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 This morning the National Association of Realtors reported that existing home sales in July plunged 27.2%.
Not surprisingly, the end of the homebuyer tax credit caused these sales to fall off a cliff. People just didn't realize how high that cliff was.
In case there was any doubt that it made a difference, this chart from Waverly Advisors shades in the period of the tax credit. Home sales started rising immediately, and have fallen off immediately with the tax credit's expiration. The July numbers to the far right are the lowest in the last 10 years.
As we move away from the distortion that the tax credit caused, we expect sales to rebound to levels witnessed early in this decade, especially with mortgage rates at around 4%.
Metro Milwaukee home values appear to have stabilized despite a daunting inventory of homes for sale. Although this is certainly good news for anyone trying to sell their home, it can prove to be quite tricky when it comes to developing a pricing strategy. If you are unsure about the changes in home values, and how this may affect your pricing strategy, you’re not alone. Most sellers want to price their homes aggressively, and also price them to reflect the changes in buyer habits; but they also don’t want to price themselves right out of the market. How to Develop an Accurate Pricing Strategy: - Hire a qualified, seasoned real estate agent – This is one area of selling your home that you don’t want to skimp on. Find a top-notch agent who understands the market and will advise you on how best to present your property to the buyers. Such an agent sells a lot of properties (far more than the average), works full time and is a veteran in real estate. As many of you know, all of Homeowners Concept agents fit these requirements.
- Price it right – Although this may seem like a no-brainer, many sellers, absolutely sure of their ability to sell their home at a higher rate than other comparables in the area, find themselves sitting on their property without an offer in sight. The bottom line is that your pricing strategy should accurately reflect neighborhood home values, not your idea of what you think your home is worth.
- Develop a realistic sales strategy – Decide upon your sales strategy beforehand so that your game plan is put in place. More importantly, however, make sure your sales strategy is flexible so that you can react according to the market and according to home values.
- Make it ready to sell – Most buyers of today are looking for turn-key properties, so make sure your home is in excellent condition before you list it for sale. It is important to realize that all the pricing strategizing in the world can’t make up for a home that doesn’t compare to other homes in the neighborhood. Clear out the clutter, stage it to sell, and perform any repairs or upgrades that will allow it to compete with other homes for sale in the neighborhood.
When you buy a home, one of the provisions in the Offer to Purchase is something called earnest money. Earnest money is a deposit that a buyer makes at the beginning of a home purchase that shows that they are serious about the transaction. Earnest money demonstrates that the buyer does have funds readily available and they are willing to tie them up while they inspect the property and apply for their loan. Second, earnest money provides a monetary consequence that a seller can tap if the buyer defaults on the contract. This partly protects the seller from monetary damages incurred when a buyer breaches the contract, and may keep resolution of these damages out of the court system. Lastly, it does prevent buyers from playing games. Earnest money should not be confused with the down payment but it becomes part of the down payment at the closing. So how much earnest money should you put down? We typically see earnest money deposits ranging from 1%-2% of the purchase price. On a $300,000 transaction, a buyer would typically make an earnest money deposit of $3,000 to $6,000. Make it Enough to be Taken Seriously Sellers, particularly in today’s tougher real estate market, are understandably nervous about a successful transaction. By signing a contract with you, they have to take the home off the market for 30-60 days, and they want some assurance that you are going to do what you said you were going to do in the Offer. Low amounts of earnest hardly shows that the buyer is serious or financially capable of buying the home. A seller faces real economic consequences when a buyer backs out of a deal, and a serious buyer needs to be willing to show that they will risk some of their own money to compensate the seller if they get cold feet. If you are competing with other offers, raising your earnest money is one frequently used method to entice the seller to accept your offer. With all other terms being equal, which buyer would you prefer, one with $500 earnest money or one with $5,000 earnest money? You can use this same technique if you are offering a low price. With some sellers, you may get them to accept a lower price if they have added assurance that you will close quickly, with minimal risk to them. Recognize the Risks Earnest money is probably the biggest reminder of how seriously real estate contracts need to be taken. Most contracts will have a variety of contingencies that allow a buyer to walk away from the house based on unsatisfactory inspection results or the buyer’s inability to procure a loan. If the buyer backs out for a legitimate reason covered by one of these contingencies, the earnest money will be returned to them. However, if you make it all the way to the end of a transaction and walk away for no legal reason, you will lose your earnest money, so you need to take the obligations spelled out in a real estate contract very seriously.
We closed on yet another home that was rented with the option to buy. The sale was completed in less time than was allotted in the contract, as the buyers were able to qualify sooner and get the low rates of today. During the time of the Rent to Own contract was in effect, the seller was able to cover the mortgage while the buyer worked on getting the downpayment and bringing the credit score to a level that they could qualify. Increasingly this is an option that sellers turn to to sell their property, especially if the property is vacant.
