Plenty of ink and air time about the economy is given to consumer confidence as if confidence will come charging over the hill to save us from recession or depression. Highly skilled athletes, I think, are some of the most confident people. Still, their confidence doesn't keep them from running head first into disaster from time to time. I wonder if patience might be useful as a necessary virtue and confidence could use its help. Confidence, we could say, was driving the bus when the bubble burst.
Patience allows a home buyer to rise with the tide and roll with the flow of buying a distressed sale (short sale or foreclosure) property. Patience helps the Realtor listen and learn the deepest concerns of their selling clients. Patience keeps home sellers from quitting before the miracle.
As we end 2010, we can say confidently that patience has already served us well. We've patiently weathered the first volleys of the economic storm (their may be more to come) and we've learned and adjusted to the new normal. We let go of what was not realistic (lending practices and double digit appreciation) and accepted the more prudent conservative norms.
Confidence supported by evidence is different than the confidence of wishful or grandiose thinking. Evidence based confidence is powerful when combined with patience. We now know the fundamentals of real estate sales (recent comparable sales, documented evidence of value, top condition, documented income, pre-approval in hand) have to be adheared to in order to achieve positive results. When we employ the fundamentals, we can confidently and patiently navigate the real estate economy. Try to do it with one without the other, and the journey is vicious with uncertainty.
Monday, December 27, 2010
Friday, December 3, 2010
Leaving Some Room to Negotiate
Old habits die hard and so do old ideas about pricing. The world has changed for anyone who wants to move fbeyond offering a house for sale to collecting a check from a buyer's mortgage lender. There is a power greater than seller expectations and buyer excitement involved and I call that power lender restraint.
In 1988 the Realtor world preached pricing according to sold comparables in order to attract interest and achieve a value supported appraisal. We kept on with that mantra while the system switched gears and appraisals became rubber stamps. Eventually pricing had nothing to do with recent sales and everything to do with pricing according to exagerated asking prices.
We've been operating under the "new" guidelines for long enough to know that correctly priced homes attract attention. Evidence in the Dane County market proves that the buyers come forward and make reasonable offers on homes priced right. . If the asking price is not supported by real good and recent comparable sales your chances of negotiating on an offer are slim to none.
So, why are we leaving room to negotiate? I don't know. There is no negotiating with people who don't submit offers. Yes there are people who, regardless of the evidence, will submit offers that are lower than evidence supported fair market values. Value will always be subjective. However, if the evidence shows that an appraisal for $465,000 is impossible but $450,000 is definite, pricing at $465,000 and leaving room to negotiate is futile. It worked in 2005 but it's as out of style as a leisure suit today.
Our best chance of getting full price is pricing exactly in line with recent sales. Expecting buyer entusiasm for our property to result in substantially more dollars is an unreasonable expectation.
In 1988 the Realtor world preached pricing according to sold comparables in order to attract interest and achieve a value supported appraisal. We kept on with that mantra while the system switched gears and appraisals became rubber stamps. Eventually pricing had nothing to do with recent sales and everything to do with pricing according to exagerated asking prices.
We've been operating under the "new" guidelines for long enough to know that correctly priced homes attract attention. Evidence in the Dane County market proves that the buyers come forward and make reasonable offers on homes priced right. . If the asking price is not supported by real good and recent comparable sales your chances of negotiating on an offer are slim to none.
So, why are we leaving room to negotiate? I don't know. There is no negotiating with people who don't submit offers. Yes there are people who, regardless of the evidence, will submit offers that are lower than evidence supported fair market values. Value will always be subjective. However, if the evidence shows that an appraisal for $465,000 is impossible but $450,000 is definite, pricing at $465,000 and leaving room to negotiate is futile. It worked in 2005 but it's as out of style as a leisure suit today.
Our best chance of getting full price is pricing exactly in line with recent sales. Expecting buyer entusiasm for our property to result in substantially more dollars is an unreasonable expectation.
Wednesday, November 10, 2010
What if? A business plan has a place in a Realtor's life
http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/SERV_STRATPLAN.html
Accidental success, a compelling Hollywood story ingredient, is not as likely as planned endeavors to produce satisfactory results. A story in REALTOR, issue November/December 2010, about an agent who moved from financial services to real estate caught my attention today. Although her results appear impressive, I'm not interested in money she made, what made me pause was the URL http://www.sba.gov/ under the bold paragraph lead: Have a real business plan. Imagine that, the Federal Government as a resource for planning. The irony aside, the idea that smart information could be available for free on the internet made me look.
Whether starting new, starting over, or starting to get more focused, the business plan idea strikes me as brilliant. For 20 some years I planned a little and worked a lot; going where the winds blew and doing what I liked, and sometimes what I didn't like, all in the name of business. Looking back it appears the business planned me and I was a willing servant to the master. It's November 2010, the fall of the year and probably the fall of my career. Today I know enough to know what I do well, and what does me in. I'm making my plan and sticking to it.
The Business Plan Template from the Small Business Administration is eleven pages; not long but it will inspire deep thoughts. The promise is the plan will inspire the writer to tell a compelling story of their business, telling who, what, when, where, how, and why. My guess is "Why?" is not best answered as "Because I want to." When I am finished with this plan, there should be significant logic and discipline injected into the product.
What if I started a journey of business planning? Will I uncover a passion? Will I see what I has been hidden to me? "What if" is what keeps me getting up with the sun.
Accidental success, a compelling Hollywood story ingredient, is not as likely as planned endeavors to produce satisfactory results. A story in REALTOR, issue November/December 2010, about an agent who moved from financial services to real estate caught my attention today. Although her results appear impressive, I'm not interested in money she made, what made me pause was the URL http://www.sba.gov/ under the bold paragraph lead: Have a real business plan. Imagine that, the Federal Government as a resource for planning. The irony aside, the idea that smart information could be available for free on the internet made me look.
Whether starting new, starting over, or starting to get more focused, the business plan idea strikes me as brilliant. For 20 some years I planned a little and worked a lot; going where the winds blew and doing what I liked, and sometimes what I didn't like, all in the name of business. Looking back it appears the business planned me and I was a willing servant to the master. It's November 2010, the fall of the year and probably the fall of my career. Today I know enough to know what I do well, and what does me in. I'm making my plan and sticking to it.
