Dear Pat,
Our elderly neighbors just sold their house after two months on the market. They told us they got very close to their reduced asking price, but had to agree to pay the buyer’s closing costs. Somehow it doesn’t seem right for a seller to pay costs of the buyer. Is there something wrong here?
---Just Wondering
Dear Wondering,
No, nothing is wrong or illegal with the seller paying the buyer’s closing costs. It’s been a common practice for years, often used to help cash-poor buyers who were willing to add the closing costs on top of the price offered on the home. For example: an offer of $205,000 on a house priced at $200,000, asking the sellers to pay $5000 of the buyer’s costs (which would still give the seller $200,000).
But now we see it more often as a seller concession, with no compensation to the sale price. In this market a seller is often willing to pick up a substantial portion of the buyer’s costs—it’s the same as agreeing to sell for less. This is especially true if the home has been on the market for 30 days or more. Other seller concessions that we see more frequently these days include decorating allowances, and substantial improvements or repairs (not necessarily related to safety) after the buyer’s inspection. It really comes down to being competitive and willing to negotiate with buyers in a market full of inventory. Naturally, if a home sells quickly there is less “give” from the seller. Regardless of what we all read in the paper about market-time averages, many houses are candidates to sell in the first ten days if they offer at least two of the following attributes: great condition, desirable location, and market-conscious price. Of course, the last of these is the most critical—if an otherwise worthy home is seen as too expensive, the adjustment will eventually happen in price reductions and seller concessions.
Sunday, October 1, 2006
Wednesday, August 2, 2006
Turn Back the Clock
Dear Pat,
I've been offered a great job in Maryland, but I'm worried about selling our house in this "buyer's" market. I see many "for sale" signs, but few seem to be selling. We've put the house in top-notch condition in the five years we've owned it, and I really don't want to rent it out if it doesn't sell. Just how bad it it out there?
--We're Leaving
Dear Leavers,
This market has been a major disappointment for those sellers who expected the party to last forever. Buyers, already uneasy about media "bubble" talk, are cautious as they face higher interest rates that limit their spending ability. Realtors and other real estate service providers feel the pinch of reduced volume; and generally there's a lot of hand-wringing going on. That's the feeling.
Here are the facts. I combed through Longfellow sales data for two and three bedroom single family homes for the first six months of this year, and compared the numbers with the same period in 2005. Prices remained steady at an average of about $219,500--no increase this year, but no indication of a "bubble." However, sellers should be cautioned by the fact that, while the number of on-market listings was way up this year, actual closed sales were down by 20%. From my own experience I interpret this to mean that houses sold this year, as the "pick of the litter", were probably superior to the houses sold at the same price last year, when buyers had fewer to choose from. Thus I have to conclude that, in this hidden and impossible-to-measure way, home values have probably gone down. The average price in June actually slipped 7% from June 2005 (too short and too small a sample to cause alarm, but perhaps worth mentioning).
So, to answer your question, Leavers: if your home is in top-notch condition (as you say) and if you are reasonable in your pricing and timing expectations, I would say it's not bad out there at all. My advice is to turn back the clock--in absolute terms, what seller wouldn't be happy with 4 out the 5 last years' appreciation, even if he didn't get that fifth year he had hoped for? Just a few years ago, buyers would have been salivating at the prospect of 6.5% interest rates, and real estate professionals would have turned cartwheels if they were doing 80% of a 2005 volume. Perspective is everything. Good luck!
I've been offered a great job in Maryland, but I'm worried about selling our house in this "buyer's" market. I see many "for sale" signs, but few seem to be selling. We've put the house in top-notch condition in the five years we've owned it, and I really don't want to rent it out if it doesn't sell. Just how bad it it out there?
--We're Leaving
Dear Leavers,
This market has been a major disappointment for those sellers who expected the party to last forever. Buyers, already uneasy about media "bubble" talk, are cautious as they face higher interest rates that limit their spending ability. Realtors and other real estate service providers feel the pinch of reduced volume; and generally there's a lot of hand-wringing going on. That's the feeling.
