Selling to a real estate investor

Needless to say, real estate investing has become popular again. Selling to a real estate investor was even embraced by tech companies that are called “iBuyers.” To get your attention, real estate investors post road signs, send direct mail, and inundate social media with a promise of getting cash for your home. But real estate investors are not all the same, and their intentions are not always fair: which begs the question “Should you sell your home directly to a real estate investor?”

Selling to a real estate investor

selling to a real estate investor
Home Values

When most people think of a real estate investor, they think of someone who will renovate and resale the home. This is commonly called “flipping.”  However, another type of flipping has become popular, where the investor, also known as a “wholesaler,” flips their purchase contract to another buyer (usually at a huge profit for them). Also, there are investors who buy and then keep the property to rent.

What’s the catch?

The typical lure from the real estate investor is a quick sale. Although many can close quickly, others not so much. The reality is that real estate investors offer the quick sale in lieu of a huge reduction in their sale price. After all, they never promised you top dollar. The truth remains that real estate investors pay a fraction of what you can likely sell your home on the MLS (and the irony is that the MLS buyer is likely to be to an investor).

What about the promise of cash? Although investors offer cash for your home, you won’t literally be getting cash at settlement. Rather, just like any real estate transaction, you’ll either get a check from the title company or a wire to your bank.

Many real estate investors tout “no Realtor fees.” Sounds good, right? Not so fast. Many real estate investors charge premiums and/or miscellaneous fees. Some make you pay their closing costs.  In truth, your unexpected fees can exceed the average agent commission.

Real estate investors also promise “no contingencies.” However, many investors use a “study period” in lieu of specific contingencies for various reasons, including obtaining the funds to close. Wholesalers use the study period to find a “buyer” (usually another investor) for their contract (you may not have assurance that the assigned buyer has the ability to complete the purchase).

Due diligence

Before you sell directly to the real estate investor, consider your goals with the pros and cons. Due diligence on your part will help you obtain your goals. Don’t be afraid to approach a local real estate agent to understand the value of your home. Compare an investor sale to the MLS sale (which is typically getting your money a few weeks sooner for a fraction of the value).  You should consult with an attorney to review the purchase contract to ensure you understand what you’re signing.

By Dan Krell
Copyright © 2022

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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.

Home Selling during the Holidays

Home sales have been in a slump for several months. But the lackluster volume of homes being sold isn’t what most people are making of it. Of course, rising interest rates have curtailed some home buyers’ plans, but the historically low supply of homes for sale continues to drive the market.  If you’re home selling during the holidays, consider that supply will continue to dwindle as many homes will be removed from market.

Home Selling during the Holidays
Home Sale Prices

What does that mean if you’re a motivated home seller? Although the housing market normally slows down during the holiday season, it’s not entirely closed. Motivated home buyers are always looking for the perfect home. And with limited home seller competition, you could potentially do well with your sale.  The only obstacle to your sale would be severe winter weather.

Things to consider when selling a home during the holiday season:

If you’re selling your primary residence, consider how and when your home will be available for home buyer visits. Be proactive with your communication to your listing agent so there is no confusion about showing times. The idiom “strike while the iron is hot” holds true. If you make your home available to show, stick to the schedule. Buyers will get frustrated and turned off when their scheduled appointment is canceled at the last minute.

If you’re selling a vacant home, it will be easy to show. However, you should plan to visit the home regularly for cleaning and maintenance. Maintenance is especially important during the colder winter weather.

If your home is already on the market, maintaining a show quality home is still a must. However, if your home will be listed for sale during the holiday season, you have to take care in preparing your home for buyer visits during colder weather. Decluttering, repairs, and staging are the main staples of home preparation.

If you ask real estate agents about holiday decorations, you’ll get a variety of advice. Keep in mind how home buyers will see your home. If you decorate your home, keep it tasteful and uncluttered.