The Business Plan Template from the Small Business Administration is eleven pages; not long but it will inspire deep thoughts. The promise is the plan will inspire the writer to tell a compelling story of their business, telling who, what, when, where, how, and why. My guess is "Why?" is not best answered as "Because I want to." When I am finished with this plan, there should be significant logic and discipline injected into the product.
What if I started a journey of business planning? Will I uncover a passion? Will I see what I has been hidden to me? "What if" is what keeps me getting up with the sun.
Wednesday, November 3, 2010
Price Trends----Going Down
Middleton appears to be weathering the real estate storm as well as any of the communities and neighborhoods that make up the Dane County real estate market. Of the properties that have come on the market since January 1, of this year, 106 have SOLD and 107 are showing a status of ACTIVE. That's a balanced market as I see it. The inventory provides choices for the consumer and the rate of sales suggests a seller has reason to be hopeful. Middleton is a good barometer of the local real estate climate because it has a broad range of housing stock representative of the majority of the communities and neighborhoods in the County.
I was curious to know if prices were holding stable or trending down. Considering it's November, I could make a reasonable guess, but having decided to put numbers to my expectations, I went ahead and did some quick crunching. This is what I think I see:
In a September 20th blog entry, I noted that Buyer Enticing Pricing does impact time on the market. To accomplish the goal of selling, owners had success by reducing their price after the first thirty days on the market. Each 30 days seems to be a good time to evaluate the results. Once the right price was reached, offers came within 30 days.
If statistics matter to you, keep these facts in mind as you market your house, or as you consider making an offer.
With no limitation on price or listing date, 114 single family, non-condominimium, properties are currently showing a status of ACTIVE, no offer, in the RASCWMLS for the MIddleton High School geographic area. A random selection of 42 properties out of the 114, starting from lowest prices to highest, showed 24 had made at least one price reduction. The average number of price reductions for those that had made at least one is 2.25. There were 40 price changes in the lowest 20 priced homes, and 20 price changes in the 22 highest priced homes of the survey properties. November 3, 2010
I was curious to know if prices were holding stable or trending down. Considering it's November, I could make a reasonable guess, but having decided to put numbers to my expectations, I went ahead and did some quick crunching. This is what I think I see:
- Home prices are coming down for owners who are trying to sell
- The typical home owner is going to lower the price over the course of their time on the market at least once
- Below the median price, expect to see owners more active in price reducing
- The lower half of the market changes prices downward about 2 to 1 compared to the upper half
- Owners of higher priced homes are more reluctant to make price changes
In a September 20th blog entry, I noted that Buyer Enticing Pricing does impact time on the market. To accomplish the goal of selling, owners had success by reducing their price after the first thirty days on the market. Each 30 days seems to be a good time to evaluate the results. Once the right price was reached, offers came within 30 days.
If statistics matter to you, keep these facts in mind as you market your house, or as you consider making an offer.
With no limitation on price or listing date, 114 single family, non-condominimium, properties are currently showing a status of ACTIVE, no offer, in the RASCWMLS for the MIddleton High School geographic area. A random selection of 42 properties out of the 114, starting from lowest prices to highest, showed 24 had made at least one price reduction. The average number of price reductions for those that had made at least one is 2.25. There were 40 price changes in the lowest 20 priced homes, and 20 price changes in the 22 highest priced homes of the survey properties. November 3, 2010
Monday, October 25, 2010
Fall and Winter Sellers Have the Buyer's Attention
The best time to sell a home is always when you and your house are ready. Looking at the number of homes on the market, spring appears to be the time of choice for most people to try to sell. It's also the time when the most people get out and start looking at homes. In Madison, our spring market begins on the first business day after New Years Day and if that's when it starts, November and December is when it ends. So it looks like we are coming to the end,... or maybe we can look at this another way. Let's look at what we know and decide if maybe there is opportunity right now.
I like making decisions based on what we know as opposed to what we hope for. Today I know interest rates are at 50 year lows for people with great credit--the rest of qualify for better rates than were available over the last 10 years. So, let's put interest rates in the plus column. Next, we know the appraisers have to have sales in the last six months to support a purchase price for the underwriters. Well, we can go back to April, May, June for recent sales, and since those were the days of highest demand, we can conclude there are some comparable sales to support our asking price. That's another favorable factor. For a third, we can assume the best homes have sold, the ones still on the market have been considered and passed over, the new listings are sitting on the sidelines until spring. Competition is weak.
That's a total of 3 market forces favoring sellers in the fall and winter in Madison. Now, let's maximize our advantage. Fall in Madison makes for some beautiful photographs. Even a garden at the end of fall looks better than a blanket of snow in the eyes of a relocating person who will be seeing your house for the first time on-line. Those relocating families are the bigger fish in the pond of qualified buyers. They don't have the luxury of waiting until spring, and they will select a home from the best choices on the market in a relatively narrow window. We want to get their attention. Photos and walk-thru videos will help get their attention and keep it.
Great value always matters, so let's consider increasing our market audience by range pricing. Reach down below a price point to draw qualified buyers up and in to your home. Look at your market to determine the next lowest break point and invite those people in.
Keep in mind that the buyer of today is different than the buyer of 2004. In only six years we have gone from a broker centric business model to one where the consumer has access to information. Highly motivated buyers may be sitting on the sidelines appearing to be unmotivated but watching for the right property. The more well informed a person is, the less likely they are to display the common characteristics of fear of loss---and that's what we might mistake for motivation. The internet provides everything a person needs to stay in and on top of the real estate market 12 months a year. These people will step up and identify themselves when they see what interests them.
Wait until spring and you are competing with everyone for the attention of the home buyers. If you have a crystal ball, you may be able to jump in at the right time. Without one, you should be safe in going with what you know. Price smart, prepare your home, and yourself, then put the house out for consideration. When offers come in, pay close attention to what works for you. It's possible the closing date and assurance of a sale could be the most valuable attributes of an offer.
I like making decisions based on what we know as opposed to what we hope for. Today I know interest rates are at 50 year lows for people with great credit--the rest of qualify for better rates than were available over the last 10 years. So, let's put interest rates in the plus column. Next, we know the appraisers have to have sales in the last six months to support a purchase price for the underwriters. Well, we can go back to April, May, June for recent sales, and since those were the days of highest demand, we can conclude there are some comparable sales to support our asking price. That's another favorable factor. For a third, we can assume the best homes have sold, the ones still on the market have been considered and passed over, the new listings are sitting on the sidelines until spring. Competition is weak.