Here are the facts. I combed through Longfellow sales data for two and three bedroom single family homes for the first six months of this year, and compared the numbers with the same period in 2005. Prices remained steady at an average of about $219,500--no increase this year, but no indication of a "bubble." However, sellers should be cautioned by the fact that, while the number of on-market listings was way up this year, actual closed sales were down by 20%. From my own experience I interpret this to mean that houses sold this year, as the "pick of the litter", were probably superior to the houses sold at the same price last year, when buyers had fewer to choose from. Thus I have to conclude that, in this hidden and impossible-to-measure way, home values have probably gone down. The average price in June actually slipped 7% from June 2005 (too short and too small a sample to cause alarm, but perhaps worth mentioning).
So, to answer your question, Leavers: if your home is in top-notch condition (as you say) and if you are reasonable in your pricing and timing expectations, I would say it's not bad out there at all. My advice is to turn back the clock--in absolute terms, what seller wouldn't be happy with 4 out the 5 last years' appreciation, even if he didn't get that fifth year he had hoped for? Just a few years ago, buyers would have been salivating at the prospect of 6.5% interest rates, and real estate professionals would have turned cartwheels if they were doing 80% of a 2005 volume. Perspective is everything. Good luck!
Saturday, June 3, 2006
No Surprises: Surviving the Home Inspection
Dear Pat,
Our house sold fairly soon after we put it on the market, but the buyer's home inspection wrecked the deal. After three hours the inspector had assembled a huge list of concerns and the buyers walked away. We bought this old house without an inspection, and maybe it could be in better shape, but we've been comfortable here for 15 years without any problems. Next time, how do we avoid getting . . .
--Burned
Dear Burned,
You have my sympathies. Nothing infuriates me more than being at the mercy of an over-zealous inspector who lacks the ability to put an older home's flaws in perspective for the buyer. Unfortunately, when the paid "expert" states an opinion, it's all too easy for a buyer to accept it as gospel, even if that opinion is based on limited real-world experience. But I don't mean to condemn the breed--most inspectors I've met are pretty savvy about the issues we face with our older housing stock, and know how to inform buyers without scaring them.
Let's look at ways you can sidestep the pain next time, Burned. First, find out what's wrong with your house. Ask the selling agent for a copy of the deal-killing inspection report. Or you may want to get your own inspection by a reputable professional. (Be aware that a Minneapolis Truth-in-Sale-of Housing report is not complete enough to give you the information you need.) Some sellers get home inspections prior to going on the market, and have the full inspection report available to any prospective buyer--although buyers might want their own inspection anyway.
Now you have your work-list, and, we hope, some good advice from your inspector about ways to address the problems he/she has found. Use your Realtor to help set priorities: spend what you can affort to fix the most important items, adjust your expectations of eventual sale proceeds for the rest. Remember, there is no such thing as a fatal house flaw--a big problem might scare away some buyers, but others will take on the challenge if the price or seller concessions make it possible. The key for you, Burned, is to know the potential stumbling blocks before you sell. No surprises.
Thursday, April 6, 2006
Open House Etiquette
Dear Pat,
My husband and I are trying to get a feel for the real estate market by going to open houses. Sometimes it’s hard to get past the Realtor or homeowner just to see the house. We’ve been asked all kinds of questions, and been asked to sign in several times. We want to do our research in our own time frame, but we know the calls will start once we sign in. Is this a requirement? We want to see what’s out there in this “buyer’s” market, but we’re
---Reluctant
Dear Reluctants,
Short answer, “maybe.” It depends on the agent, and what he has promised the seller. But I don’t see why signing a sheet has to open the gates to a flood of unwanted calls. I have held open houses for my sellers for many years, and in that time I’ve developed a few simple rules of etiquette on Sunday afternoons:
1. Sellers have a right to know who came into their home. I will always ask buyers to sign in, along with a promise to not call them unless they specifically request it. However, I won’t withhold a buyer’s privilege to tour the home if he refuses to sign in (that would not be in the best interest of my seller).
2. Buyers have the right to tour the home without interference. We all laugh at the classic how-not-to-show-your-house example wherein the seller follows the buyer from room to room breathlessly announcing the obvious (“…and this is the kitchen!”). But a well-intentioned agent who simply wants to be nearby for questions may also be too much for some buyers. A buyer with a question can find me easily in the home.
