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.
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