The way the Rent to Own program works is as follows: Buyer agrees to rent the property until such time (usually up to a year - but can be extended) that the buyer can get a loan. The buyer cannot qualify for a mortgage upfront due to credit, length of time on the job, sufficient downpayment or other reasons. Buyer would pay an upfront "option premium" which would not be refundable (usually around 1 to 2% of sales price ). In addition any amount above and beyond an average rent for a similar property can be credited toward the downpayment of the buyer.
From the standpoint of the seller, the Rent to Own provides a temporary tenant that could look after the property and help with the mortgage. The buyer on the other hand gets into a property they can call their future home. As a result they can make improvements with the blessing of the seller. Most times the sellers agree to the improvements/updates since it makes their property more valuable. At the point in time that the buyer can get a mortgage the property can go to closing and seller can transfer title. Homeowners Concept has done hundreds of Rent with the Option to Buy contracts since 1984, as a result we are very familiar on how to negotiate and structure the contract so that the property does eventually close.
Did you know that most high commission companies charge an administrative fee of anywhere from $195 to as high as $600 at closing? THIS is above and beyond the 5% or 6% commission one pays with these companies. It is a travesty that so many sellers blindly pay these fees on top of an excessive commission. These sellers either do not know any better or they are in a frame of mind of paying over $12,500 for the average priced home that they figure what's a few hundred more. Our administrative fee is only $95 AND you pay much less to sell and have a truly skilled Realtor on your side. Bottom line: a few hundred dollars on top of the thousands ONE SAVES BY USING HOMEOWNERS CONCEPT adds up to a substantial amount of money, especially in this economy. And even if one wants to be a big spender with money why not take the savings and make a big donation to your favorite charity. YOU WILL feel good rather than spending it on unnecessary commissions.
 Perhaps the better question is "Why Wouldn't You List With Us?" ... In the world of real estate today, there's a lot of confusion about what you get for the money you pay in commission. So many things have changed that even Realtors find it hard to explain what differentiates them from anyone else. And then there's confusion over what really matters in the sale of a home! Do the big firms have an advantage? What matters more - the agent or the firm? What services truly impact a sale? What's fluff in the Realtor sales pitch? If you analyze the way buyers go about finding and writing an offer on a property in this internet connected era, you will come away with the following important items. Buyers care about how your home is priced for its location, features and condition. An agent and the respective company should assist the seller to optimize the way the property presents itself to the market, pricing it correctly, maximizing exposure and use his or her experience during negotiations once a buyer(s) wants to buy. In other words a seller should be employing a Realtor that has considerable expertise, offers to cover all bases to expose the home and have strong negotiation skills and attention to detail. To that end, one will be hard pressed to come up with a better package than what Homeowners Concept offers. The savings in commissions is really a bonus. It's all in the data You see the average agent at Homeowners Concept sells 3 to 4 times more homes per year than the high commission agent and has been in real estate for 17 years vs only 4.5. Add to this the extensive marketing we provide via our unique magazine and high trafficked website. The differences are SUBSTANTIAL and our services stand above of the higher priced solutions! High commission agents persuade sellers to pay unnecessary commissions when in fact, on average, they deliver less than us.
One of the biggest questions sellers ask agents when selling their home is: should I remodel my home before I sell? You may have heard a number of stories about people who were able to command top dollar for their properties because they remodeled them. Although remodeling can, in fact, yield a higher asking price for your home, you must be careful when spending money on remodeling projects, as you may not always see sufficient return on your investment. Generally a remodel will pay off but don’t assume that you will recoup all of your expenses, or even that you will see any of your investment returned to you. An experienced agent will be able to guide you on this (stick with experienced agents such as the ones employed by Homeowners Concept).
Below are some common mistakes to avoid when remodeling your home for sale: - Remodeling to suit your tastes – When remodeling, think like a buyer. In other words, you are remodeling to suit them, not yourself. Don’t remodel with taste-specific components; instead, keep it simple and neutral, thereby attracting the largest audience of buyers.
- Overpricing yourself out of the area – You must pay very close attention to the high end of prices for your neighborhood. You will not be able to get any more money for your house, regardless of what improvements you have made if you go over the price ceiling. Before remodeling, look closely at recently sold properties and the updates they had. This will provide you with a good gauge when deciding which remodeling projects to undertake and how much to spend.
- Emphasize kitchen or bathroom(s) remodel – Bottom line: the most important rooms of a home in today’s market are the bathrooms and the kitchen. These rooms have been shown to have the biggest influence on the price of a home; so, if you're on a budget, consider spending your remodeling dollars to update these rooms. They will yield higher returns on investment, provided you don’t go overboard in your remodeling efforts.
Experience Matters When Selecting A Real Estate Agent – Just Not For Most People
Surveys show that only 57% of home buyers or sellers would use the last agent they worked with in the future. By service standards that is a very low percentage. Part of the problem is that people put very little thought on selecting an agent. As a result, many consumers are stuck with a mediocre agent.
