Many full service, high quality agents charge as much (or as little) as discount brokers. A 2015 study by Barwick & Pathak (The costs of free entry: an empirical study of real estate agents in Greater Boston; The RAND Journal of Economics; Vol 46, No. 1, Spring 2015, p.103–145) indicated that increased Realtor competition has forced average commissions to decrease over the last few decades. Of course, they found that the decreased commission structure of the full-service agent good for consumers and the housing market. They also concluded that decreased commissions would increase quality by decreasing entry into the industry for the wrong reasons.

To make better home sale choices, educate yourself.

Understand what services are available and what it costs. You should ask yourself if the services can meet your expectations of helping you through the process of selling your home? And, how will it impact your sale, time on market, and price?

Unfortunately, the National Association of Realtors doesn’t do enough to educate consumers about their choices when buying and selling a home. Including negotiating reduced commissions and buyer rebates. And I wouldn’t expect they will any time soon because of their mission statement (posted on their website nar.realtor): “The core purpose of the National Association of REALTORS® is to help its members become more profitable and successful.”

So how do you choose among your home sale choices? Be a savvy home seller. Don’t stick to “conventional wisdom.” Explore your needs and expectations. Investigate your choices and ask questions. Don’t fall for sales tactics. And don’t be afraid to negotiate commission.

Be a savvy home seller

Don’t stick to conventional wisdom
Explore your options. There is no “one size fits all” home sale plan.
Search for an agent that meets your needs and expectations

What are your plans? How fast of a sale do you expect? In what condition is your home? Interview several agents with different approaches to your home sale.
Ask Questions
Every agent has their own process. Some are hands on and responsive, while others hand off your sale to their “team” and you never see them again. Can you call anytime, or are their limited times? How will the agent meet your expectations?
Don’t fall for sales tactics
Many real estate agents spend lots of time and money learning sales tactics to get the listing. Many have developed polished presentations that are very convincing. Call the agent’s past clients to find out if they over promise and under deliver.
Negotiate listing commission
It’s a very competitive market. Although some agents won’t negotiate their commission, many will. Some will limit their services when they reduce their commission, while others offer full service.

Original published at https://dankrell.com/blog/2019/02/18/home-sale-choices

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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.

January 12, 2019July 23, 2019

Occam’s razor home selling

Occam's razor and selling a home — Staging is one of the four basics of home selling. (infographic from nar.realtor)

Many home owners are preparing to sell their homes this year. And in doing so, home sellers are looking for new and exciting ways to sell their homes fast and for top dollar. But the reality is that selling a home is not rocket science. There really isn’t a secret trick or approach to selling a home. Rather, it’s more like magic, where properly performed fundamental tasks can set the stage for a satisfying experience. If you don’t know how Occam’s razor (or what it is) can help you get the most from your home sale, pay close attention.

Unfortunately, it’s a human trait seek a complex solution to a simple question. In other words, applying Occam’s razer to your home sale can save you time and allow you to get out of your own way. Occam’s razer is a tool that is often used to figure out solutions and devise scientific theories. It has become popularized as the “keep it simple stupid” method. However, Susan Borowski’s history and explanation of Occam’s razor, written for the American Association for the Advancement of Science, gives it teeth (The Origin and Popular Use of Occam’s Razor; aaas.org; June 12, 2012). Borowski states, “Occam’s razor doesn’t necessarily go with the simplest theory, whether it’s right or wrong; it is not an example of simplicity for simplicity’s sake. It merely tries to cut through the clutter to find the best theory based on the best scientific principles and knowledge at the time.”

In other words, focus on the tried and true fundamentals of selling a home. Anything above and beyond may not necessarily help to sell the home faster or for more money, but could help make the process more enjoyable. That in mind, let’s consider these four basic concepts:

First, consider the condition of your home. Do you have deferred maintenance issues? Does your home need a makeover? Homes that get top dollar are “turnkey.” Many home buyers are willing to compete and pay more for recently upgraded and renovated homes. Selling a home with deferred maintenance or lacking recent updates can not only turn off many home buyers, but can encourage low-ball offers. A pre-listing home inspection can help you identify maintenance issues. Also, consider consulting with a design professional to help you understand which updates (if any) are necessary to help your home sale.

Next, work on the home’s presentation to give it a clean and spacious feel. Decluttering is one of those tasks that can be overwhelming, but it’s importance cannot be overstated. Decluttering will force you to decide which items to keep in the home. Additionally, staging your home can help balance space, furniture and décor. This can help home buyers envision living in the home.

Deciding on a list price is often a conundrum. Although enticing, don’t be seduced by the agent who tells you the highest sales price without understanding their rationale. The housing market can turn on a dime. If your home isn’t priced correctly, it can languish on the market. There are many aspects that go into deciding a price, so work with a respected seasoned agent to go through the market details and scenarios.

