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April 2, 2015

Home seller expectations are high for 2015 market

Have you ever waited to be seated in the new trendy restaurant? You’re anticipating the menu, and thinking about what you might eat. If the wait is too long, your patience wears thin; you begin to calculate the time to the next open table. You might even scan the dining room trying to determine how much longer individual diners intend to stay at their table. If your wait is too long, you might even decide to leave. If you do get seated, you might be disappointed with an over-priced and limited choice menu.

Today’s housing market is much like the visit to that restaurant. Home buyers are motivated to jump into the market and eagerly await the next home listing; and like the restaurant menu, are often disappointed with limited choice and high prices. Additionally, low housing inventory, much like the restaurant’s long table turnover, may leave many to look for other options; some would-be home buyers are putting off their purchases and renewing leases for another year.

One of the factors that contribute to low housing inventory is the velocity of home ownership (how often a home gets sold). And indeed, home owners are staying in their homes longer before selling, according to a special study conducted by the National Association of Home Builders (nahb.org). Dr. Paul Emrath, of NAHB’s Economics and Housing Policy, provides details in a follow up study showing a decline in home owner mobility since 2007. Single family home owners stayed in their homes for an average of 12 years between 1987 and 2007. However, since 2007 the average time the home owner stayed in their home increased to 16 years. And since 2001, first time home buyers stayed in their homes 4 to 7 years less than move-up buyers.

If you’re one of those who feel that your stay in your home has been long enough, it may seem as if the market would favor a home sale. You might believe that the low inventory environment should make your sale quick, and possibly resulting in multiple offers. After all, the low number of homes listed for sale was cited for price growth by National Association of Realtors® Chief Economist Lawrence Yun in the NAR March 23^rd press release (realtor.org). And it makes sense to think that that first time home buyers should be motivated by relatively low interest rates and higher rents.

But before you set your expectations too high, consider that not all homes sell quickly – even in today’s low inventory environment. The Montgomery County average days on market during February exceeded 70 days. And even though the NAR reported a 7.5% increase in the average home prices across the country during February; the Montgomery County average sale price during February decreased 5.4% compared to the previous February and decreased 2.1% compared to January, according to RealEstate Business Intelligence (getsmartcharts.com).

If you’re putting your home on the market, don’t take home buyers for granted. Just like diners at the restaurant, home buyers have high expectations and want choices. Home buyers typically look for a combination of location, quality, and value. And just because inventory is low, buyers are not compelled to purchase your home – especially if the home is perceived to be over-priced.

For best results this spring – work with your listing agent to prepare your home, and price it according to neighborhood trends.

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.

December 4, 2014November 23, 2021

Overcoming challenges of a winter home sale

Some might say that selling a home during the winter is advantageous because of limited seller competition. Although it may be true that there is less competition, there is typically less home buyer traffic during winter months as well. Additionally, many home buyers who look during the winter months expect home sellers to be more flexible about pricing, and may subsequently make a lowball offer. However, if you’re having your home on the market during the winter, preparation and marketing can increase your success.

Ideally, you have your furnace checked and cleaned annually by a licensed HVAC professional. But if you don’t, this might be at the top of your list to ensure your home is comfortably heated to warmly greet home buyers from the cold.

Checking the condition of the home’s roof, gutters and downspouts can lessen the impact of severe weather, including heavy snow and ice. Ice dams resulting from melted and frozen snow are known to lift roof shingles and siding – which can allow water to make its way into your home. Water penetration from ice dams can damage ceilings, walls and window casings. Left unrepaired, mold and possible structural issues may develop; which is obviously an issue when selling a home.

Snow and ice removal/treatment from sidewalks and steps is essential when selling your home, so as to lessen the possibility of someone slipping and getting hurt from a fall. Additionally, downspouts should also be cleared of snow to reduce drainage blockages, which can be a source of water buildup around the home’s foundation.

Another winter concern is plumbing maintenance. Problems with pipes can arise anytime the temperature falls below the freezing point. There is a misconception that frozen water inside pipes cause pipe ruptures; however, pressure that builds up from trapped air within frozen pipes is typically the culprit. A licensed plumber can advise you on preventing freezing pipes.

If you’re selling a vacant home, you might consider winterizing it. “Winterizing” is a term that describes the draining of the plumbing system. Winterizing may reduce the risk of bursting pipes and damaging plumbing fixtures. Hiring a licensed plumber to winterize/de-winterize may decrease the probability of damage to the plumbing system from any high pressure build-up. If you are out of town, you might consider having a trusted person regularly check on the home (even if you are listed with a real estate agent). This person can take care of any house related issues that may arise while you are away.

