home seller Archives - Page 14 of 31 - Real Estate News and Commentary

January 6, 2017November 23, 2021

Greedy home seller tips

Don't be a greedy home seller — Pricing Strategy for a Home Sale (infographic from forsalebyowner.com)

When there is a buzz about home sellers being greedy, you know home sales are doing well. So, not surprisingly, along with last year’s record home sales came the reports of greedy home sellers. Are you a greedy home seller? Or are you adjusting to a market where home prices are increasing?

Greed has developed a bad rap. Surely there is an evolutionary basis for greed. Many believe that early hominids promoted personal and group survival by being “greedy” (although disputed by some). Those who hoarded food, so as to have more than enough, lived through difficult winters and droughts. During times of financial prosperity, greed is looked upon favorably. However, in the aftermath of a recession, greed is thought of as the basis for fiscal calamity. Immortalized in Gordon Geckko’s famous “greed is good” speech in the 1987 movie Wall Street, “greed” is a cinematic vehicle to show the fine line between a healthy desire to prosper and a corrupt drive to have more than enough.

Avoid being viewed as a greedy home seller by creating a realistic pricing strategy. Creating a pricing strategy is an art and a science. When selling a home, you have to determine the list price. There are many factors to consider besides recent neighborhood sales, such as condition of your home, sales trends, mortgage interest rates, economic trends, etc. Like other home sellers, you fall into a conundrum. If you price your home too high, then it will limit potential home buyers who visit. However, if you price your home too low to increase home buyer interest, you may not get the price you want.

Contrary to some assertions that a home’s list price doesn’t play a role in the sale, there is evidence to suggest that it really does matter. Lu Han and William C. Strange determined that a lower list price does increase home buyer visits – but only to a point (What is the Role of the Asking Price for a House? University of Toronto, Rotman School of Management; 2012). They concluded that there is a point at which the home price is perceived to attract too much buyer competition, which may turn off other home buyers. Furthermore, their data shows that there is a negative relationship between a list price and the number of home buyers: meaning that the higher the list price relative to the neighborhood, the lower number of home buyer visits, and vice-versa.

If you fear being a greedy home seller by asking for a high price for your home, there is research to suggest that you’ll let go of the greed in order to make a deal. A 2013 study by Nuno T. Magessi and Luis Antunes looked at how the emotions of fear and greed compete internally (Agent’s fear monitors the spread of greed in a social network; Proceedings of the 11th European Workshop on Multi‐Agent Systems EUMAS, 12-13). They concluded that greed is mitigated by the fear of loss within the confines of a social network. When applied to a home sale, the fear of not selling a home competes with the impulse to hold out for the high price. Deducing further, there is a need to fit within one’s social network by trying to sell a home for the most money, and yet avoid the stigma of a failed home sale.

Don’t be a greedy home seller. RealtorMag described three common home seller mistakes in a 2015 post (3 Mistakes Sellers Often Make; realtormag.realtor.org; April 12, 2015). Included were “Not being honest with the home’s history,” “Not making a better home presentation,” and “Being unrealistic about the home’s value.” About unrealistic home value, it was said:

“…Despite tight inventories of homes for-sale in many markets, sellers still need to be careful not to get too greedy with their list price, say real estate professionals…Home owners tend to get a much lower price when they overprice a home at the onset and then drop the price several times. The longer the home lingers on a market, the more likely it will receive a deeper discount…”

If your home doesn’t sell, you must examine your pricing strategy. Was the price realistic, or were you too greedy?

Original published at https://dankrell.com/blog/2017/01/06/greedy-home-seller/

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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 4, 2016November 4, 2016

35 years of home buying changes

Years of home buying changes? (infographic from keepingcurrentmatters.com)

This week’s release of the National Association of Realtors® Annual Profile of Home Buyers and Sellers marks the 35^th year of NAR’s analysis and description of home buyer and seller behaviors and attitudes. You may not remember what it was like in 1981, but the country was coming out of a deep recession. The economy was still scarred with double-digit unemployment, inflation and interest rates. The 35^th issue makes us think about home buying changes over the years.

