Downsizing is a very prevalent trend in today's' real estate market. And the two graphs below demonstrate this trend. The first shows the months-of-inventory of single family family homes that are over 4000 square feet in size (21 months), while the second graph shows the months-of-housing inventory of homes under 4000 square feet (7 months). History shows us that a balanced market is one where the months-of-inventory number is 6. In other words, at 6 months-of-inventory the forces of supply and demand are at equilibrium; subsequently we do not see either appreciation or depreciation of real estate prices.
To reiterate: There are presently 20+ months-of-inventory of homes like the one that you're looking to sell and only 7 months-of-inventory of homes like the one that you're looking to buy. So by putting off the move, what will in all eventuality happen is that you'll end up selling in a depreciating market while buying in an Appreciating market. This is the case because the market for the smaller homes is almost at equilibrium and will enter its appreciating cycle shortly thereafter; the market for the home that you're looking to sell still has plenty of depreciation left in it!
The take-away is that by making the move now you will have MORE MONEY to take with you towards the new house.
Friday, December 30, 2011
Monday, December 19, 2011
Meet the new real estate agent, same as the old real estate agent
This post was originally published by a colleague. I felt it was relevent enough to repost it:
Of course this is a play on “Meet the new boss, same as the old boss.” But what I am trying to address here is that many people think changing real estate agents will help a listing that is not selling. One agent is as good as another, so if one doesn’t “perform” then we just move on to the next. Commoditization of the work force seems to be the order of the day – so it is somewhat natural that buyers and sellers would treat real estate agents the same way.
Sometimes change can be a good thing. If your agent isn’t doing a good job marketing your home, bringing in a new agent may be the answer. But in other cases, and perhaps more often than not in this crazy market – it will make little or no difference in the final outcome. In fact, it could actually work against a seller to do this.
Agents have limited control over the final sales price…
One dirty little secret of real estate is that an agent has a very limited ability to influence the final sales price. We can help you get the most that the market will allow….but beyond that we too are at the mercy of market forces. The notion that we can beat the bushes through saturation bombing marketing and pull out the ONE buyer willing to pay a premium for your home because of its special features is the stuff of urban legend.Look at it this way: If Hondas have gone down in price by 10%, can a Honda dealer realistically be expected to move them for their original price? The answer is plainly no. And although there no two houses are identical, the ability of the agent to defy market forces (fully tricked out kitchen and crown moldings not withstanding) is simply not there.
The above is particularly true given that you have to sell your house three times. Once the buyer says “yes” the home still has to pass muster with the inspector as well as the bank and the bank appraiser. So even if you find a buyer willing to pay $1.25 on a $1.00 value, there are several more “decision makers” in the mix that can nix the deal… and these decision makers are not buying with their hearts – for them its all about the bottom line. So unless you find a cash buyer (and those are generally as rare as hens teeth) the home will have to pass muster with the bank. The banks are NOT happy campers right now and they will not fund an 80% loan if the home is overpriced. Period.
So how does changing agents harm the seller?
By giving them false hope….in a declining market false hope is your worst enemy. Actually TIME is your worst enemy, but false hope ensures that you waste time and chase the market down. In a rapidly declining market, sellers need to realize that they are losing money – significant money – every week their home is on the market.
Holding out for that higher price, will get you less in the end. Relisting with another agent under these conditions accomplishes nothing and can be an expensive mistake.
Original author > © 2011 – Ruthmarie G. Hicks- http://thewestchesterview.com All rights reserved.
Of course this is a play on “Meet the new boss, same as the old boss.” But what I am trying to address here is that many people think changing real estate agents will help a listing that is not selling. One agent is as good as another, so if one doesn’t “perform” then we just move on to the next. Commoditization of the work force seems to be the order of the day – so it is somewhat natural that buyers and sellers would treat real estate agents the same way.
Sometimes change can be a good thing. If your agent isn’t doing a good job marketing your home, bringing in a new agent may be the answer. But in other cases, and perhaps more often than not in this crazy market – it will make little or no difference in the final outcome. In fact, it could actually work against a seller to do this.
