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January 12, 2017January 13, 2017

Best home sale?

As the housing market strengthens, consumer confidence in real estate increases. Along with a stronger home sale market comes the increase of for-sale-by-owners (FSBO). The obvious upside to selling a home on your own is to increase your net. And a study conducted in 2009 may support your FSBO yearnings. But is FSBO the best home sale?

Research conducted by Hendel, Nevo, and Ortalo-Magné (2009; The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com; American Economic Review; 99:1878-98) found that homes that sold on a FSBO website sold for as much as homes that were listed in the MLS. However, homes that sold on the MLS did so with significantly fewer days on market. The authors also found that a significantly higher proportion of home buyers bought homes listed on the MLS. The research concluded that “FSBO attracts a particular type of seller…” A FSBO seller is very patient to wait for someone to pay for their higher priced home.

The research conclusion about sale price is contrary to annual surveys reported by the National Association of Realtors. For example, the National Association of Realtor’s 2015 Profile of Home Buyers and Sellers reported that the average home sale price for a FSBO was $185,000, while the average home sale price for an agent assisted home sale was $240,000. Of course, the 2009 research indicated that homes that did not sell on the FSBO website were promptly sold on the MLS. Besides being limited to a specific market, excluding “failed” FSBO sales from their data set could have skewed results and could explain 2009 study’s conclusion about sale prices. From NAR’s Field Guide to Quick Real Estate Statistics:

For Sale By Owner (FSBO) Statistics

FSBOs accounted for 8% of home sales in 2015. The typical FSBO home sold for $185,000 compared to $240,000 for agent-assisted home sales.

Most difficult tasks for FSBO sellers:

Getting the right price: 18%

Preparing/fixing up home for sale: 13%

Understanding and performing paperwork: 12%

Selling within the planned length of time: 3%

Having enough time to devote to all aspects of the sale: 3%

Going FSBO sounds simple and maybe the best home sale; but going it alone is not for everyone. Selling a home is much more than putting a sign in the yard – especially if you are demanding top dollar. Take your efforts up a notch to increase the probability of realizing your sales goal. Among the many tasks that are essential for a successful home sale, consider a basic marketing plan. Attract more buyers with professional high quality photos. Prepare for buyers to visit your home by decluttering and making minor repairs. You should also have a contract ready in case there is no buyer agent. Even though you are selling FSBO, you still have to comply with federal, state, and local disclosure laws. Be prepared for the details of the transaction, which include: negotiating home inspection repairs; providing sale comps to appraiser; dealing with the buyer’s lender and title company.

If going FSBO is intimidating, consider hiring a real estate agent that offers à-la-carte services. The agent can assist you in many areas of your sale, only charging you for the pieces you need. You can even pay a flat fee for a MLS placement of your sale.

If you’re like many FSBO’s, you’ll realize the value of a Realtor. Real estate agents are housing and marketing experts that can assist you in setting a realistic sale price. Besides freeing up your time, experienced agents can facilitate offers and are expert negotiators. They know of latest home sale trends and are aware of any new legislation that can affect your sale.

The best home sale

You may find selling FSBO attractive. But selling a home is in the details that are executed throughout the transaction. The best home sale may actually be through a Realtor. The research supports the notion that hiring a Realtor can provide a more successful and satisfying home sale than doing it FSBO.

As I wrote about FSBO’s in 2005:

How much money can you realistically save? …there as been a trend of negotiated commissions, so actual savings for a FSBO have been reduced….Additionally, FSBO’s are contracting and paying commission with more Realtors and their homebuyers in this environment of limited home inventory. In the end, the FSBO’s savings from Realtor commissions may be marginal.

… there are some real negative aspects of selling your home FSBO, such as time, expense, and contractual obligations.

How much is your time worth? Selling a home requires the application of time to tasks. Among the many tasks of selling a home, the top things that a FSBO may do include (and is not limited to) preparing the home for the open house, contacting the paper to advertise, putting up signs, meeting potential homebuyers, and negotiating contracts. The time quickly adds up.