That's a total of 3 market forces favoring sellers in the fall and winter in Madison. Now, let's maximize our advantage. Fall in Madison makes for some beautiful photographs. Even a garden at the end of fall looks better than a blanket of snow in the eyes of a relocating person who will be seeing your house for the first time on-line. Those relocating families are the bigger fish in the pond of qualified buyers. They don't have the luxury of waiting until spring, and they will select a home from the best choices on the market in a relatively narrow window. We want to get their attention. Photos and walk-thru videos will help get their attention and keep it.
Great value always matters, so let's consider increasing our market audience by range pricing. Reach down below a price point to draw qualified buyers up and in to your home. Look at your market to determine the next lowest break point and invite those people in.
Keep in mind that the buyer of today is different than the buyer of 2004. In only six years we have gone from a broker centric business model to one where the consumer has access to information. Highly motivated buyers may be sitting on the sidelines appearing to be unmotivated but watching for the right property. The more well informed a person is, the less likely they are to display the common characteristics of fear of loss---and that's what we might mistake for motivation. The internet provides everything a person needs to stay in and on top of the real estate market 12 months a year. These people will step up and identify themselves when they see what interests them.
Wait until spring and you are competing with everyone for the attention of the home buyers. If you have a crystal ball, you may be able to jump in at the right time. Without one, you should be safe in going with what you know. Price smart, prepare your home, and yourself, then put the house out for consideration. When offers come in, pay close attention to what works for you. It's possible the closing date and assurance of a sale could be the most valuable attributes of an offer.
Friday, October 22, 2010
Consider Your Lifestyle, and Forget About Resale...
Houses are not investments--they're homes; places we live, raise families, grow memories. How we live in our homes, how we create our home environments, is something unique and best when consideration for resale value does not drive our creating. That idea iscontrary to the popular cliche "Think Resale". I believe thinking resale and thinking of homes as investments are two ideas which will fade away in the consumer's new attitude toward home ownership---and that will be healthy.
There are some home buying ideas which will always make sense. These are a couple: Buy within your means. Buy the best location available in the neighborhood you want. Keep your mortgage to 15 or 20 years. Compare properties to the homes that have recently sold to best determine a price to offer.
After that, doing what you want to fit your lifestyle is smart. The more you make the home what you enjoy, the more likely you are to be pleased with the home for a long time. Buying today and resisiting home improvements because you fear the impact on "resale" just means you will live in a house that is not you until something better comes along. The costs of moving up, down, or sideways once factored in more than offset home improvements which somebody might say are not condusive to resale or won't be recouped.
This property in Blackhawk is an exceptional example of what you can do when people start wtih an optimum location, don't overspend, then improve a property for their lifestyle. They took an ordinary home in a special neighborhood, on a spectacular lot, and made the house a home. The houses I like the most are the ones that are designed or renovated for the owners. Size is irrelevant.
This property in DeForest was built for the owners. They raised their children, entertained guests, and enjoyed hobbies from here. The location in the neighborhood is terrific; the yard is mature, and the tranquility is superb. Price is irrelevant.
Next time you hear "Think About Resale" ask why you should try to design your home for somebody who you have never met, who has never seen your home, and who if they ever do see your home, may not like it anyway. Logic says don't worry about somebody who doesn't exist, and focus on your family, and your lifestyle.
There are some home buying ideas which will always make sense. These are a couple: Buy within your means. Buy the best location available in the neighborhood you want. Keep your mortgage to 15 or 20 years. Compare properties to the homes that have recently sold to best determine a price to offer.
After that, doing what you want to fit your lifestyle is smart. The more you make the home what you enjoy, the more likely you are to be pleased with the home for a long time. Buying today and resisiting home improvements because you fear the impact on "resale" just means you will live in a house that is not you until something better comes along. The costs of moving up, down, or sideways once factored in more than offset home improvements which somebody might say are not condusive to resale or won't be recouped.
This property in Blackhawk is an exceptional example of what you can do when people start wtih an optimum location, don't overspend, then improve a property for their lifestyle. They took an ordinary home in a special neighborhood, on a spectacular lot, and made the house a home. The houses I like the most are the ones that are designed or renovated for the owners. Size is irrelevant.
This property in DeForest was built for the owners. They raised their children, entertained guests, and enjoyed hobbies from here. The location in the neighborhood is terrific; the yard is mature, and the tranquility is superb. Price is irrelevant.
Next time you hear "Think About Resale" ask why you should try to design your home for somebody who you have never met, who has never seen your home, and who if they ever do see your home, may not like it anyway. Logic says don't worry about somebody who doesn't exist, and focus on your family, and your lifestyle.
Tuesday, October 5, 2010
Good Dirt on Recreation and Ag Land--Good for the Soul
Rural land experts do exist in our real estate community, and I won't pretend to be one. But what I can sort out as well as anyone, is the fact that competition for land is almost a non-factor today. Unlike a few years ago when money was available for recreation land purchase financing, cash buyers are king again...and they aren't builder/developers with deep pockets.
I reviewed the sales of 35 transactions where more than 30 acre parcels were sold in Iowa, Dane, Green, and Columbia County since January 1, 2010. Obviously the land closest to Madison is most likely to sell as a home site and you will see greater dollars per acre spent. Move out a ways and you can find parcels of 40, 60, 80, 120, acres selling for $2400, $2900, $3,000 per acre to $5,000 per acre. These might be reasonable prices for recreation land for hunting, riding, hiking, and just getting out. Some have a building site available, some don't--but that's why God invented the camper trailer.
Financing is hard to come by as lenders have no appetite for recreation or development land purchases, so I suppose the appraised value has little power in swaying an owner to concede on asking price. But the elimination of the leveraged buyer means little or no competition for the cash buyer. A fair number of sales have closed this year so you have solid evidence to determine a reasonably smart price. It's possible the inventory of land will increase in the next 24 months with three and 5 year ARMS coming due on properties purchased around 2005. Just like vacation homes, recreation land will be let go before the home. If you have a connection with rural property lenders, ask to be kept informed of land which may be coming into the bank's real estate inventory.