Agents have limited control over the final sales price…
One dirty little secret of real estate is that an agent has a very limited ability to influence the final sales price. We can help you get the most that the market will allow….but beyond that we too are at the mercy of market forces. The notion that we can beat the bushes through saturation bombing marketing and pull out the ONE buyer willing to pay a premium for your home because of its special features is the stuff of urban legend.Look at it this way: If Hondas have gone down in price by 10%, can a Honda dealer realistically be expected to move them for their original price? The answer is plainly no. And although there no two houses are identical, the ability of the agent to defy market forces (fully tricked out kitchen and crown moldings not withstanding) is simply not there.
The above is particularly true given that you have to sell your house three times. Once the buyer says “yes” the home still has to pass muster with the inspector as well as the bank and the bank appraiser. So even if you find a buyer willing to pay $1.25 on a $1.00 value, there are several more “decision makers” in the mix that can nix the deal… and these decision makers are not buying with their hearts – for them its all about the bottom line. So unless you find a cash buyer (and those are generally as rare as hens teeth) the home will have to pass muster with the bank. The banks are NOT happy campers right now and they will not fund an 80% loan if the home is overpriced. Period.
So how does changing agents harm the seller?
By giving them false hope….in a declining market false hope is your worst enemy. Actually TIME is your worst enemy, but false hope ensures that you waste time and chase the market down. In a rapidly declining market, sellers need to realize that they are losing money – significant money – every week their home is on the market.
Holding out for that higher price, will get you less in the end. Relisting with another agent under these conditions accomplishes nothing and can be an expensive mistake.
Original author > © 2011 – Ruthmarie G. Hicks- http://thewestchesterview.com All rights reserved.
Tuesday, November 8, 2011
Wednesday, November 2, 2011
Where the real estate industry is wrong
Many of my colleagues know that I'm generally very tough on myself, as well as our industry. I'm not afraid to dish out tough love when I sincerely feel it's called for. And here's such a case.
You don't need me to tell you that it's simply a tough market to sell a home; especially when you get into the upper pricing tiers. It's a well known fact that many of the properties that are on the market today are just not going to sell; at least not the first time around anyway. There's certainly enough blame to go around as to why this is happening. But I don't think that we need to go very far to find one of the culprits; it's the real estate brokerage industry.
From real estate school to company training to continued education we're taught a very methodical, quantitative, and easily repeatable formula for determining a property's market value. We're conditioned to rely on it, and then we in turn use it to recommend a list price to the home seller. Problem is..............it's wrong!
It's wrong because we're relying on yesterday's data to determine today's market value. What a home sold for 6 months ago, 6 weeks ago, or even 6 days ago has absolutely no bearing on what the next buyer will be willing to pay. So to price a home based on those factors is a losing proposition that more often not leads to overpriced properties that languish on the market, sometimes for years, and often at great expense to the homeowner.
Many of the home sellers that I work with are surprised when I show up for our initial meeting without a list of recent sales. They're surprised because that's what the last agent, who coincidentally failed to sell their home, brought with them. Yet what I bring to the kitchen table is far more important; their competition!
You don't need me to tell you that it's simply a tough market to sell a home; especially when you get into the upper pricing tiers. It's a well known fact that many of the properties that are on the market today are just not going to sell; at least not the first time around anyway. There's certainly enough blame to go around as to why this is happening. But I don't think that we need to go very far to find one of the culprits; it's the real estate brokerage industry.
From real estate school to company training to continued education we're taught a very methodical, quantitative, and easily repeatable formula for determining a property's market value. We're conditioned to rely on it, and then we in turn use it to recommend a list price to the home seller. Problem is..............it's wrong!
It's wrong because we're relying on yesterday's data to determine today's market value. What a home sold for 6 months ago, 6 weeks ago, or even 6 days ago has absolutely no bearing on what the next buyer will be willing to pay. So to price a home based on those factors is a losing proposition that more often not leads to overpriced properties that languish on the market, sometimes for years, and often at great expense to the homeowner.
