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

attitudes about real estate
Attitudes about real estate market (infographic from nar.realtor)

An October 19th 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 18th 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/

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector


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.

Real estate tin men

real estate tin men
Beware the real estate tin men (infographic from keepingcurrentmatters.com)

Beware the Real Estate Tin Men!  “Tin men” was a term used to describe con-artists after the 1987 Barrie Levinson movie by the same name became a nationwide hit.  The movie was about aluminum siding salesmen who did whatever they could to sell home improvements in 1963 Baltimore.  The story revealed how everyday “schnooks” created the façade of a successful sales person, as well as revealing their unscrupulous sales tactics.  The main characters are flawed and likable, so much so that you’re rooting for them as they are cross-examined at their MHIC license hearing.

Modern versions of tin men still exist.  They exist in all professions.  They are constantly refining their tactics to get your business. They will often tell you what you want to hear.

When it comes to buying and selling a home, beware of the real estate tin men!  These are agents who will say and do almost anything for your business.

Many real estate agents still use tin men tactics.  Real estate sales is difficult and many agents will do whatever they can to get a leg up on their competition and a chance at a sales commission.  There is a subculture in the industry that is focused on pushing the ethical envelope to make money.  This philosophy is spread by “gurus” and coaches who teach sales tactics, persuasion, and income strategies.

Unlike the world of 1963, when a salesman could easily lie to make the sale, today’s easy flow of information makes it unlikely that a real estate agent would flat-out lie.  The internet has created a savvy and knowledgeable consumer by allowing easy authentication of information.  However, the internet has not changed the real estate agent’s reputation for bending the truth, otherwise known as “puffery.”

Rapport is often built on appearances.  Like the 1960’s tin men, many real estate agents also employ smoke and mirrors to help them appear successful.  Although some still drive cars and dress beyond their means to “fake it,” many agents rely on technology for their trickery.  The art of deception is widely used by agents who dare to manipulate data.  Many real estate agents, who supervise other agents, take credit for MLS sales they had nothing to do with so as to appear they have many more sales (than they actually do).  Likewise, many agents pay for fake internet reviews.  Although many platforms screen for false reviews, agents continue to find ways to get fake 5-star reviews on websites, including incentivizing unsolicited otherwise 5-star reviews from clients.

Many real estate agents rely on gimmicks as a means of getting business.  A popular agent promotion is “I will buy your home if it doesn’t sell.”  The reality is that although the agent may offer to buy your home if they can’t sell it, the conditions actually don’t make it a viable option.  Another oversold gimmick is “cutting-edge” marketing.  The promise of cutting-edge marketing used to mean advanced and new.  However, today cutting-edge real estate marketing is overshadowed by the truth that homes are primarily viewed on real estate internet portals, such as Zillow (all MLS listings are posted to these portals).

Most Realtors are ethical and do the right thing.  A recent article by Jim Dalrymple II even touts broker (and agent) humility as the “new method” and business model (Humility, not arrogance, is the new real estate leadership trend; inman.com; October 17, 2017).  And although real estate agents have increasingly been leaning towards transparency and authenticity, you should still beware of tin men.

Original located at https://dankrell.com/blog/2018/10/25/real-estate-tin-men/

By Dan Krell.          Copyright © 2018.

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

Quick sale investor promise?

Is a quick sale to a real estate investor worth it?

House flipping is a misunderstood industry.  Sure, these investors promise a quick sale, but legitimate home flipping is valuable to the real estate industry and the community.  Home flippers revitalize run-down homes, and market appealing homes to home buyers.  In a low inventory housing market, home flips have become a significant percentage of home sales in a low inventory market.

House flipping data

quick sale
House flipping is a significant portion of home sales (Home Stats infographic from nar.realtor)

ATTOM Data Solutions (attomdata.com), the data solutions behind Realtytrac, recently released its Home Flipping Report for Q1 2018.  The report indicated that there were 48,457 U.S. homes that were flipped, which represented 6.9 percent of all home sales.  Although the number of homes flipped decreased 3 percent from last year, the percentage of flipped homes in the home sale inventory increased!  The number of flipped homes decreased to a two-year low, but the home flipping rate is the highest since 2012.  The average gross profit of $69,500 is at the highest point since ATTOM started collecting the data in 2000.