My degree is in political science not economics. So don't ask me if recreation land is a good investment. I have no idea. I like to spend time on land for its serenity benefits. Outdoor recreation may help keep you young, or it may not; it will certainly help you enjoy life. And being a responsible land steward is good for one's soul. Let's walk some land this fall, winter, and spring.
I reviewed the sales of 35 transactions where more than 30 acre parcels were sold in Iowa, Dane, Green, and Columbia County since January 1, 2010. Obviously the land closest to Madison is most likely to sell as a home site and you will see greater dollars per acre spent. Move out a ways and you can find parcels of 40, 60, 80, 120, acres selling for $2400, $2900, $3,000 per acre to $5,000 per acre. These might be reasonable prices for recreation land for hunting, riding, hiking, and just getting out. Some have a building site available, some don't--but that's why God invented the camper trailer.
Financing is hard to come by as lenders have no appetite for recreation or development land purchases, so I suppose the appraised value has little power in swaying an owner to concede on asking price. But the elimination of the leveraged buyer means little or no competition for the cash buyer. A fair number of sales have closed this year so you have solid evidence to determine a reasonably smart price. It's possible the inventory of land will increase in the next 24 months with three and 5 year ARMS coming due on properties purchased around 2005. Just like vacation homes, recreation land will be let go before the home. If you have a connection with rural property lenders, ask to be kept informed of land which may be coming into the bank's real estate inventory.
My degree is in political science not economics. So don't ask me if recreation land is a good investment. I have no idea. I like to spend time on land for its serenity benefits. Outdoor recreation may help keep you young, or it may not; it will certainly help you enjoy life. And being a responsible land steward is good for one's soul. Let's walk some land this fall, winter, and spring.
Tuesday, September 28, 2010
Market Range Pricing--So Misunderstood, So Effectively Good
Carly Simon's You're So Vain is about somebody, but she won't say who. Thanks to Al Gore's internet, I now know the guy, who we don't know, didn't walk into the party and "scarf apricots", and there were no "clowns" but "clouds" in Carly's coffee. With a little better understanding of the words, the song makes sense.
So, is this blog about songs or real estate?A little of both I guess. Instead of singing the blues in a market where competition is lagging, it appears Realtors are picking up one of the most misunderstood marketing tools and getting results. A quick search of the Realtors Association of South Central Wisconsin, MLS shows 3053 single family home sales in Dane County of properties listed since January 1, 2010. Of those sales, 354 are noted to have been marketed as Range Priced. A simple marketing idea of inviting people to come and look even if they had capped their search below the seller's contracted list price. I expect the trend of range priced properties to go up as the housing economy goes forward.
When I first heard about Market Range Pricing it was 1996 or so, and the concept had hit California via Australia. The San diego real estate community had picked up on Market Range Pricing and found it to be effective in a down market. Real estate is always valued, (appraisals, assessments) on comparison price evaluations. When the housing market is not fast and furious, people making buying decisions take time to do comparison price evaluations too. However, the price setting is traditionally done the way a commodity is priced---by a fixed price. Probably all fine and good but the inflexibility of a fixed price in a highly flexible environment may result in some buyers being intimidated away and some seller's missing out on acceptable prices and extraordinary terms from highly qualified buyers.
The Intent of Market Range Pricing is to invite the person who is qualified to visit your house even if they have capped their search to a price below your asking price. We know people are being more conservative and for example, while the bank may have qualified you for a purchase of $300,000, you may have capped your search at $250,000, and maybe $275,000. If I have a client who has a house verified worth $300,000 and we are not getting activity because there are few buyers in our price point in our neighborhood, I will suggest a range price strategey of $250,000 to $300,000. By entering the property in the MLS at $250,000+ the house is being found by the persons who limit their search at $250,000 or $275,000. I know this house will compare favorably to those priced significantly less. A clear explanation of our intent helps the buyer, and their Realtor, know this is not a bait and switch strategy, but an invitation to visit and compare. I provide 2 or 3 comparable sales to support our listed price of $300,000.
We expect buyers are going to do their homework and know what a home's value is to them. Not for everyone, but for many people, when given a choice to spend more than they planned, instead of less than they should, to get more of what will make for a better home for them, the choice to move up is an easy one. There are few things more expensive than owning the wrong home at any price. Owning the right home at a fair price is always going to be the wise decision.
Why should I make an offer above the low end of the range? That's a question I often hear and the answer is simple. Range pricing is designed to bring more people to the house. More people improve our chances of having mulitple offers. You don't know what someone else might do and there is no guarantee that you will get a second chance to make your best offer. The owner is inviting you to compare and make a decision on what the house is worth to you. If you offer $250,000 on a house with evidence to support a $300,000 appraisal, do you want the owner to consider your offer to be your best? Unless you have some compelling reason to not offer your best offer, a low offer with weak terms, might leave you on the outside looking in at what could have been a great home.
I think range pricing is misunderstood here because like anything that hits the midwest from the left coast, we are compelled to add our own flavor to the product. Range pricing came here when our market was in fast-forward. Remember, this is a tool designed for a down market, so when we picked it up, every broker put their twist on the model. What we called range price marketing didn't look much like the authentic tool; instead of being as simple as a cross cut saw, it was more like a hammer, screw driver, wrench, and pudding set in one. One common misperception is range pricing is used when value is unknown. That's probably been a past use. When the market was hot and I thought a house was worth $240,000 and the owner hoped for $250,000 +, we could range price at $240,000 to $260,000 and maybe get $255,000. The appraisers appraised and everyone was happy.
Buyers and Sellers have a win - win opportunity with range pricing. Some of the best terms in today's economy are not price first. Sure price is important, but so is closing date. An offer subjet to sale of real estate is a big uncertainty, but an offer from a pre-approved buyer with nothing to sell and flexibilty to close is highly preferred. I can't say enough about a pre-approval letter from a local lender. Given the choice of a buyer with a letter from a lender in the community or a commitment letter from an internet broker the seller is likely to choose the local lender buyer for peace of mind.
Limitations exist. The search systems in our MLS and real estate web sites require one price, and at first look a consumer will see a price of say "$275,000". The explanation of Range Pricing is typically found in the body of the description, but it is possible for a person to feel mislead when they see one price, get enthused, and then find out the house is actually priced at $300,000, but the range price marketing shows $275,000 to $300,000. Explanations help.
Range pricing is a tool who's time has come.