Many of the home sellers that I work with are surprised when I show up for our initial meeting without a list of recent sales. They're surprised because that's what the last agent, who coincidentally failed to sell their home, brought with them. Yet what I bring to the kitchen table is far more important; their competition!
Tuesday, September 6, 2011
Wednesday, July 20, 2011
Mastery of the process
The real estate brokerage industry has gone through some dramatic changes in the seven years that I've been privledged to particpate in it. And quite often, the acceptance of these changes could be marked by the industry-wide kicking and screaming as we struggled to accept, innovate, and keep up. Yet nothing has had more dramatic an effect on the way we do business as the advancement of technology. In the early 1990's, only 10-15% of buyers started using the internet as a primary search tool. And my industry was shaking in its pants! After all, we were the keepers of the information. If you wanted to know anything about what homes were on the market, when they sold, what they sold for, or even to get access to them; you had to come to us. Then all of a sudden.....OMG! If the consumer now had access to all of this information, then what did they need us for? Even though I wasn't a Realtor a the time, I distictly remember op-eds talking about the end of the real estate brokerage industry as we knew it. Needless to say, these gloom and doom scenarios never materialized. But,we don't even have to go back that far. The transaction itself is quickly turning into a paperless affair. For example, Coldwell Banker's Homebase system takes the entire transaction online giving all parties online access to all pertinent informaton and documents. And as expected, some agents are balking at having to turn over pertinent paperwork and/or information about about their clients.
Reality check: We will never again be the keepers of the information. And our value to the public that we're so priviledged to serve lies not in some fictitional proprietary claim to John Does' phone number and email address.
Our value is derived from the mastery of the process!
Reality check: We will never again be the keepers of the information. And our value to the public that we're so priviledged to serve lies not in some fictitional proprietary claim to John Does' phone number and email address.
Our value is derived from the mastery of the process!
Tuesday, July 19, 2011
sell the large home now...the net effect
Our present economic environment has created a discernible paradigm shift in the psyche of the American populous. The signs are everywhere, that bigger is no longer necessarily better. For example, luxury car brands are now offering compact cars, and many home builders are now rolling out increasingly smaller models.
I feel a bit compelled to write about this trend because I'm presently speaking with a prospective home seller of a large home, and he's considering down-sizing (surprise surprise!), yet this homeowner is hesitant to bring their home to market because my assessment of the property's market value is somewhat lower than his. Could this possibly be you?
If you live in a large home and are thinking about selling it for whatever reason, here are just three reasons why selling now is better than later.
1. The trend amongst affluent buyers is to buy a home that's smaller, smarter, and more energy efficient. Simply put, the demand for large homes is decreasing, and so are the selling prices.
2. Jumbo Loans are becoming scarcer and harder to qualify for. Coincidentally speaking, the FHA loan limit for Jumbos has been reduced in many areas. So even if the buyer pool for larger homes is still be ready and willing, will they be able to buy?
3. Reason #3 is in my opinion the most compelling. Presently, in Miami-Dade County the months of inventory of homes under 3000 sq. ft. is 7.1, while the months on inventory of homes over 3000 sq.ft. is 12.3 months! The effect of this difference in months of inventory is that your large home will continue to depreciate for a longer period of time than the the smaller one that you'd like to buy. To mitigate this situation, consider selling your large home now, and you'll be much more likely to have more money to take with you towards the smaller home home because you will be both selling and buying in the same market cycle. The possible peril of waiting to sell is that one runs the very real risk of selling on the downside of the market cycle while then buying on the appreciating side. So instead of having $10.00 to apply towards your next home, you could conceivably end up with only $7.00.
So if you don't want to miss out on those three bucks, sell the large home now!
Friday, June 24, 2011
Wednesday, June 15, 2011
hyperlocality, and choosing the best agent
“How’s the market?” Seems like everybody wants to know. And it’s really such a loaded question with real world implications for my business. When many folks ask this question, what they’re really asking is “how’s your business”. In other words, the “how’s the market” question is quite often an informal job interview. And the way that the I answer it gives the interviewer a lot of instant information about my knowledge base, my attitude, and my overall proficiency in the subject at hand….real estate that is.