Selling your home FSBO is supposed to save you money right? Well, there is a bit of expense that is necessary. A FSBO must have signs in the yard, as well as directionals (the small arrow signs) to point homebuyers in your direction. Additionally, you might consider paying the local paper for advertising, as well as paying for an internet advertisement (although there are many websites that will allow you to post for free). Another expense may be to have your attorney to prepare and review the contract…. It seems that the expenses also quickly add up.

…even FSBO’s are responsible to adhere to certain federal and local laws pertaining to the sale of real estate (i.e., equal housing, lead paint, Maryland disclaimer-disclosure, etc). This is the one area that FSBO’s get themselves in trouble because of the lack of knowledge and expertise. There is an increased liability potential.

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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.

November 22, 2016October 20, 2020

A hot winter housing market

Winter is not usually a time of year when you would think of selling your home. After all, everyone gets into holiday and hibernation mode. Between Thanksgiving and New Year’s Day (during the winter housing market), home sale inventory is usually trimmed by an average of 50 percent and contract activity is significantly reduced.

But this winter will be different. Rising interest rates and pent up demand could make the housing market very active this winter.

Consider that mortgage interest rates are on their way up. Freddie Mac (freddiemac.com) reported last week about a mortgage interest “spike” that can get fence-sitters to jump into the winter housing market. The rate for the 30-year-fixed-rate mortgage averaged 3.94 percent, which jumped from the prior week’s average of 3.57 percent. On the face of it, the increase doesn’t seem significant. But the difference is about $70 per month on a $300,000 mortgage.

Last week’s interest rate surge could be the beginning of interest rate increases we’ve been anticipating (for five years). Speculation is that the bond market is anticipating and pricing in a Fed interest rate hike at next month’s Open Market Committee meeting. Of course, the next sixty days could be a lead up to new mortgage rate expectations, which could exceed 4.5 percent by the end of next year.

Historically low interest rates for a 30-year-fixed-rate mortgage have become part of our lives. Upward movement will be met with hyperbole and excitement from the media, claiming reduced home sales and a faltering real estate market. However, let’s put it in perspective. Mortgage rates averaged above 4 percent throughout 2014. The last time we had an average mortgage rate above 5 percent was 2010. In fact, the average mortgage rate at the height of the go-go market during 2006 was above 6 percent.

What does it mean for you if you’re planning a sale? Don’t wait until spring! Consider selling during the winter housing market. You won’t have much competition; and serious home buyers, who are sensitive to interest rates, will be looking through the holidays and winter.

If you decide to sell during the holidays and the winter housing market, make sure your home is ready. Decluttering is the most important aspect of home preparation. However, winter decluttering may be more difficult because of the colder weather and our desire to slow down during these months. Besides our inclination to “nest,” it’s easy to accumulate items in the house that make us cozy and comfortable. But winter clutter can be minimized by organization and a daily straightening-up for incoming buyers.

Check your home’s systems. Have licensed professionals inspect your furnace and roof. Besides keeping the house warm and dry for buyers who visit, checking these systems can prevent surprises when a home inspection is performed.

After a weather event, clear your walkways and driveway of ice and snow. Besides making it easier for home buyers to visit your home, it lessens the possibility of someone falling and getting hurt.

If your home is vacant, have a licensed professional winterize it. Winterizing your home can reduce the risk of bursting pipes and damaging plumbing fixtures. If you are out of town, have a trusted person check on the home regularly (even if you are listed with a real estate agent). Your “stand-in” should also be available to take care of any house related issues that occur in your absence during the winter housing market.

By Dan Krell
Copyright © 2016

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September 10, 2016July 12, 2019

Home price impact of power lines and cell towers

Anyone who has bought or rented a home has been told about lead paint, radon, and maybe even asbestos, as well as other potential hazards in the home. But what about potential hazards brought about by technology, how do they affect home prices? Many shirk away from homes that are close to power lines or cell towers because of health concerns; while some are repelled by the aesthetics. Regardless, there’s probably a home price impact when in close proximity to power lines and cell towers.