Monday, September 20, 2010
Buyer Enticing Pricing, and Time on the Market
I analyzed the data reported to the MLS by the listing brokers of 126 sales in and around Madison, through mid September 2010. To be considered in the study, the property had to be listed on or after January 1, 2010.
Conclusion:
The data proves nothing we haven’t known about the fundamentals of pricing: There is a correlation between “over price” and a longer length of time on the market. In the economy of pre-2007, which is the one most home seller’s knew when they bought their homes and still relate, the fundamentals were nearly irrelevant. Testing the market at prices not supported by recent sales could draw interest and offers. Appraisers adjusted and underwriting conceded.
A home owner who was a buyer five or more years ago probably can’t get revenge today. But, they could accomplish a relatively quick sale and avoid the stress of a protracted effort if they concede the "hopeful price" and price according to recent neighborhood sales. Take time to evaluate your objective. If peace of mind is more important than a bigger than reasonable piece of the pie, price is the solution.
A home owner who was a buyer five or more years ago probably can’t get revenge today. But, they could accomplish a relatively quick sale and avoid the stress of a protracted effort if they concede the "hopeful price" and price according to recent neighborhood sales. Take time to evaluate your objective. If peace of mind is more important than a bigger than reasonable piece of the pie, price is the solution.
Findings:
· Thirty seven percent (37%) of the group sold without making a single price change
· Average time on the market of all the sales in the group is 116 days
· Average time on the market from last price change to accepted offer is 34 days
· Average sale price to last asking price (price after one or more price reductions and before a buyer made an offer) is 96%
· Average sale price to initial asking price is 91%
· Average days on the market until the price where a buyer made an offer that resulted in a closing is 88 days
A couple of observations:
· A home not sold in the first 30-40 days is not likely to attract a buyer at the asking price
· Homes do attract qualified buyers relatively quick (34 days), when the buyer considers the price to be favorable
· When you properly price on day one, a sale price of 97-98% of your asking price is reasonable to expect
- Using this information to work backward expecting to still get a price above supported value is not going to work.
Deficiencies, and Logical Assumptions in the study:
Distressed sales are an unknown percentage of this study. Time on the market from last price change to a status change from ACTIVE to a status indicating an offer is in place is not always accurate. Logical judgment was used to come up with a reasonably accurate data. Sales where I could see a continuous effort to market the property beginning prior to January 1 are included. I excluded properties where the data provided appeared to indicate a non-listed property offered for sale by owner and sold by a buyer agent as those do not give time on the market or pricing history information.
Friday, September 17, 2010
Buried Treasure in Madison, Wisconsin Sales Numbers
Pirates buried their treasures and some just took them to the bottom of Davey Jone's Locker with their ships. These gold nuggets get found today by people who go down beneath the surface or otherwise don't wait for the good stuff to rise up and find them. I think there is gold underground in Madison, WI. The kind of gold we can do something with---golden insight. I got a tip off by listening to some open house visitors last Sunday.
The typical buyer is looking at numbers and not the numbers the Realtor Associations are giving out; buyers are flush with data, and we know he who has the information is in charge. Information, relevant information is gold. Gold is king. Here's what I am hearing the informed buyer talking about.
Initial asking prices are determined by many opinions and influence: Broker, Seller, Neighbor, Friend, Hope, Faith, Obama, Doyle...If it weren't for Hope and Faith, I think we would see homes come on the market at 7% less than they are and we would see homes selling in less than 60 days.
Here's the Gold in the buried treasure: Appraisers will be using the sales from 2010 to value homes in 2011. Those prices will be used to decide to sell or stay, offer or walk away. Possibly, as homes come on the market from here out we will have homes priced in line with the true new economy, not the false stimulated economy of first quarter 2010.
The typical buyer is looking at numbers and not the numbers the Realtor Associations are giving out; buyers are flush with data, and we know he who has the information is in charge. Information, relevant information is gold. Gold is king. Here's what I am hearing the informed buyer talking about.
- Price relative to Assessed Value. OK. We don't like that comparison even in a hot market. But at a time when municipal budget shortfalls, foreclosures, distressed sales, high property taxes, are on one's mind, it makes sense to see if what we knew from the old economy is true today with respect to property assessed values. While we might have grinned to bear it, around Madison, Wisconsin, there was said to be a reasonable correlation between assessed value and market value. Homes sold for about 5% to 8% above assessed value. Buyers resisted it and owners accepted it.
- Asking Price to Sales Price. Our MLS reports the last asking price and the sales price. In 2005 that percentage was typically 98% and price reductions were relatively minor. Today, the same comparison looks a little lower, but not disturbingly low, at about 95%. That's not enough to label the market a bust, but if you look at the initial asking price and compare to the final sales price you might be at least a little uncomfortable if not disturbed.
- The average Cumulative Time on the Market is pushing triple digits in Madison, Wisconsin. We don't talk a lot about cumulative time. We report the last marketing effort and that number will always show a relatively short time. In the hay-day that was fine because the original effort was typically enough to get the job done. A buyer knowing houses are staying on the market and going through more than one broker, may hold off expecting the new listing will become interesting in about 6 to 7 months.
Initial asking prices are determined by many opinions and influence: Broker, Seller, Neighbor, Friend, Hope, Faith, Obama, Doyle...If it weren't for Hope and Faith, I think we would see homes come on the market at 7% less than they are and we would see homes selling in less than 60 days.
Here's the Gold in the buried treasure: Appraisers will be using the sales from 2010 to value homes in 2011. Those prices will be used to decide to sell or stay, offer or walk away. Possibly, as homes come on the market from here out we will have homes priced in line with the true new economy, not the false stimulated economy of first quarter 2010.
Tuesday, September 14, 2010
Madison Area Homeowners Look to FHA to Refinance Upside Down Mortgages
Department of Housing and Urban Development has a solution for Madison area homeowners who are upside down in their primary home mortgage. It's possible to refinance from a non-FHA insured loan into an FHA loan if your situation meets prescribed conditions. Granted, meeting all of these conditions is a tall order, but for those that do, it's worth a look.
The FHA resource center is a place to start,
1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Another avenue would be an FHA mortgage lender. If your bank doesn't have an FHA expert on staff, call Bill Quigley 608-831-4663.
Madison, WI area home owners can protect their homes and their credit by using help of local experts and government initiatives.