Keep in mind that selling a home means having strangers traipsing through your home. Plan ahead with a showing schedule if you’re having holiday celebrations and hosting family and other guests in your home.

Home Selling during the Holidays is not for everyone. If the holiday season is a hectic, then adding the stress of selling your home is probably not a good idea. Consult with your real estate agent about home selling during the holidays and if it is an appropriate choice for you.

By Dan Krell
Copyright © 2022

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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.

Home selling 2023

Memory is flawed and I believe that people forgot what the housing market was like prior to 2020. People were told that the housing market of 2019 was in a new normal, and, yes, signs were pointing to a balanced market. Then 2020 shocked the housing market, and everyone took a short break during the health crisis. After a short market shock, home buyers came back in droves and further stressed the already limited home sale inventory. And for almost two years, a crazy and sometimes irrational sellers’ market was the “new normal.” What will be the new normal for home selling 2023?

home selling 2023

Besides quick home sales, home sellers have also become accustomed to double-digit home sale price growth.  However, steep interest rate increases have seemingly cooled home buyer motivation. Home sales dropped to their lowest levels in a decade. The question that everyone seems to be trying to answer is how will the current conditions play out.

Supply and demand. The one aspect, in retrospect, that has driven the housing market since 2013 is home sale inventory. Home sale inventory never completely bounced back to equilibrium levels since then, and sparked the several sellers’ market mini-cycles in the past decade.

Chief economist for the National Association of Realtors, Lawrence Yun, agrees, saying in a recent NAR new release “For most parts of the country, home prices are holding steady since available inventory is extremely low. Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back.”

Yun commented that the sharp mortgage rate spike since January has definitely impacted the volume of home sales this year. However, talking about home sale inventory, he stated, “Housing inventory is about a quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years.”

Yun anticipates home sales to continue to decline about 7 percent in 2023, however, national median home prices will modestly increase in the range of 1 percent.

Home selling 2023: If you’re planning a home sale in next year, make certain you have a reasonable home sale strategy. Make certain you prepare you home by decluttering and making necessary repairs. Pay close attention to neighborhood home sale trends. And don’t overprice your home when choosing a list price.

By Dan Krell
Copyright © 2022

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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.

Home Selling with Pets

home selling with pets
Home renovations (infographic from census.gov)

We love our pets, they’re part of the family!  If you’re home selling with pets, you’ll find home buyer pet owners will likely be drawn to your pet accommodations.  According to the 2020 Animal House: Pets in the Home Buying and Selling Process report (nar.realtor, April 2020) many home buyers make decisions with their pets in mind.  Some highlights include: 43 percent of pet owners would move to find a better home for their pet; paramount to 18 percent of pet owners is outdoor spaces and convenience to a vet; 68 percent of home buyers’ decision to buy or rent was based on the community’s animal policy.

But there are many other buyers who don’t have pets.  Non-pet home buyers are often turned off by a “pet home” for various reasons.  Some have pet allergies, and can be affected when they enter the home.  Others are turned off by pet odors.  And some are distracted by free-roaming pets while touring the home.  Is there a home selling with pets strategy that can make your home more appealing to all home buyers?

Professionally deep-clean your home. 

One of the most common obstacles home buyers encounter when viewing a home is that their allergies are triggered when they enter a home where a dog and/or a cat live.  A common cause for this is pet dander and odor.  These issues are typically addressed by hiring a professional to clean carpets and furniture.  Refusing to do this could devalue the home and stay on the market longer. 

Repair pet related damage.

Pets are wonderful, but they sometimes scratch walls, doors, and furniture. Carpets sometimes get ripped and stained.  Wood floors can also be scratched and stained.  Pets can also dig holes in the yard and garden beds. If your pet has done any of these things to your home, consider making repairs. Failing to repair pet related damage can turn off potential buyers, and devalue your home. 

Before a buyer visits a home.