What is considered to be necessary for modern living, power lines and cell towers are fundamental to our lives. And although many are wary of the health effects from living nearby these devices; they will still have wi-fi, and a microwave oven in their home, and they probably also use a cell phone. All of which emit similar types of radiation.

According to the American Cancer Society (cancer.org), the type of radiation emitted from power lines and cell towers are non-ionizing radiation, like the electronic devices mentioned above. Non-ionizing radiation does not remove particles from atoms, nor does it directly change DNA. Power lines emit ELF (extremely low frequency radiation), which is a lower energy radiation than visible light and infrared.

Cell towers, on the other hand, emit radiofrequency (RF) radiation that is between FM and microwaves. Although very high levels of RF can be damaging to body tissue, the American Cancer Society website states that cell phones and towers emit RF at much lower levels (of course, one should not stand next to a cell tower). More about power lines, cell towers, and health concerns can be obtained from the American Cancer Society website.

What is the home price impact when you sell your home?

Findings of a 2005 study conducted by Bond & Wang (The Impact of Cell Phone Towers on House Prices in Residential Neighborhoods. The Appraisal Journal. Summer 2005.) indicated that about 40% of the control group were concerned about health effects of living in close proximity to a cell tower; which compared to 13% of respondents already living nearby a cell tower. Nevertheless, both groups were highly concerned about future property values: 38% of the control group would lower asking price by as much as 20%; while almost two-thirds of the respondents living close to a cell tower would lower the home price by as much as 19%. Certainly you can see that there are concerns that may have a home price impact.

Maybe a home price impact is minimal. Roddewig & Brigden’s review of the research into property values surrounding power lines was enlightening (2014. Power Lines and Property Prices. Real Estate Issues, 39(2),15-33.). They stated that the appraisal industry does not automatically reduce prices just because of a property’s proximity to a power line, even though there has been history of concern over the environmental impacts. And caution home owners, buyers, and real estate professionals to not substitute opinion for analyses of actual home prices.

They concluded that if there is a home price impact, it is a small reduction. They explained that “the real estate appraisal profession has been studying those prices since the 1960s. Some of the many published studies have found adverse impacts to property prices and values while others have found no impact or statistically insignificant impacts despite media attention given possible health effects of exposure to EMFs.”

Roddewig & Brigden also found that the long history of research suggests that negative impacts on property values from power lines can be limited by proper “land use planning and subdivision layout procedures.”

Original published at https://dankrell.com/blog/2016/09/10/home-prices-power-lines-cell-towers/

By Dan Krell
Copyright © 2016

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September 3, 2016July 18, 2019

Think resale when home buying

A common question, especially among savvy first time home buyers, is what will the resale value be like when they sell? Of course they are not asking for a specific price, but rather they question if the future home buyer will find the home just as desirable as they do. In other words, think resale when home buying.

That is a good question, since your home is one of the largest investments you’ll ever make; and you want to make sure you’re making a sound investment. Some things to keep in mind when buying a home and keeping an eye to the resale includes: focusing on current desirability; keeping the home complimentary to the neighborhood; considering added value; and not going overboard with updates and upgrades.

Ask yourself what attracted you to the home you’re purchasing and you’ll have a number of items that probably will make it desirable to the future home buyer. Most likely at the top of the list is the location. “Location, location, location” may be cliché, but it holds true. Items such as the home’s accessibility to metro and major commuter routes are important, along with its proximity to neighborhood and local amenities. Other top attractors to the home possibly include the living space and back yard.

Consider the future plans for the area, as it could affect the home’s resale. You can view the master plan for the county and specific localities on the Maryland-National Capital Park and Planning Commission’s website (montgomeryplanning.org). You can decide if the home you’re about to buy will be impacted by some future development or zoning change.

Another resale factor is how the home compares to its neighborhood cohorts. Is the home similar or does it obviously different? Has the current owner modified the existing living space in any way? Have they converted a three-bedroom home into a two-bedroom home; or similarly, added a bedroom by taking space from an existing bedroom or living area? Such modifications can make the home feel cramped and smaller and affect future resale.