This is not to say that I ought to have a canned, oober impressive, industry laden jargon beast of an answer. But let’s say, all things being equal, that you ask 2 real estate agents the big question:
Agent #1; “The market’s great!”
Agent #2; “The Real estate market today is very hyper local. And those gloom and doom market scenarios that you read about have to be taken with a grain of salt. For example, homes in Las Vegas are down 60% from peak prices, while homes in Pittsburg are down only 1% from their peak. Wouldn’t you agree that they strategy for getting a home sold in either of these two markets would have to be different?”
Now which one of these two agents would you hire to handle the sale of your house?
This is not to say that I ought to have a canned, oober impressive, industry laden jargon beast of an answer. But let’s say, all things being equal, that you ask 2 real estate agents the big question:
Agent #1; “The market’s great!”
Agent #2; “The Real estate market today is very hyper local. And those gloom and doom market scenarios that you read about have to be taken with a grain of salt. For example, homes in Las Vegas are down 60% from peak prices, while homes in Pittsburg are down only 1% from their peak. Wouldn’t you agree that they strategy for getting a home sold in either of these two markets would have to be different?”
Now which one of these two agents would you hire to handle the sale of your house?
Tuesday, May 10, 2011
Wednesday, April 27, 2011
Thursday, April 21, 2011
Short sale vs. foreclosure
There are many legitimate reasons why a homeowner may find themselves in a position where they’re unable to continue paying for their home. And when confronted with this circumstance, a loan modification may be a solution. Yet successful loan modifications are unfortunately not very common. Subsequently some homeowners will ride the foreclosure process out until they eventually have to abandon the property, or they’ll short sell it and move on.
A common question that I get from consumers is “should I do a short sell, or just walk away from the property”. Fact is that there is no one correct answer and people should always consult with an attorney and/or tax adviser before doing anything. That being said, let’s dispel a very commonly held belief. And that is, that other than ruining one’s credit, that there are no additional repercussions in walking away from a property. Based upon my consultations with various attorneys, I can confidently tell you that this if FALSE. Let’s presume that you owe $200,000, you let the property go into foreclosure, you lender repossesses it, and then turns around and sells it at today’s market value of $100,000. Who can they come after for the $100,000 deficiency? YOU, the borrower is likely on the hook. What they can do is get what’s called a deficiency judgment for the $100,000. They can then, if they’re unsuccessful in collecting from you, sell this judgment to a collection agency, who may then sell it to another collection agency and so on, and so on. Furthermore, deficiency judgments can haunt you for up to 20 years; long after your credit would have otherwise recovered!
A short sale may alleviate you from this scenario, particularly if the property is your primary residence. In many cases, my experience as well as that of my colleagues, has been that lenders will waive the deficiency and allow you to walk away free and clear. As a matter of fact, we’re even seeing the waiving of deficiencies on second homes and investment properties. Not to mention, that your credit rating will recover considerably sooner in a short sale scenario. And even in the event that your lender does not waive the deficiency, they may be willing to either reduce the deficiency amount and/or work out a payment plan. Whatever the case, almost anything beats a deficiency judgment. In conclusion, a short sale just may be the difference between having some control versus absolutely no control of an otherwise terrible situation.
A common question that I get from consumers is “should I do a short sell, or just walk away from the property”. Fact is that there is no one correct answer and people should always consult with an attorney and/or tax adviser before doing anything. That being said, let’s dispel a very commonly held belief. And that is, that other than ruining one’s credit, that there are no additional repercussions in walking away from a property. Based upon my consultations with various attorneys, I can confidently tell you that this if FALSE. Let’s presume that you owe $200,000, you let the property go into foreclosure, you lender repossesses it, and then turns around and sells it at today’s market value of $100,000. Who can they come after for the $100,000 deficiency? YOU, the borrower is likely on the hook. What they can do is get what’s called a deficiency judgment for the $100,000. They can then, if they’re unsuccessful in collecting from you, sell this judgment to a collection agency, who may then sell it to another collection agency and so on, and so on. Furthermore, deficiency judgments can haunt you for up to 20 years; long after your credit would have otherwise recovered!