The FHA resource center is a place to start,
1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Another avenue would be an FHA mortgage lender. If your bank doesn't have an FHA expert on staff, call Bill Quigley 608-831-4663.
Madison, WI area home owners can protect their homes and their credit by using help of local experts and government initiatives.
Monday, September 13, 2010
Mr. and Mrs. Janus, and the depression survivor view
Why am I writing about Mr. and Mrs. Janus? Because, as a Realtor, I interact, seven days a week, with people who are evaluating their peace of mind. Unlike Mrs. Janus, who is not being forced to change her spending and saving habits, the recession-depression is squeezing society into submission. Once the surrender is complete, a revolution of sorts will grow. How people price homes and how the consumer determines value could be very different very soon.
Already we are seeing consumers of real estate service turning to non-Realtor controlled on-line systems such as Zillow.com for insight into local real estate values, and home selling/buying advice. The consumer walking into an open house is likely to have more data on recent sales stored in their smart phone than the hosting realtor has in their possession. Cautious and conservative buyers know a fair value when they see one and they almost don't even want to see anything unless it's a stunning value. How value is determined by buyer and seller may never be entirely the same. However, if the differences continue to move apart this could be a very interesting few years.
Access to market data has been the prized jewel for home sellers during the price run-up days. Sure buyer agents had that data for their clients in 2005, but rather than come into the process highly educated on values and trends, the home sales data was mostly used to verify that an asking price was not too unreasonable. Today, the buyer who meets a Realtor shows up with high quality data of neighborhood highs, lows, trends, and generally conservative advice for negotiating. There is nothing to be gained in debating an armed buyer. They're armed for a reason--protection. There is no chance of changing determined minds. No one wants to make a mistake and lose. That goes for both sides of the table. Safety is a reasonable goal.
Buyers are already thinking like Mr. and Mrs. Janus, with a view of the future and an eye on the past. They are expecting to buy a home and some cushion from further decline of value. Home owners who are would-be home sellers have hope that the prices are at least stable. I'm going to continue to evaluate what I am seeing, hearing, and concluding.
We can make it out of this recession-depression, but probably not with everything we carried in.
Tuesday, September 7, 2010
Who's That Knocking at My Door?
Door to door sales was a career choice for a fellow political science college grad friend of mine in 1982. He became a lawyer and has an educational system related job in New York State today, but back in the day, my friend was being driven from D.C. to the burbs to knock on doors selling who knows what. Until Al Gore invented the internet the best way to knock on doors was to knock on doors. Today, the door knockers are knocking on our smart phones.
It's a steady stream of offers I'm getting this month. I can go back to school for Photography, an MBA (ya, I want one of those degrees), or even to learn to install replacement windows. Graphic design is an option if it's my passion, which it's not. Medical billing and coding experts must be in demand. I assume they need people to code "Insured" or "Not insured" on medical records. There are 15 positions a person can do from home...provided they have a home.
As my phone continues to "ping" with the alert of another email I glance at my door and wonder what it would look like outside if these offers were being delivered by the door to door salesperson. I see a line of people waiting their turn to wrap their knuckles on my wooden baricade.
Real estate is not my job, it's my career. I enjoy this business and wouldn't miss this opportunity of a lifetime. There is no other service where life experiences have better prepared me to be helpful to people. When we make it through, and we will, I want to be able to say I was part of the solution, and I hurt no one.
I have a message for the solicitors in general: You can keep on knockin' but you can't come in. I'm riding the storm out.
It's a steady stream of offers I'm getting this month. I can go back to school for Photography, an MBA (ya, I want one of those degrees), or even to learn to install replacement windows. Graphic design is an option if it's my passion, which it's not. Medical billing and coding experts must be in demand. I assume they need people to code "Insured" or "Not insured" on medical records. There are 15 positions a person can do from home...provided they have a home.
As my phone continues to "ping" with the alert of another email I glance at my door and wonder what it would look like outside if these offers were being delivered by the door to door salesperson. I see a line of people waiting their turn to wrap their knuckles on my wooden baricade.
Real estate is not my job, it's my career. I enjoy this business and wouldn't miss this opportunity of a lifetime. There is no other service where life experiences have better prepared me to be helpful to people. When we make it through, and we will, I want to be able to say I was part of the solution, and I hurt no one.
I have a message for the solicitors in general: You can keep on knockin' but you can't come in. I'm riding the storm out.
Thursday, September 2, 2010
Neglected Improvement Homes Might Be Your Best Opportunities
When given the choice of staying home and fixing up around the house some fellas will be opt for a morning at Home Depot and a weekend on a ladder. I want to buy the house these people are selling. Are they the norm? Doubt it.
A good use of a home equity line of credit, when homes had equity and our ratings had credit, would be home improvements. But the allure of an exotic week to 10 day vaction to an island beach house with tile floors, luxury kitchens, and fancy bathrooms was more appealing than replacing the old vinyl with tile and the kitchen with brilliance. Procrastination Vacation. So today we have upside down mortgages or tapped out equity, limited income, and maxed out credit cards. When the writing is on the wall and selling the house is the way out of a financial press, where will the money come from to bring the 20 year old house up to speed? I give up.The money probably isn't there.
Good homes in great locations are on the market. The asking price might include the cost of that spectacular vacation, the cottage up north, or the third car, and cool boat. (I always intended to pay those off with the next big pay day or bonus.) Should the owner expect a buyer to pay the price for my grand lifestyle? No, but that doesn't mean somebody won't try.
When you see a property with a few years worth of weekend projects left behind, it's a good indicator that the money for improvements is gone on the seller's side of the closing statement. Prior to today it was typical for a home buyer to estimate the expense of updating higher than actual and negotiate for a credit or price discount at twice the actual cost. That approach won't work today. The money is gone. A more successful strategy is to take the time to get real estimates and use real prices.
Reputable remodelers are charging fair prices. If you can come to terms on price, exclusive of the repairs, and the location is terrific, keep moving to closing by focusing on real costs. Losing a house that has the right location because we can't negotiate extraordinary expenses for repairs might be short sighted. A perfect condition property in an equally ideal location will have more demand and drive a higher price. It is more likely that location won't be comparable and you will pay more than you should for a house that has less of what you want. The National Association of Remodelers- Madison Chapter is a super resource for the people you need to make smart decsions and get brilliant remodeling.