Finally, when the home is ready to list, how is it to be marketed? Today’s MLS listing syndication takes advantage of the fact that most home buyers actively search homes on the internet. Don’t rely on gimmicks that promise activity on your listing. A complete marketing plan will take into account the factors we discussed here, and apply strategies to attract motivated home buyers.

Original published at https://dankrell.com/blog/2019/01/12/occams-razor-home-selling/

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November 17, 2018April 25, 2019

Home sale renovations

According to the National Association of Realtors (nar.realtor), the average time a homeowner stays in their home is ten years. This is higher than the seven-year average prior to the great recession (but is less than the thirteen-year average immediately following the recession). Needless to say, many homeowners are approaching (or have exceeded) their ten-year stint, and are likely selling their home during the spring and will likely be doing home sale renovations.

Any home sale preparation in today’s housing market should include some home sale renovations. If you haven’t replaced the home’s systems (such as the roof or HVAC) while you lived in your home, there’s a good chance that they are approaching or have exceeded their average life expectancy.

Additionally, the décor and fixtures in your home are likely outdated. The home sellers who make the mistake of not updating or renovating before they list inevitably face home inspection issues. They ultimately find that the home takes longer to sell at a reduced price.

Let’s face it, remodeling can be expensive and overwhelming, especially when it’s for home sale renovations. According to the NAR’s 2017 Remodeling Impact Report, about $340 billion was spent on remodeling projects in 2015. Although a majority of homeowners would remodel their home themselves, thirty-five percent would prefer to move instead of remodeling their home.

The Report cited functionality and livability as the top reasons for home sale renovations. It’s a no-brainer that home buyers prefer homes that are functional, comfortable, and sustainable. Aesthetics is not enough for a home to be appealing to today’s home buyer, it has to fit their life style. Additionally, home buyers want efficient systems in their new homes that can help save on utility costs.

Home sale renovations should focus on functionality and livability

What projects will get buyers who will pay top dollar into your home? It should be no surprise that the number one interior project, listed by the 2017 Remodeling Impact Report, is a complete kitchen renovation. Other essential interior projects include renovating bathrooms, installing new wood flooring, creating a new master suite, replacing the HVAC system, and finishing a basement or attic.

It also shouldn’t be a surprise that the Report listed replacing the roof as the top exterior project. Other exterior projects in high demand include new windows, new garage door, new siding, and installing a new front door.

If you want to add value to your home, even if it’s not for home sale renovations, check the 2018 Cost vs. Value report (costvsvalue.com). The report can give you insight to which remodeling projects are the most popular, and estimates how much of the cost you can potentially reclaim when you sell your home.

There’s no doubt that renovating your home can be expensive. Although the costs of home sale renovations can tempt you to cut corners, don’t. Cutting corners on renovation projects can actually cost you more. You may have to repair, or even re-do the project if not finished adequately. Home buyers are savvy, and can spot low quality materials and poor workmanship.

Also, make sure to get permits when required. If the home buyer doesn’t ask you, the home inspector will likely recommend that the home buyer check for permits.

Although many homeowners don’t mind a DIY project, many hire home improvement professionals. When hiring home improvement professionals, check with the Maryland Home Improvement Commission (dllr.state.md.us/license/mhic) to ensure they are licensed contractors. You should also ask for proof of their insurance, including Workman’s Comp insurance, in case there is an accident on your property while completing the project.

If you hire a contractor who will accept payment when the house sells, read your contract carefully and thoroughly. Do your due diligence. There may be provisions in your contract that you may not be aware of, such as added costs, charging interest, and setting/lowering the sale price.

Original article is published at https://dankrell.com/blog/2018/11/17/home-sale-renovations

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November 1, 2018July 21, 2019

Buyer and seller attitudes about real estate market

Economists are officially pessimistic about the housing market. This is the general sentiment following another month of declining home sales. Experts are pointing to a number of factors for the slowdown, including increased interest rates and housing affordability. But what are home buyer and seller attitudes about real estate? The National Association of Realtors’ most recent Housing Opportunities and Market Experience survey hints at a busy spring!

Economic attitudes about real estate market

An October 19^th NAR news release (nar.realtor) reported that September’s home sales were the weakest in several years. The nationwide trend affected all regions. NAR chief economist Lawrence Yun stated:

“This is the lowest existing home sales level since November 2015…A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”

First-time-home-buyers are finding the housing market increasingly challenging. This segment’s participation needs to be strong for a healthy home sales. September’s low thirty-two percent first-time-home-buyer participation is attributed to rising interest rates and home prices.