A short sale may alleviate you from this scenario, particularly if the property is your primary residence. In many cases, my experience as well as that of my colleagues, has been that lenders will waive the deficiency and allow you to walk away free and clear. As a matter of fact, we’re even seeing the waiving of deficiencies on second homes and investment properties. Not to mention, that your credit rating will recover considerably sooner in a short sale scenario. And even in the event that your lender does not waive the deficiency, they may be willing to either reduce the deficiency amount and/or work out a payment plan. Whatever the case, almost anything beats a deficiency judgment. In conclusion, a short sale just may be the difference between having some control versus absolutely no control of an otherwise terrible situation.
Wednesday, April 6, 2011
CB Home Loans Mortgages Tamed Video
This is one of the best promotional videos for a mortgage company that I've ever seen...
Wednesday, March 23, 2011
blowing my own horn...
We had a great office meeting this morning with Clark Toole, our Chief Operating Officer. Here's Mr. Toole handing yours truly a productivity award:
Monday, March 14, 2011
What's in a code?
Have you ever seen those funny looking squiggly cubes that are popping up here and there?
Ever wonder what they are? Maybe they’re secret coded messages or an extraterrestrial alphabet. Actually the answer’s a bit more down to earth. It’s called a QR Code (quick response code). And it’s a very effective way to link two worlds that previously had little to do with each other; the print world and the online world. And if you start to look around, you’ll note that they’re creeping up all around us from billboards, to newspapers, and yes…even real estate.
It works by allowing you to snap a picture of it with any Smartphone, and then instantaneously taking you to a designated website. Whether it’s a just a fad or a marketing revolution is hard to say, but here’s my personal experience. After putting one of these on the back of my business card and direct mail pieces the traffic on my website increased by 25%! I’m SOLD, and I plan to further expand the use of the QR code by placing it on all printed materials from my letterhead, to flyers, yard signs, and even my car, (remember the 200,000 mile machine from a previous post!).
A Eureka moment in the marketing of real estate?…………..yours truly thinks so.
Thursday, February 24, 2011
market diagnosis and pain mitigation
‘It’s never been harder to buy or sell a property.” This is a sentiment that’s shared by many of my colleagues that have been in the real estate business for many years and through many market cycles. Fact is that they’re right. And historically speaking, here’s one reason why: From 1900 to 2000 home prices appreciated roughly 3-5% year over year. Yet from 2000 to 2006 the cumulative appreciation was 89%! We reached such ridiculous heights, that the fall had to be painful. And that pain continues to manifest itself in the way of foreclosures, bankruptcies, and the havoc that those wreak on everyday Americans. Make no mistake about it, we’re right in the thick of a social and financial reality check in our country; a painful one at that.
However, even pain can be mitigated. And in the case of real estate, that mitigation comes in the form of information. As a home seller, it’s not nearly enough to know what homes sold for last month, last week, or even yesterday. Where the market was this morning is of no consequence to you. Where it will be tomorrow and how you position yourself within the context of that future will ultimately determine your success or failure. And if a real estate professional cannot demonstrate that he or she has their finger on the pulse of that future, than I suggest that you find yourself another doctor.
“But what if I’m buying”, you may ask. Truth is that the methodology is not much different. Learning about recent sales is an indicator of past market activity, where the market was, and subsequently of limited value. Yet to determine whether a property is a good buy, or whether to buy at all, you need to know where the market will be in the foreseeable future. And once again, if your real estate professional lacks the resources to do that, then you certainly need a second opinion…or maybe a specialist! LOL!
However, even pain can be mitigated. And in the case of real estate, that mitigation comes in the form of information. As a home seller, it’s not nearly enough to know what homes sold for last month, last week, or even yesterday. Where the market was this morning is of no consequence to you. Where it will be tomorrow and how you position yourself within the context of that future will ultimately determine your success or failure. And if a real estate professional cannot demonstrate that he or she has their finger on the pulse of that future, than I suggest that you find yourself another doctor.