Buying or selling a home is the single largest transaction that most consumers undertake. The process can be filled with uncertainty, emotion and pitfalls, so most buyers and sellers choose to work with a real estate agent to help them through the process. Selecting an agent is obviously an important step, and most consumers would agree that agent expertise and experience should weigh heavily in that choice. The shocking statistic is that the majority of home buyers and sellers select agents who have little or no experience closing real estate transactions.
Most Consumers Do Not Select Experienced Real Estate Agents
If one delves into the statistics one can see that the average agent sold a little over 6 properties in 2009 in metro Milwaukee. That is one every other month. Hardly enough to be an expert in this field. If one removes the number of sales from the top 200 agents (this includes 9 out of 10 of Homeowners Concept agents) then we are left with 2,500+ agents that only did 2-3 deals last year. Surprised by the data? Most people are. If there is one thing that can be said for our industry, it is that there are loads of hucksters and part-timers out there who fast talk their way into a couple of deals each year. Consumers can do better.
How Many Transactions is Too Many?
A small group of agents closed a very large number of transactions in 2009. A few agents closed more than 50 transactions last year. Certainly they have significant transaction experience, but realize that the only way this is physically possible is by working with a substantial team of folks or by sacrificing service. There are only so many hours in each work week and in the high commission world an agent spends considerable time trying to get listings. If you are planning to work with a very high volume agent, recognize that you will be interacting more with their team than with the agent who is getting credit for the transaction, or you may be sacrificing service levels because your agent is assisting so many customers. You will want to understand who is on the team, and when exactly you will get to work with the main agent, along with getting clarity on the service levels that they provide to you.
Striking a Balance
Consumers should require that their agents demonstrate results. Stick with full-time agents who do this for a living and are closing at least 2 to 3 deals per month, and you’ll be using an agent in the top 5% of all agents in Greater Milwaukee. Our own agents consistently rank in the top 5% of agents (and of course, the savings in commissions is a bonus). We are able to close more deals than a typical agent by focusing 100% of our work on selling homes and closing deals, not on trying to prospect for clients. At the same time, we are not ultra-high volume agents, to make sure that our customers do not have to sacrifice service to obtain our expertise. Furthermore and because of the way the Homeowners program works we have an extremely low turnover (unlike the high commission agencies). The strategy is to have only full time agents that have been in business a very long time and do at least 3 times as much sales per year as the average agent. To that we have succeeded and our clients are very thankful. Our record and A+ rating with BBB speaks for itself. Consumers should be more diligent when selecting their real estate agent and make sure that they select agents who have substantial experience getting deals done.
Getting your home sold in the Greater Milwaukee area is not as tough as you might think despite the market (now dealing without the tax credit). The key is understanding a few things about yourself and how you approach the market that determines if and how quickly you sell. What Home Buyers WantRight now, there are roughly half the number of buyers in the market as we would normally see. As a general rule, they are conservative and concerned due to the state of the economy and tough lending requirements. They are looking for value. Ultimately, they are going to buy the home that is the best value on the day they make their purchase decision… Wouldn’t you if you were buying today?
Understanding The Housing Competition Knowing that buyers are looking for value, another key factor if you want to sell a home is knowing who your true competition really is. For you to determine “good value,” you have to know what to compare with. This takes working with a real estate agent that understands the market better than the others. Choosing your initial market position is perhaps the most important factor when deciding to put your home on the market. Your Motivation To Sell A Home.
So you know what buyers want and you understand your competition and how to value your home, the next and final step is to understand your current situation. Are you motivated enough to sell your home? Here’s a simple test: Pick which of the below choices best describes you. Think seriously before you decide, as this will help you greatly. - The Casual Seller - The casual seller says things like “We are not in a hurry,” or “We don’t want to give it away.” You can expect this person to say “We will sell if we can get $X ….”
- The Serious Seller - The serious seller says things like “I understand the market and I’m willing to sell my home for what I’m seeing out there.” This seller is ready to sell at “perceived market value” and they expect to price their home with the competition to get it sold.
- The Very Serious Seller - The very serious seller must sell now. They are willing to create a perception of value and entice buyers to select their home before all others.
Who will sell their home in the next few months?
So, what kind of a seller are you? If you answered the above question as honestly as you could, you need to know that the casual seller is not going to sell their home in today’s market. There are just way too many homes for sale and the casual sellers are doing themselves and the very serious sellers a dis-service by adding to the inventory.
The market will eventually recover and there will again be great times to sell, but today’s buyer pool is looking for value. Even the serious seller is most likely not going to sell their home. With over 11 months of supply in SE-WI plus new short sales and foreclosures entering the market, only the very serious sellers have the best chance of being successful over the next 12 months. Luckily with our very low commission of 1.5%, a seller listing with Homeowners Concept has quite a few thousands of dollars in savings to play with (As did idol Danny Gokey). A serious seller can take the savings and deduct it from the list price making their home much more attractive to buyers.
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