Given the stats and profits, it was just a matter of time for the mom and pop home flipping business to become corporatized.  Using the power of the internet and corporate financing, companies such as Opendoor, Offerpad, and recently Zillow have become players in house flipping business.  Whether corporate flippers are profitable or have a sustainable business model is for another column.  But, there is no doubt that home sellers are seduced by one-click instant offers and promises of a quick closing.

How real estate  investors operate

House flippers are known to buy foreclosures and other financially distressed properties.  However, these real estate investors also go after other properties too, as long as it’s financially feasible (it’s a business after all).  Other types of targeted homes include estate sales, divorce sales, long-time rentals, and outdated or obsolete homes.  So, if you haven’t already received a letter offering you a quick offer and fast closing, it’s just a matter of time.

For some home sellers, a quick sale to an investor is fitting.  The seller is disposing of a home that would otherwise continue to be a financial burden and deteriorate further.  However, many realize they can sell for more on the open market (MLS).

Is a quick sale to an investor all it’s cracked up to be?

If you’re thinking of selling your home (or even currently selling), you might be fascinated by the idea of a quick sale.  But for most, the dream of selling for a large sum and closing quickly is just a fantasy.  You should realize that home flipping is risky business, and the investors build their costs into their offer.  So, be prepared for a really low offer.  A typical investor offer is about 70 percent of the home’s value minus rehab, carrying, and marketing costs.

Before you sell to an investor, do your due diligence.  Compare multiple investor offers.  Verify that the investor is legitimate.  Be wary of investors who include extended contingencies.  Be aware that “wholesalers” will tie up your home while looking to sell their purchase contract to other investors.  Although most investors promise “cash” deals, the reality is that most investors actually borrow money.  It is not uncommon for investors to back out or default on a deal because their financing doesn’t come through.  Most important, have your attorney review any contract before you sign.

Also, talk to a Realtor.  You could possibly sell your home for more than the investor’s “instant” offer.  Marketing your home on the MLS at a price appropriate for its condition could net you more.

Original is located at https://dankrell.com/blog/2018/10/11/quick-sale-promises/

By Dan Krell.          Copyright © 2018.

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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.

The copious home sale contract

home sale contract
Home buying process (infographic from floridarealtors.org)

If you’ve recently bought or sold a home in Montgomery County MD, you probably recognized that the home sale contract was quite lengthy.  In fact, depending on the situation and additional addenda, a contract can be fifty-plus pages. It seems as if that the home sale contract gets fatter as every year passes. It’s no wonder why I am often asked “Why are home sale contracts long winded?”

Why is our home sale contract so long?  Our local home sale contract has a number of required addenda and disclosures.  There is a simple reason for this, but let’s look at the foundation and need for the contract.

It’s important to mention that property sale contracts around the country are not the same.  Every jurisdiction has their own criteria for a home sale contract.  A recent client who relocated from New Jersey shared their home sale contract, which was a fraction of the size of our local contract.  Likewise, a colleague asserted the same about the property contracts in Arizona, where he was licensed for a number of years.

Property sale contracts go back into antiquity.  Most likely, ancient contracts formed a basis of ancient record keeping.  These ancient contracts were also “promises” that were enforced in some manner that was keeping with the time.  For example, The History Blog (thehistoryblog.com) tells the account of the Mogao Caves which are located in the Gobi Desert and date back to the fourth century.  One of the caves held a cache of financial documents from medieval China, including property sale contracts and records!

According to the legal historian A. W. B. Simpson, modern English contract law has roots in the middle ages (A History of the Common Law of Contract: The Rise of the Action of Assumpsit; Clarendon Press; 1987).  The contract was founded in the concept of “assumpsit,” which was the basis for resolving “broken promises.”  Assumpsit allowed individuals to bring claims of broken promises to local courts.  Although the practice was traced back to the thirteenth century, court hearings were routine in the sixteenth century.  This model became the basis for enforcing a private contract.

It wasn’t until 1677 when the English Parliament enacted “An Act for the Prevention of Frauds and Perjuries,” known today as the Statute of Frauds.  According to Russell Decker, the Parliament enacted the law that required contracts to be written, because parties obliged by a contract were not allowed to provide testimony in court (The Repeal of the Statute of Frauds in England; American Business Law Journal; 1973; 11:1 p55).  The written contract was the “witness” to a promise.  However, most of the Statute of Frauds was mostly repealed in England in 1954.