“But what if I’m buying”, you may ask. Truth is that the methodology is not much different. Learning about recent sales is an indicator of past market activity, where the market was, and subsequently of limited value. Yet to determine whether a property is a good buy, or whether to buy at all, you need to know where the market will be in the foreseeable future. And once again, if your real estate professional lacks the resources to do that, then you certainly need a second opinion…or maybe a specialist! LOL!
Thursday, January 27, 2011
marketing in proper perspective
The real estate brokerage business is perhaps one of the most competitive service industries out there. And in our eternal quest to gain market share we real estate agents continually play a game of marketing one upsmanship. We say things like,”hire me and I’ll market your property in this magazine, that newspaper, and these internet sites”. And then the next agent will say, “I’ll do that as well, and on top of that I’ll add x, y, and z too!” And the icing on the cake is that all of this “stuff” that we’re giving you will sell your property “quickly and at the highest price”
Here’s a reality check that’s likely to put me at odds with many of my colleagues: No marketing, at any time in the history of real estate, has ever sold a single piece of property. I’d love to take credit for this eureka statement, yet my humble respect for Mr. Jay Schweppe prevents me from doing so (more on him in a future post maybe). Even yours truly, with a degree in marketing, has seen the light.
Here’s the logic: Marketing can sell products. Marketing can sell services. Is your house a product or a service? Or perhaps it’s something else. Truth be told, real estate is a commodity, and no amount of marketing, no matter how good, can sell it. When was the last time you saw an ad in The Wall Street Journal reading “great deal on wheat futures”? Yet wheat futures sell every single trading day. There are always buyers, regardless of what the market conditions are. And what ultimately determines how much sells, is whether there’s a perception of value for the commodity on that day.
Real estate is no different. The buyer pool remains relatively constant, yet it’s the perception of value that changes. Is the perception of value for real estate in 2011 different than it was in 2005? Of course! So what’s a would-be home seller to do? Make no mistake about it; the only tool that a home seller has at their disposal to create a perception of value for their property is the asking price. “So why all the fancy schmancy marketing?” one may ask. That’s a good question.
One must be able to reach as much of the Buyer pool as humanly possible. So it stands to reason that the Seller who employs the most prolific, extensive, interactive, targeted, cutting-edge, and technologically driven marketing platform, will ultimately reach the entirety of the buyer pool. Couple this with a well-positioned property that creates the necessary perception of value, and the net result will be a sold property. Happy selling!!!
Here’s a reality check that’s likely to put me at odds with many of my colleagues: No marketing, at any time in the history of real estate, has ever sold a single piece of property. I’d love to take credit for this eureka statement, yet my humble respect for Mr. Jay Schweppe prevents me from doing so (more on him in a future post maybe). Even yours truly, with a degree in marketing, has seen the light.
Here’s the logic: Marketing can sell products. Marketing can sell services. Is your house a product or a service? Or perhaps it’s something else. Truth be told, real estate is a commodity, and no amount of marketing, no matter how good, can sell it. When was the last time you saw an ad in The Wall Street Journal reading “great deal on wheat futures”? Yet wheat futures sell every single trading day. There are always buyers, regardless of what the market conditions are. And what ultimately determines how much sells, is whether there’s a perception of value for the commodity on that day.
Real estate is no different. The buyer pool remains relatively constant, yet it’s the perception of value that changes. Is the perception of value for real estate in 2011 different than it was in 2005? Of course! So what’s a would-be home seller to do? Make no mistake about it; the only tool that a home seller has at their disposal to create a perception of value for their property is the asking price. “So why all the fancy schmancy marketing?” one may ask. That’s a good question.
One must be able to reach as much of the Buyer pool as humanly possible. So it stands to reason that the Seller who employs the most prolific, extensive, interactive, targeted, cutting-edge, and technologically driven marketing platform, will ultimately reach the entirety of the buyer pool. Couple this with a well-positioned property that creates the necessary perception of value, and the net result will be a sold property. Happy selling!!!
Subscribe to:
Posts (Atom)