3. Neighbors have the right to look, too. I always welcome “nosy” neighbors. They are invariably friendly houseguests who many times over the years have become matchmakers for the perfect buyer.
4. Any guest in the home has the right to my immediate and undivided attention. It’s my party, and my obligation to be a courteous, responsive host.
My advice, Reluctants, is to act as though every open house you enter has this “bill of rights.” Explain to an over-eager agent that you feel more comfortable touring the home quietly, by yourself. Or note on a sign-in sheet that you don’t want to be called later. Now, go forth and sample this so-called “buyer’s market.” Good luck!
My husband and I are trying to get a feel for the real estate market by going to open houses. Sometimes it’s hard to get past the Realtor or homeowner just to see the house. We’ve been asked all kinds of questions, and been asked to sign in several times. We want to do our research in our own time frame, but we know the calls will start once we sign in. Is this a requirement? We want to see what’s out there in this “buyer’s” market, but we’re
---Reluctant
Dear Reluctants,
Short answer, “maybe.” It depends on the agent, and what he has promised the seller. But I don’t see why signing a sheet has to open the gates to a flood of unwanted calls. I have held open houses for my sellers for many years, and in that time I’ve developed a few simple rules of etiquette on Sunday afternoons:
1. Sellers have a right to know who came into their home. I will always ask buyers to sign in, along with a promise to not call them unless they specifically request it. However, I won’t withhold a buyer’s privilege to tour the home if he refuses to sign in (that would not be in the best interest of my seller).
2. Buyers have the right to tour the home without interference. We all laugh at the classic how-not-to-show-your-house example wherein the seller follows the buyer from room to room breathlessly announcing the obvious (“…and this is the kitchen!”). But a well-intentioned agent who simply wants to be nearby for questions may also be too much for some buyers. A buyer with a question can find me easily in the home.
3. Neighbors have the right to look, too. I always welcome “nosy” neighbors. They are invariably friendly houseguests who many times over the years have become matchmakers for the perfect buyer.
4. Any guest in the home has the right to my immediate and undivided attention. It’s my party, and my obligation to be a courteous, responsive host.
My advice, Reluctants, is to act as though every open house you enter has this “bill of rights.” Explain to an over-eager agent that you feel more comfortable touring the home quietly, by yourself. Or note on a sign-in sheet that you don’t want to be called later. Now, go forth and sample this so-called “buyer’s market.” Good luck!
Monday, March 6, 2006
Building in the City
Dear Pat,
For some time now we’ve been eyeing a wonderful property that has a small house on the back of a nicely wooded lot (40x140), just a few blocks from the river. The owner will sell to us for $150,000, which is probably an OK price if we intended to live in the little house. But we really just want the lot so we can build a custom energy efficient home. What is normal lot value these days, and are we crazy to start a project with so much into the land?
---Builders at Heart
Dear Builders,
I understand what you want to know, but you’re asking the wrong questions. First, it’s best to forget any notions of “normal” lot value, especially in the city. Appraisers, assessors, and insurance underwriters may apportion a percentage of overall market value of an existing property as land value for their own purposes, but that doesn’t determine the real market value of a lot for sale. Obviously, the ever-moving market determines the market value.
The rule of thumb for new suburban construction is 25-30% of the overall cost to be spent on land. Thus, in a development of homes averaging $400,000, lot values typically will average $100,000-125,000. Of course, that 3-1 ratio is hard to obtain in the city where undeveloped land is extremely rare, and where the most desirable building sites are already taken. In the city a 2-1 ratio (or less when a tear-down is involved) is more likely, and you should be careful to ensure that the overall cost of your project doesn’t push too far past the average property values in your neighborhood, or on your block.
As to crazy, I wouldn’t hazard a guess without knowing much more about your specific location and construction plans. But let’s assume you can buy the lot, with building, for $150,000, and can complete the construction of your dream house for an additional $250,000. (Not easy, I know, but you said you were Builders at Heart). That’s $400,000.
Now here are the questions you should be asking: if we put $400,000 (or put your own number here) into a house, will this neighborhood support it? Could we sell it today for that price, or perhaps in 5 years, with a modest 3% appreciation rate? Are we planning a home that will have wide buyer appeal in terms of features and aesthetics, or does our plan limit the eventual market? And, most important: if the answers don’t add up, do we care?