A good use of a home equity line of credit, when homes had equity and our ratings had credit, would be home improvements. But the allure of an exotic week to 10 day vaction to an island beach house with tile floors, luxury kitchens, and fancy bathrooms was more appealing than replacing the old vinyl with tile and the kitchen with brilliance. Procrastination Vacation. So today we have upside down mortgages or tapped out equity, limited income, and maxed out credit cards. When the writing is on the wall and selling the house is the way out of a financial press, where will the money come from to bring the 20 year old house up to speed? I give up.The money probably isn't there.
Good homes in great locations are on the market. The asking price might include the cost of that spectacular vacation, the cottage up north, or the third car, and cool boat. (I always intended to pay those off with the next big pay day or bonus.) Should the owner expect a buyer to pay the price for my grand lifestyle? No, but that doesn't mean somebody won't try.
When you see a property with a few years worth of weekend projects left behind, it's a good indicator that the money for improvements is gone on the seller's side of the closing statement. Prior to today it was typical for a home buyer to estimate the expense of updating higher than actual and negotiate for a credit or price discount at twice the actual cost. That approach won't work today. The money is gone. A more successful strategy is to take the time to get real estimates and use real prices.
Reputable remodelers are charging fair prices. If you can come to terms on price, exclusive of the repairs, and the location is terrific, keep moving to closing by focusing on real costs. Losing a house that has the right location because we can't negotiate extraordinary expenses for repairs might be short sighted. A perfect condition property in an equally ideal location will have more demand and drive a higher price. It is more likely that location won't be comparable and you will pay more than you should for a house that has less of what you want. The National Association of Remodelers- Madison Chapter is a super resource for the people you need to make smart decsions and get brilliant remodeling.
Wednesday, September 1, 2010
Reasonably Competent Human Being (RCHB)
I think I am. Not brilliant by any means, but reasonably competent. I base that opinion on my awareness of my logical approach to conclusions. Illogical positions confound me. Now I don't believe there has to be a scientific explanation for everything, in fact logic suggests science can not answer all questions because it is not possible that all science is known today. So, as an RCHB (I saw that term in a book by Jennifer Allan a real estate agent mentor extraordinary person) I'm not perplexed by the real estate market. Nothing is going significantly up in the short term. There are no indicators of UP.
Let's look at interest rates: Interest rates are pretty much at an all time low. Would you say there is a 50/50 chance that rates will go up in the next 60 days? Well, November is coming up and elections are scheduled so do you think we will see interest rates go up? I don't. Would it be logical to conclude the evidence suggests rates will remain stable? I do.
What do we know about home prices and interest rates? Do we agree lower rates do not drive significantly more buyers into all markets. Lower interest rates drive some home owners out of the buyer market and into refinance. And in times when interest rates have been historically low for many months, the majority of buyers who wanted to take advantage of historic rates got in earlier---the pool of buyers who can qualify for the best rates is rather shallow by now. If the number of buyers entering the market doesn't move the needle the competition will remain cool. Right? Right. I thought so.
Do we think more buyers are coming into the market? Maybe. There are always new buyers coming in for one reason or another. What about this: Will more homes be brought to market by distressed sellers and distraught bankers? Yup. Hmmm...supply is going to exceed demand. Rates will be stable. How about jobs? Will unemployment go up or down or sideways? Let's assume it goes down. More people working, more people fully employed might stop the slide of sentiment. That'd be nice. Until more people feel more confident, more patience is going to be required.
Seems logical to me---A reasonably competent human being.
Let's look at interest rates: Interest rates are pretty much at an all time low. Would you say there is a 50/50 chance that rates will go up in the next 60 days? Well, November is coming up and elections are scheduled so do you think we will see interest rates go up? I don't. Would it be logical to conclude the evidence suggests rates will remain stable? I do.
What do we know about home prices and interest rates? Do we agree lower rates do not drive significantly more buyers into all markets. Lower interest rates drive some home owners out of the buyer market and into refinance. And in times when interest rates have been historically low for many months, the majority of buyers who wanted to take advantage of historic rates got in earlier---the pool of buyers who can qualify for the best rates is rather shallow by now. If the number of buyers entering the market doesn't move the needle the competition will remain cool. Right? Right. I thought so.
Do we think more buyers are coming into the market? Maybe. There are always new buyers coming in for one reason or another. What about this: Will more homes be brought to market by distressed sellers and distraught bankers? Yup. Hmmm...supply is going to exceed demand. Rates will be stable. How about jobs? Will unemployment go up or down or sideways? Let's assume it goes down. More people working, more people fully employed might stop the slide of sentiment. That'd be nice. Until more people feel more confident, more patience is going to be required.
Seems logical to me---A reasonably competent human being.
Friday, August 27, 2010
I want a great home, and I don't wanna pay a lot of money...
Who doesn't want a great home at a steal? "Hey Tom, show me the crummy houses and make sure they're over priced." Never heard it, never will. I might be able to fill that order, as crazy as it is. But you know what order I can't fill, and it's equally absurd? This one: "Tom, show me the best homes, in the best locations, and priced below market value." If those homes exist, I've never seen one. But everyone wants one. I think, even in a tough economy, the customers will line up for great homes in great neighborhoods, if the home is underpriced. And then what will happen is the competition will push the price up to fair market value, or close to it.
Back in the mid 1990's a marketing strategy came to the west coast via Australia and eventually moved east to the other coast, and the strategy was called Market Range Pricing, or MRP. The purpose of MRP was to get conservative, but qualified buyers, to come and look at homes priced above their comfort zone. California has seen more drastic market swings than the rest of the country over the decades, so they were ripe for a tool that might spur competition where none exisited. MRP worked because it is basic human nature to feel a need to be conservative until we feel a desire to be comfortable. Well, I don't know if that's basic human nature or not, but it sure seems logical.
This humanitarian crisis may be a good time to employ MRP in Dane County because we sure are lacking motivation from conservative would be home buyers. Not everyone is going to live in a van down by the river, or even shack down by the lake, but everyone appears to be cautious about keeping more money in the bank, or mattress, than they are thinking of spending on a house. Prices may be falling in neighborhoods where demand is next to nill, and a firm price doesn't move with the market. In fact, the market moves away from a price and there you sit.
Consider MRP with a wide enough range to reach down to the most conservative buyers who are qualified to purchase at your price. Bring them in. Invite them to compare your home to others they're seeing. It's possible they will decide that it's better to spend a little more than they planned, instead of less than they should, and own a home that has more of what they want to be comfortable.