Before buyers visit your home, vacuum rugs and furniture, and sweep up dander in any other areas.  Inspect your home to make sure there are no surprise droppings from your pet.  Put away your pet’s toys.  Professionals recommend placing non-toxic flowers and plants through the home to help provide a fresh environment.  Because not everyone is a dog lover, take your dog out for a walk while buyers tour your home.

Many professionals advise pet owning home sellers to hide traces of their pets as much as possible.  However, it many feel this is more work than they signed on for.  Is there a balance where you don’t have ot remove your pet while selling?

Melissa Dittmann Tracey, in her NAR article Can You Stage the Household Dog? (March 26, 2012; nar.realtor) relates her experience about selling her home by getting her dogs in on the sale.  The staging is basically making the pet area more homely.  Tracey dressed her dogs for a photo to be placed in their area. The photo said “Welcome to our home.”  She related that when she removed her pets, she didn’t get an offer.  However, when the pets where in the home, she received two offers.  Of course, Tracey’s experience is purely anecdotal, but it’s something to think about as an alternative staging idea.

By Dan Krell
Copyright © 2021

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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.

Price is Everything

Price is everything
Home owner equity

Home sellers want to get top dollar, and home buyers want value.  This is a hard to truth to acknowledge, but regardless of your home’s condition, location, etc. it all comes down to the home sale price.  Don’t just take my word on it. There’s plenty of peer reviewed research on the topic.  For example, Han and Strange’s study that demonstrates how home price effects home buyers’ response and motivation to visit and/or make an offer on your home (What is the Role of the Asking Price for a House?; Journal of Urban Economics; Volume 93, May 2016, P115-130).  The conclusion indicated that list prices that are consistent with neighborhood values (not overpriced) maximize home buyer engagement.  Price is everything .

The “price is everything” concept applies to any housing market.  It applies when the market is slow, and even when the market is doing well.  Take for example this year, when it seemed as if any home that come on the market sold quickly. However, there’s a caveat: homes that were priced correctly sold quickly.  Homes that were overpriced took much longer to sell.  For those overpriced homes that sold, they sold for less than original list price. 

As home prices continue to appreciate, home sellers are eager to push the envelope when setting their list price.  But home buyers are savvy and won’t overpay for a home, so creating a realistic pricing strategy is key to your home sale success.  Things to consider include your home’s condition, your local market, and your competition.

The main tool to help you decide on a list price is the CMA (comparative market analysis), which you can get from your agent.  The CMA is not an appraisal, but it is a snapshot of market activity for similar homes in your market area.  The CMA can show how homes like yours (that are similar in size, style, age and condition) sell by price and days on market.  Typically, the CMA is broken down into 3-month, 6-month, and 12-month segments to show how home sales are trending.  Compare active homes to homes that sold as well as those that didn’t sell for sale price and days-on-market).  Also be aware of any seller concession, which can affect your net sale.  Finally keep track of neighborhood active listings, this is your competition that can also help you modulate your price if needed.

To help sellers understand how their homes compare to the competition, I used to advise clients to visit neighborhood open houses.  This was helpful in understanding how to prepare their homes by comparing the homes’ condition and features.  Although visiting open houses may not be practical for you these days, technology makes it easy to see the interior of home via HD pictures, virtual tours and floor plans. 

Another pricing strategy that many home sellers use to get more buyer traffic is “just-below” pricing.  Just-below pricing is reducing your decided list price below the rounded number.  For example, if your list price is $450,000, the just-below price might be $449,900. This strategy was demonstrated through research by Beracha and Seiler (The Effect of Pricing Strategy on Home Selection and Transaction Prices: An Investigation of the Left-Most Digit Effect; Journal of Housing Research; 2015; Vol. 24, No. 2, pp.147-161).  Just-below pricing works best the list price is rounded down to the nearest hundred or thousand.

Original published at https://dankrell.com/blog/2020/12/20/price-is-everything/

By Dan Krell
Copyright © 2020

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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.