According to the US Census Bureau (census.gov), the median price for a new home in 1981 was $68,900, while in 2010 the average new home price was $221,800. Freddie Mac’s (freddiemac.com) data indicates that the average mortgage interest rate in 1981 was 16.63 percent, and 4.69 percent in 2010. Surprisingly, the cost of housing (when financing 100 percent of the sale price) has only increased about 17.5 percent from 1981 to 2010!

People want their space and privacy. According to the American Enterprise Institute (aei.org), the median square feet per person in a home in 1981 was about 550sf, while in 2014 it was 987sf. This expansion in personal space was expressed in the home size. The median size of a home in 1981 1,550sf, while 2010 it was 2,169sf (according to the Census Bureau). Also consider that the typical home of 1981 only had one and a half bathrooms, and the expectation today is that a home should have at least two and a half bathrooms.

An October 18^th news release from the NAR (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) provided some insight into how the housing market has changed through the years. One noticeable factor is the reduced number of first time home buyers entering the market due to underemployment, student debt, lack of down payment, or delaying family formation. Last year’s percentage of first time home buyers dropped the lowest rate since 1987; and “according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds is currently at 34.1 percent, the lowest level in records dating back to 1994.”

It’s becoming apparent that real estate agents are not being replaced by the internet. Although a majority of home buyers use the internet to assist them with the home buying process, the NAR reported that 90 percent of home buyers and sellers surveyed for this year’s profile worked with a real estate agent. As a result, for-sale-by-owner transactions were at the lowest level ever (FSBO transactions peaked during 2003-2004).

The home buying process now takes longer than it used to. Putting aside recent changes to the mortgage process, the 2016 Home Buyer and Seller Profile brings attention to the amount of time a home buyer needs to find a home. According to the NAR, the average time to find a home was relatively unchanged from the 1980’s to about 2007; which about seven to eight weeks. The duration of the home search peaked at twelve weeks from 2009 to 2013. However, since then the average time needed to find a home is about ten weeks. The increased search time is due to a number of factors. Brisk sales combined with periods of low inventory has not provided home buyers with much of a choice from which to select. Not to mention an unprecedented amount of available information that has created a savvy home buyer.

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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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July 29, 2016July 12, 2019

Home selling don’ts

When preparing for a home sale, the devil is in the detail. You probably already know about the “do’s,” de-cluttering, curb-appeal, staging, and making necessary repairs. But here are a few home selling “don’ts” that often trap home sellers into making mistakes:

Home selling is not about you. Don’t make a statement. Now is not the time to be bold with renovations and staging; but rather stay focused on getting your home sold. Stay away from trendy features, and bold designs. Although bright and dramatic colors seem tempting, stick with neutral color schemes. Besides making rooms feel awkward, making a statement with trendy fixtures and bold colors may turn off home buyers. Bold style statements make home buyers fixate on the style, rather the space and potential of each room.

Home selling is not about being cheap. Don’t hire a contractor because they are the cheapest. When it comes to home repair, the idiom “you get what you pay for” typically holds true. Home buyers have a discerning eye and can spot poor workmanship. Don’t be tempted to hire the unlicensed handyman to save a few dollars either; you and the future buyers won’t have recourse if there is a problem with the repair. Don’t also be talked into a cheap renovation that is meant to appear as a luxury amenity. Poor workmanship, sloppy installation, and/or inferior materials will turn away many home buyers.

Home selling is not about being amateur. Don’t assume all house painters are alike. A good paint job can make a room look terrific and create positive emotions; while a poor paint job makes a room appear shabby and unstylish. And even though you may be tempted to save a few dollars, don’t paint your home on your own – hire a professional. The amateur paint job appears sloppy and has the telltale uneven edges, painted over light switches and receptacle covers, and painted shut windows.