MRP works a little bit like an auction and a little bit like normal shopping. The owner is not saying they will accept an offer at any price, but they will consider all of the terms of all offers. It your offer price reflects a value supported by recent sales, you have a good chance of owning a great home, in a great location, at a fair price---maybe even below market price. Click Here to see a great home in Madison Market Range Priced from $210,000 to $235,000.
Back in the mid 1990's a marketing strategy came to the west coast via Australia and eventually moved east to the other coast, and the strategy was called Market Range Pricing, or MRP. The purpose of MRP was to get conservative, but qualified buyers, to come and look at homes priced above their comfort zone. California has seen more drastic market swings than the rest of the country over the decades, so they were ripe for a tool that might spur competition where none exisited. MRP worked because it is basic human nature to feel a need to be conservative until we feel a desire to be comfortable. Well, I don't know if that's basic human nature or not, but it sure seems logical.
This humanitarian crisis may be a good time to employ MRP in Dane County because we sure are lacking motivation from conservative would be home buyers. Not everyone is going to live in a van down by the river, or even shack down by the lake, but everyone appears to be cautious about keeping more money in the bank, or mattress, than they are thinking of spending on a house. Prices may be falling in neighborhoods where demand is next to nill, and a firm price doesn't move with the market. In fact, the market moves away from a price and there you sit.
Consider MRP with a wide enough range to reach down to the most conservative buyers who are qualified to purchase at your price. Bring them in. Invite them to compare your home to others they're seeing. It's possible they will decide that it's better to spend a little more than they planned, instead of less than they should, and own a home that has more of what they want to be comfortable.
MRP works a little bit like an auction and a little bit like normal shopping. The owner is not saying they will accept an offer at any price, but they will consider all of the terms of all offers. It your offer price reflects a value supported by recent sales, you have a good chance of owning a great home, in a great location, at a fair price---maybe even below market price. Click Here to see a great home in Madison Market Range Priced from $210,000 to $235,000.
Thursday, August 26, 2010
Recession, depression, recovery? Who cares; it hurts.
The beauty of a business built on helping friends of past clients, and friends, is that I continually get to work with smart people who come to me with a high level of trust. In this economy, maintaining that trust depends on my willingness to say what I mean and mean what I say…without saying it mean. Every person who chooses to work with me wants to know what I think is real and what’s fiction about the real estate economy.
A few decades ago then presidential candidate, Ronald Reagan said, “A recession is when your neighbor loses his job. A depression is when you lose your job.” He added for a laugh, “Recovery is when the President loses his.”( I don’t bring that up as a statement against the current administration; I contributed my part to this humanitarian crisis.) The quote makes the point that the difference between depression and recession is relative to how close the pain hits home.
Do we care if this situation is called depression, recession, or recovery? I don’t. It’s a humanitarian crisis and whether Dane County fairs better or worse than the rest of the country is of no significance. Losing a job, security, savings, home, peace of mind is painful. Some say the economy is improving and it may be. But if this is early stages of recovery, I doubt people are looking around and saying, “Wow! That sucked. Let’s go buy a house.” The sentiment, the emotional attitude, of people is transforming and it’s an evolution process. Two, or three generations emerged from the Great Depression with conservative attitudes. That huge population had an aversion to high risk, and their attitude carried the day for over 50 years. In the last 20 years of the 20th Century and into the 21st, elevated levels of risk were assumed by an unprecedented percentage of the American public. If history is an indicator, we are going to see people living with less and saving more for a long time. Risk taking and excessive spending are likely to be uncommon in all purchase decisions.
But what about selling decisions? Regardless of when a person wants to sell, the best information will always be for time that just passed. I can't tell you today if tomorrow will be a better time to sell than today. We don't know tomorrow, we barely know today. We can depend on what we know of yesterday...until next month when the government revises their last month figures by adjusting down. Isn't it better to look at what is available, consider what we know about our own situation, and make a decision that works best for ourselves in the present? Sometimes we will win, sometimes lose. But at least we make decisions based on what we can control and we aren't at the mercy of uncontrolled forces. Know your neighborhood. Be honest about your property. And be smart about your expectations.
A decision to sell always considers your alternatives and alternatives are not always best determined by dollars and cents. People who put their emotional and physical health and well being first typically find out that everything else takes care of itself.
A few decades ago then presidential candidate, Ronald Reagan said, “A recession is when your neighbor loses his job. A depression is when you lose your job.” He added for a laugh, “Recovery is when the President loses his.”( I don’t bring that up as a statement against the current administration; I contributed my part to this humanitarian crisis.) The quote makes the point that the difference between depression and recession is relative to how close the pain hits home.
Do we care if this situation is called depression, recession, or recovery? I don’t. It’s a humanitarian crisis and whether Dane County fairs better or worse than the rest of the country is of no significance. Losing a job, security, savings, home, peace of mind is painful. Some say the economy is improving and it may be. But if this is early stages of recovery, I doubt people are looking around and saying, “Wow! That sucked. Let’s go buy a house.” The sentiment, the emotional attitude, of people is transforming and it’s an evolution process. Two, or three generations emerged from the Great Depression with conservative attitudes. That huge population had an aversion to high risk, and their attitude carried the day for over 50 years. In the last 20 years of the 20th Century and into the 21st, elevated levels of risk were assumed by an unprecedented percentage of the American public. If history is an indicator, we are going to see people living with less and saving more for a long time. Risk taking and excessive spending are likely to be uncommon in all purchase decisions.
But what about selling decisions? Regardless of when a person wants to sell, the best information will always be for time that just passed. I can't tell you today if tomorrow will be a better time to sell than today. We don't know tomorrow, we barely know today. We can depend on what we know of yesterday...until next month when the government revises their last month figures by adjusting down. Isn't it better to look at what is available, consider what we know about our own situation, and make a decision that works best for ourselves in the present? Sometimes we will win, sometimes lose. But at least we make decisions based on what we can control and we aren't at the mercy of uncontrolled forces. Know your neighborhood. Be honest about your property. And be smart about your expectations.
A decision to sell always considers your alternatives and alternatives are not always best determined by dollars and cents. People who put their emotional and physical health and well being first typically find out that everything else takes care of itself.
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