But low housing inventory is also an issue. September’s housing inventory decreased to 1.88 million existing homes available for sale (from the 1.91 available during the previous month). NAR President Elizabeth Mendenhall stated:

“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”

Economists at Fannie Mae believe that the housing market will continue to disappoint. In an October 18^th press release (fanniemae.com) Fannie Mae Chief Economist Doug Duncan stated:

“Our expectations for housing have become more pessimistic. Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”

But what do economists really know about the future? Let’s hear it directly from the consumer!

Home buyer and seller attitudes about real estate

NAR’s Housing Opportunities and Market Experience survey tracks opinions from renters and homeowners about homeownership, economy, and the housing market. The release of their third quarter 2018 survey indicates that sixty-three percent of respondents strongly or moderately believe that it’s a good time to buy a home. Although optimism is somewhat diminished from the second quarter’s survey, there continues to be a positive sentiment about buying a home. The survey’s positive sentiment continues even though a majority of respondents believed that home prices will continue to increase in the immediate six months. Additionally, a majority of respondents believe that qualifying for a mortgage may be an obstacle to a home purchase.

The survey also concurs with other metrics indicating high consumer sentiment for the economy. In light of the recent slide in home sales, NAR’s recent Housing Opportunities and Market Experience survey reveals “a near-record high of sixty percent of households believe that the economy is improving.” Adding to the strong sentiment is the survey’s increased monthly Personal Financial Outlook Index, which indicates that respondents believe that their financial situation will be better in six months.

The survey also indicates a record high of home sellers who believe it is a good time to sell a home. But given the seasonal decline of housing inventory, it is likely this will translate to a surge of home listings in the spring. The added inventory combined with high consumer sentiment will boost the housing market. So sayeth the consumer.

By Dan Krell
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/11/01/attitudes-real-estate-market/

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October 3, 2018April 26, 2019

Winter home sale profits

If you are planning to sell next spring, don’t wait! Consider a winter home sale. A National Association of Realtors survey indicates that a surge of home sale inventory is on the horizon. The NAR third quarter Housing Opportunities and Market Experience survey indicated that 77 percent of Americans believe it to be a good time to sell (Homeowners Ready to Sell in the Third Quarter of 2018, says Realtor Survey; September 25, 2018; nar.realtor)! This happens to be a record high for the survey. NAR Chief Economist Lawrence Yun believes that the strong sentiment is due to recent home price appreciation. He stated:

“Though the vast majority of consumers believe home prices will continue to increase or hold steady, they understand the days of easy, fast gains could be coming to an end. Therefore, more are indicating that it is a good time to sell, which is a healthy shift in the market.“

A winter home sale has less seller competition

The housing market conditions are such that we are on the verge of experiencing a déjà vu. Two years ago, winter home sales were fueled by rising mortgage interest rates, low inventory and pent up demand. As I predicted in a November 2016 column, rising interest rates and pent up demand were credited for the almost 10 percent jump in home sales by the end of January 2017! The massive jump in home sales occurred during the deep winter, when existing home sale inventory dropped about one-third of the summer inventory. Sellers who had a winter home sale during 2016-17 were greeted by eager home buyers and faced little competition.

Fast forward to 2018. Yes, admittedly, home sales have slightly dropped off during summer. But many are attributing this phenomenon to the lack of inventory. Consider that Montgomery County existing single-family home sale inventory was almost 20 percent lower than that of the summer of 2016. Although summer home sales dropped off, indicators point to a hot winter housing market. Moderating home prices, combined with pent up buyer demand and a strong economy could make a winter home sale ideal.

It’s clear that home buyers facing rising interest rates have taken a pause. But as rates approach 5 percent, positive economic sentiment is lessening the shock and many are planning to buy before rates creep higher. Giving perspective to the mortgage rate hysteria, current mortgage rates are about the same as they were during 2014. Additionally, the last time we saw mortgage rates above 5 percent was in 2010. Rates exceeded 6 percent when home sales broke records during the market buildup of 2006.

Current sentiment is good for a winter home sale

Another indicator that a winter home sale may be primed is the most recent Fannie Mae Home Purchase Sentiment Index (No Thanks to Housing, Home Purchase Sentiment Edges Up; fanniemae.com; August 2018). Home buyer sentiment increased the first time since May. Economists attribute this uptick to a strong economy along with the awareness of the recent market slowdown. The job and income related index components increased significantly indicating that buyers feel financially more secure with a home purchase. There is also a belief that home prices may moderate due to the summer sales slump.

Winter home sales tend to have less competition and serious home buyers. As I said in 2016, don’t wait until spring to sell your home! If you wait until spring to list your home, you’ll be faced with a profusion of seller competition.

Original located at https://dankrell.com/blog/2018/10/03/winter-home-sale-profits/

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