Home selling is not about guessing. Don’t assume your prepping will bring you a big return on your investment. If you deferred regular maintenance, you may have to make repairs regardless of the return. Likewise, if your home is outdated, you may consider making some updates to lure home buyers. Before getting in too deep on a prepping project, have a budget in mind and do a cost benefit analysis.

Consider checking out this year’s Remodeling Magazine’s Cost vs. Value Report (costvsvalue.com) to find out what updates and renovations make sense and which ones can bring you the biggest returns. Although most renovations won’t bring you a dollar-for-dollar return, they may add to the overall aesthetic and make your home more appealing. However, some renovations may not only lose money but can also blemish your otherwise beautiful home. For example, adding a backup generator may seem as if it is a much needed amenity, however, the report indicated that for the Washington DC region, you would only recoup about 57.5% of the cost. And it is possible that the home buyer will remove it because of it was poorly installed and too noisy.

The purpose of preparing your home before a sale is to not only to compel home buyers to make a top-dollar offer on your home, but to also get it sold quickly. Consider planning out how you will prepare your home. Do the research. Don’t fall into the traps that ensnare many home sellers because it can cost you. You may not only have to correct poor workmanship, but your negotiated sale price may be lower than expected.

By Dan Krell
Copyright © 2016

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July 15, 2016

About friendly advice

Home buyers and sellers often seek advice from others. Even when they’re working with a professional who provides expert guidance. You might think it’s good to get validation from others on your real estate decisions. However, a Vancouver consumer study suggests that following friendly advice may be a bad idea (Friends give bad advice; The Sun, 4/14/2011, p29).

Research of consumer psychology and behavior have time and again found that consumers want to be correct in their choices. They want to feel good about their decisions. They want to believe that their purchases are the best, and the professionals they choose are tops in their field. Consumers are known to behave irrationally to prevent the cognitive dissonance that occurs when they are confronted with conflicting thoughts about their choices. And that means they often make poor decisions.

Mintel’s American Lifestyles 2015 report indicated that 69% of those surveyed sought out product and service reviews before purchasing. While 57% of those surveyed sought out recommendations from social media. Given the finding, it is suggested that there may be emphasis for communal thinking over “individual preference.” However, about 38% of those surveyed considered independent review websites as “trustworthy;” while 34% found them useful. But, 31% found social media contacts trustworthy; while 25% found them useful (Seven in 10 Americans seek out opinions before making purchases; mintel.com; 6/3/2015).

Seeking out friendly advice is part of herding behavior, which has been found to be a part of our everyday decision making process. A groundbreaking study of home owners’ decisions to walk away from their mortgages (strategic default) during the great recession revealed how people seek and give advice (Luchtenberg & Seiler (2013). The effect of exogenous information signal strength on herding. Review of Behavioral Finance, 5(2),153-174). The study concluded that people tend to seek advice when they feel that their choice is not in agreement with others. While advice was readily given by those who felt their choices were believed to be the consensus.

Buying and selling a home may not always feel as if it is a rational process. And you may think it logical to seek friendly advice. However, indiscriminately following advice may not be the best practice because all real estate transactions are different. Each transaction presents a different set of variables such as personalities, market conditions, contract terms, etc.

Given the research, more often than not, you are doomed to follow the advice of a friend or family member – even when confronted with the evidence that the advice is ill advised. You can infer from the Vancouver study mentioned earlier that friends and family feel “pressured” to give you advice on your real estate transaction because they want to be helpful. Furthermore, herding research suggests that you probably give emphasis to advice from friends and family because following their advice will likely make you feel you are “doing the right thing,” as well as increase your acceptance by them.

Regardless of your rationale, your real estate decisions are most likely based in psycho-emotional needs and/or fears (such as status, acceptance, and avoidance of failure). Breaking away from the herd is difficult. Improve your decisions and make your transaction successful by pursuing balanced information and becoming aware of your motivations.

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