The Statute of Frauds is still alive and well in the US and the basis for the real estate contract in Maryland.  Statute of Frauds is a subtitle of the Real Property Act of the Code of Maryland.  Section 5-104 Executory Contracts states: “No action may be brought on any contract for the sale or disposition of land or of any interest in or concerning land unless the contract on which the action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged or some other person lawfully authorized by him.”

So ok, home sale contracts need to be in writing, but why are our contracts lengthy?  The reason is because many of the addenda and disclosures are generated because of statutory requirements to provide specific information in a contract of sale. Besides  the expected list of notices and disclosures (such as property condition), there is a compendium of additional required notices and disclosures that is found in Code of Maryland  Miscellaneous subtitle of the Real Property Act section 14-117 Contracts for Sale of Property.  Additionally, jurisdictions around the state include additional addenda and notices for home sales within the respective county and/or locality.  Of course, Montgomery County has added a number of disclosures and notices (such as the Utility Cost and Usage History Form and the Real Property Estimated Tax).

Make sure your agent is knowledgeable about the jurisdiction in which you are buying or selling.  As a buyer, you need to make sure you receive all the relevant notices and disclosures.  As a seller, you may incur a fine for non-disclosure of certain notices.

Original published at https://dankrell.com/blog/2018/09/20/copious-home-sale-contract/(opens in a new tab)

By Dan Krell.          Copyright © 2018.

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector
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 pricing psychology

home pricing psychologyPricing your home correctly is the foundation of a successful sale.  I have often talked about the science and art of pricing a home in various market conditions, but did you know home pricing psychology also plays a role?

With vast amounts of public data available on the internet, you may be tempted to price your home on your own.  However, keep in mind that unverified internet data can be inaccurate or outdated.  Moreover, the most recent sales data may not yet be available on your favorite real estate sites.  Asking a Realtor to help you analyze relevant comparables from the MLS can help you decide on a sales price that is in line with home buying trends.

The science of pricing a home is a straight forward method of analyzing the sale prices of similar neighborhood homes.  The analysis will provide you with a potential sales price range.  When selecting comparable homes, make sure that the homes are similar in style (colonial, split level, rambler, etc.).  Select comparable homes that are similar in size (usually within 15 to 20 percent of your home’s living area).  Also, try to find comparable sales that sold within the last six months to be relevant to current market trends.

The “art” of pricing your home is a process of fine tuning the sale price range derived from comparable homes.  Looking at various factors for each home, you can make adjustments on your calculated sale price range.  Interior differences, such as number of bedrooms, bathrooms, or having a finished basement, can change a sale price significantly.  Likewise, exterior features, such as a deck or fence, can also affect the price.

Let’s talk about your home’s condition.  Whether you like it or not, your home’s condition should be a major factor in determining a sale price.  You should be honest and objective when it comes to your home’s condition.  Have others offer their opinions about necessary updates and repairs.  Are there any comparables that are in similar condition?  You may have to make adjustments to correspond to deferred maintenance and lack of updates.

Home Pricing Psychology

To attract home buyers while trying to get top dollar, you may also have to apply home pricing psychology.  Of course, many of these home pricing psychology strategies are not sound or based on facts.  An example of this is the use of a “totem” price.  A totem price is when the second half of the number is a mirror of the first (e.g., 543,345).  This was a strategy that was highly touted during the “go-go” market of 2005-2006.

Until recently, there hasn’t been much research into the psychological effects of real estate pricing strategies.  An empirical study by Eli Beracha and Michael J. Seiler revealed how sellers can ask for a higher price without turning off buyers (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).  Their study revealed that “just-below” pricing can help you sell your home faster and get a higher price.  Just-below pricing is a strategy that lowers the price by reducing the left most digit by “1.”  However, they suggest that when using the just-below strategy in real estate, it should be rounded to the nearest hundred or thousand.  For example, if you decide on a list price of $450,000, then the rounded-just-below price will be $449,900.

Original published at https://dankrell.com/blog/2018/06/05/home-pricing-psychology/

By Dan Krell
Copyright © 2018.

If you like this post, do not copy; instead please:
link to the article,
like it on facebook
or re-tweet.

Protected by Copyscape Web Plagiarism DetectorDisclaimer. 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.