Think about how the home seller updated and upgraded the home. Although not all updates add value, many will increase the home’s appeal to buyers. Keep an eye on the kitchen, bathrooms, and flooring, as home buyers typically consider these as high cost upgrades and can affect resale value. Ask the seller if they hired licensed contractors for major renovations and additions. Also, check for appropriate permits, and ask for plans and invoices.

Additionally, do your due diligence when it comes to “green” upgrades. Although the home seller may have considered the investment into green upgrades money saving, they are not always reliable and can be expensive to repair. And it may be all the rage among home owners, solar panels may come with lease payments and/or replacement costs with little or no net savings; so it’s a good idea to ask for associated lease agreements and utility bills, as well as replacement and maintenance costs.

When it comes time for you to sell, don’t go overboard when with updates and upgrades. Contrary to belief, doing too much to the home could have a minimal return on your investment, or even decrease the value. Updates and upgrades should be comparable to similar homes in the price range to maximize return on your investment. Also, steer clear from short lived trendy designs. Experts recommend to focus on function and substance when making upgrades.

By Dan Krell
Copyright © 2016

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August 26, 2016November 23, 2021

Radon is everywhere – testing is not

Montgomery County MD is implementing two controversial bills. New county recordation tax rates. And – Radon is everywhere, but new law falls short to protect county residents.

Effective September 1^st, increased recordation tax will be collected in Montgomery County. The rate for the first $500,000 will be $8.90 per $1,000. The rate for any amount exceeding $500,000 will be $13.50 per $1,000. The individual primary residence exemption is also increased from $50,000 to $100,000. Read more about the controversy here.

Recordation tax is an excise tax that is collected for the “privilege” of recording an instrument in the land records. Of course, transfer tax is collected when a home is sold; and is also collected when a mortgage is refinanced.

Effective October 1^st radon testing is compulsory for homes that are sold in Montgomery County MD (however, the law lists exemptions). The seller must test, or allow the buyer to test radon levels in the home. The radon test must not be older than one year from the closing date. Both the buyer and seller must receive the radon report. If radon levels are above the EPA recommended action level of 4 picocuries per liter, then an estimate must be obtained from a licensed contractor to reduce level to 2 picocuries per liter. Read more about the controversy here.

Radon is a toxic, radioactive gas that is formed by the natural breakdown of radium. Radon seeks its way to the surface as an odorless, colorless, and tasteless gas. A 1999 National Academy of Sciences report (The Biological Effects of Ionizing Radiation, The Health Effects to Indoor Radon) indicated that radon causes up to 22,000 lung cancer deaths per year. As there are no immediate symptoms of radon exposure, the only way to know if a building has high levels of this gas is to test for it.

Radon is everywhere, but testing is not. Although the radon testing law is well intentioned, it misses the mark on comprehensive radon testing, education and awareness.

First, the law may unintentionally provide a false sense of security to home buyers. By requiring the test by the sale, it suggests to home buyers that the initial radon test (when the home is purchased) is the only test needed. In fact, the EPA recommends radon testing every two years. Homes with low radon levels may change over time to have increased levels, and vice versa. Additionally, the self-testing conducted by home owners may not be accurate (or worse, may be intentionally erroneous). Consequentially, home buyers should hire a qualified expert to test the home regardless of home seller provided test results.

Second, it must be asked as to why only require testing for single family home sales? Radon is everywhere. The radon law should have been more comprehensive to also include radon testing every two years for single family rental units, schools, and public buildings.

And finally, the law should have provided for consumer education much like the EPA lead paint pamphlet (Protect Your Family From Lead In Your Home) that is required for home sales and rentals. Likewise, why not provide to consumers the EPA pamphlet “Home Buyer’s and Seller’s Guide to Radon” (epa.gov/sites/production/files/2015-05/documents/hmbuygud.pdf)?

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