Decluttering your home can sometimes be a challenge; and during winter months, it can be even be more challenging to keep the home clutter-free. Winter is when we spend time indoors, creating comfort areas where we may accumulate “stuff.” Organization can help limit accumulation of winter clutter, but a daily tidy up may also be necessary to be ready for any buyer viewing.

Just because it is winter does not mean you should stop actively marketing your home sale. Having a winter pricing and marketing strategy can prepare for showings and negotiating with lowball offers. Weather permitting, winter open houses are a great way to allow potential home buyers to view your home in a controlled concentrated time period. Communicate with your agent about showing times and instructions; you may need additional notice for any last minute tidying as well as changing your availability due to the holiday season.

October 30, 2014July 5, 2019

When Selling a Home – stay away from gimmicks & listen to buyers

You’ve probably heard a story or two about a home that was priced very low to “create a buzz” and illicit a bidding war. And in fact, there was a 2012 article in a local newspaper about such a sale in DC that touted the rebounding housing market. But guess what? A recently published study, with robust empirical data, suggests that such a strategy may not be the best for a home seller. Furthermore, the study suggests evidence that real estate agents who recommend under pricing as a strategy believe that homes listed for less – sell for less than comparable homes.

Bucchianeri & Minson (A Homeowner’s Dilemma: Anchoring in Residential Real Estate Transactions. Journal of Economic Behavior & Organization. May 2013: 76–92) collected and compared data related to “anchoring” (higher list price to prompt buyers to make higher offers) and “herding” (lower list prices intended to creating bidding wars) theories. Although actual sale prices may depend on location and time on market, the conclusions are that homes listed at higher prices sold for more than those that relied on bidding up the price. The authors suggest that sellers should think twice before under pricing their home to create a bidding war; and suggest that results from such strategies are typically anecdotal.

If setting a higher price may translate into a longer time on market, how could you know if you are priced too high or low? Listen to home buyers. A study conducted by Case, Shiller, & Thompson (“What have they been Thinking? Homebuyer Behavior in Hot and Cold Markets.” Brookings Papers on Economic Activity. 2012: 265-315) of 25 years of data in four metropolitan areas concluded that there is a strong relationship between buyer’s perception of price trends and actual price changes; the stronger the price trend (in either direction), the stronger the agreement among home buyers perceptions.

Home buyers’ short term and long term expectations of home prices can differ. And although Case, Shiller, & Thompson indicate that it is more difficult to gauge long term pricing expectations, they were undoubtedly impressed that buyers’ were “out in front” of short term home price changes. They stated, “…We find that homebuyers were generally well informed, and that their short-run expectations if anything underreacted to the year-to-year change in actual home prices.”

If deciding on your home’s selling price gives you a headache, Stefanos Chen wonders if taking a Tylenol could assist in making a decision. In his October 23^rd Wall Street Journal article (Can Tylenol Ease the Pain of a Home Sale?), Chen reported of to-be-published research that indicates taking the pain reliever may ease the anguish associated with “loss-aversion” (an avoidance of a perceived loss).

“Can acetaminophen reduce the pain of decision-making?” by DeWall, Chester & White is expected to be published in the January volume of the Journal of Experimental Social Psychology (pages 117-120). The results indicate that those who took acetaminophen sold a mug (that was given to them 30 seconds prior) for significantly less than those who tool a placebo. Chen’s question whether taking a Tylenol could help a seller take a lower sales price is a stretch, considering that the study was limited to 95 college student subjects. Although further research is indicated, the study’s conclusions may have implications to lessening the “pain” of letting go of ownership.

By Dan Krell
© 2014

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September 12, 2014November 23, 2021

Getting home buyers into your listing – sellers and agents take note

Some economists have discussed how consumers are increasingly “shopping” rather than buying. And this is evident in the housing market, where home buyers have become overly discerning about their purchases. After what seemed to be a brief seller’s market, we find ourselves slipping back into a buyer’s market; and an old dilemma is reemerging: how are you going to get more buyer traffic and more offers on your home?

If your home has been on the market for while, check with your agent to review feedback from those who visited your home. Typical responses focus on price, home condition, and how the home shows. If you’re about to list your home, have some neighbors and friends tour the home (as if they were home buyers) to provide an alternate perspective of your home’s selling points and shortcomings.

Pricing your home correctly is critical to selling in a reasonable time frame. Your agent should keep you up to date with neighborhood sales activity, so you can remain competitive with other relevant listings. Recent neighborhood sales trends (1-3-6 months) can indicate where your price range should fall, as well as understanding the types of homes that are selling.

One of the main objections you may have heard from home buyers, is that your home “needs work,” which has a number of meanings. Of course, it may mean your home does need updating and/or repairing; in which case you should discuss with your agent about the possibility of making updates/repairs, and/or adjusting the price to reflect any needed updates/repairs. Before you decide to go all out on a renovation, consider making updates that are equivalent to your neighborhood and price range; over spending may not significantly increase your home value. If your home is updated and shows well, another meaning of “needing work” comes from the buyer wanting a turn-key home; and your updates/renovations do match their tastes and preferences.

Another issue to consider is that although your home may be updated and clean, you just may have too much stuff! Lots of furniture, wall hangings, and other stuff can make large rooms feel cramped and small, as well as give a busy and unsettling vibe. If this sounds like your home, consider removing items that can distract and detract from your home’s true elegance and style.

If your home is not getting many showings, another factor to address (independent of price, condition and clutter) is how your home is marketed. If you haven’t done so, look at your MLS listing; are you satisfied with the pictures, and remarks? Keep in mind that about 96% of home buyers search online and make decisions based on what they see and read. Home sellers, like you, are savvy and know that solely hanging a sign and posting a MLS listing is no longer acceptable to market a home. Ask your agent to update you on active marketing efforts, as well as other resources that may be used to market your home, including: local and global networks of agents and buyers; as well as using the internet and SEO (search engine optimization) to get buyers interested in your home.

If you’re home has been on the market for a while, you might consider addressing any of these issues to boost home buyer activity. If you’re considering a sale in the near future; have a plan of action before you list, so your sale does not languish.

May 15, 2014November 23, 2021

Picky home buyers and real estate slowdown

Why would a major real estate industry player predict a slowdown in home sales? The L.A. Times reported on May 5^th (Real estate giant predicts slow home sales for months to come) that Realogy Holdings Corp, the parent company of Coldwell Banker, Century 21 and Sotheby’s, claims that a slowdown in mid and low bracket homes could hurt the brokerage business and could prove to be a difficult 2014.

Meanwhile, a recent “Real-Time Seller Survey” conducted by Redfin (refin.com) indicated that 52.4% of home sellers were confident about selling their homes; however 40.9% of sellers were concerned about affording their next home. This may be why 40.3% of those surveyed planned to price their home above market value – maybe not the best strategy. The May 8^th Business Wire article (Redfin survey: 40% of home sellers plan to price higher than market value) quoted Redfin agent Paul Reid as saying; “Buyers this year are far less tolerant of overpricing, and homes that aren’t priced appropriately are likely to sit on the market until the seller is forced to reduce the price … Buyers often interpret a price drop as a sign there is something wrong with the home, leading some to negotiate even more aggressively or lose interest altogether.”

Economics aside, some experts say that a slowdown is in part due to institutional investors having all but left the market as distressed properties are decreasingly a part of the housing landscape; and the housing market is once again reliant on the owner occupant home buyer – who is often characterized as “picky.”

A lot has been said about “picky home buyers” since 2008, and the fact is that home buyers have not changed much – indeed, they may even be pickier today. It could be that the lessons of the financial crisis are still fresh in their minds; home buyers as group seem to be a hardy and savvy group. 2008 was a transition year, as home buyers shirked distressed properties for homes that exuded value. “Cheap” did not necessarily mean the home was a bargain to those who planned to be owner-occupants. Many home buyers were turned off to short sales and foreclosures, not just because of the process but because of the realization that the combined cost of the home purchase with repairs often exceeded the price of a re-sale that was in move-in condition.

Even though there is a perceived dearth of available homes for sale today, doesn’t mean that home buyers will pony up for an overpriced home. Home buyers are typically looking for a combination of location, quality, and value. According to Lyn Underwood (Home buyer turn-ons and turn-offs; McClatchy-Tribune Business News. April 26, 2014), home buyers are attracted to homes for a number of reasons; some of the top home characteristics include an updated kitchen with stone counters and maple cabinets; an open floor plan; new or refurbished wood floors; and flexible spaces (rooms that can be used for a number of uses).

If you’re selling this spring, don’t take home buyers for granted: don’t over price your home; and stay away from cheap renovations meant to look expensive (buyers are turned off by poor workmanship, sloppy installation, or inferior materials); and keep your home neat and tidy when showing. Your listing agent can provide guidance on preparing and pricing your home to sell in today’s market.

Original published at https://dankrell.com/blog/2014/05/15/picky-home-buyers-and-real-estate-slowdown/

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. This article was originally published the week of May 12, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.