A Realtor can answer all but one of those questions for you, Builders. But it’s the last question that may make you appear crazy if you answer it “wrong”. For what it’s worth, my husband and I answered that question “wrong” ten years ago, and we’ve never regretted it. Good luck!
For some time now we’ve been eyeing a wonderful property that has a small house on the back of a nicely wooded lot (40x140), just a few blocks from the river. The owner will sell to us for $150,000, which is probably an OK price if we intended to live in the little house. But we really just want the lot so we can build a custom energy efficient home. What is normal lot value these days, and are we crazy to start a project with so much into the land?
---Builders at Heart
Dear Builders,
I understand what you want to know, but you’re asking the wrong questions. First, it’s best to forget any notions of “normal” lot value, especially in the city. Appraisers, assessors, and insurance underwriters may apportion a percentage of overall market value of an existing property as land value for their own purposes, but that doesn’t determine the real market value of a lot for sale. Obviously, the ever-moving market determines the market value.
The rule of thumb for new suburban construction is 25-30% of the overall cost to be spent on land. Thus, in a development of homes averaging $400,000, lot values typically will average $100,000-125,000. Of course, that 3-1 ratio is hard to obtain in the city where undeveloped land is extremely rare, and where the most desirable building sites are already taken. In the city a 2-1 ratio (or less when a tear-down is involved) is more likely, and you should be careful to ensure that the overall cost of your project doesn’t push too far past the average property values in your neighborhood, or on your block.
As to crazy, I wouldn’t hazard a guess without knowing much more about your specific location and construction plans. But let’s assume you can buy the lot, with building, for $150,000, and can complete the construction of your dream house for an additional $250,000. (Not easy, I know, but you said you were Builders at Heart). That’s $400,000.
Now here are the questions you should be asking: if we put $400,000 (or put your own number here) into a house, will this neighborhood support it? Could we sell it today for that price, or perhaps in 5 years, with a modest 3% appreciation rate? Are we planning a home that will have wide buyer appeal in terms of features and aesthetics, or does our plan limit the eventual market? And, most important: if the answers don’t add up, do we care?
A Realtor can answer all but one of those questions for you, Builders. But it’s the last question that may make you appear crazy if you answer it “wrong”. For what it’s worth, my husband and I answered that question “wrong” ten years ago, and we’ve never regretted it. Good luck!
Saturday, February 4, 2006
Use a Realtor to Stay in Your Home
Dear Pat,
I’ve lived in my house for 38 years, and I’d like to stay here for as long as I’m able. I’m 72 years old, in good health, and my family is nearby in the neighborhood. I have no mortgage to worry about, but taxes and heat bills are eating up my Social Security income. I know you offer house appraisals for free, and I’d like to know the value of my house so I could look into a “reverse mortgage.” Can you do this for me, or are your appraisals just for selling?
---Homebody
Dear Homebody,
I offer a CMA (Competitive Market Analysis) to anybody who wants it, for whatever reason. And I think you have a terrific reason: if you know your home’s current value you can make better decisions about your future. When I’m first in the home I note the age of roof, gutters, mechanical systems and appliances that may need to be replaced as the years go by, and current conditions that may need attention to satisfy a bank appraiser (and to increase sale value, when the time comes). Then I’ll provide “comps” (listing information on comparable homes to yours) which have sold nearby within the past year. It’s likely I will have listed several of these homes myself, or been inside them—so I can usually make a clear and easy comparison to determine your home’s value.
I’m glad to hear you’re already aware of reverse mortgages, Homebody. They were invented for people in just your circumstances. And many people are starting to consider them as a valuable component of a sophisticated retirement plan, which might include a company pension, stock holdings and real estate, as well as social security. For the uninitiated, a “reverse” mortgage pays you a monthly income for as long as you own the home, or a lump sum payment, or a combination (you may need some cash to pay off any existing mortgage—a requirement—or to make a major repair). The amount of money you can receive is based on your home’s value, current interest rates, and your age—the older you are, the more money you can get.
You’ll still own your home and pay your own taxes and insurance. Details and qualifications of these mortgages are too complex to discuss here, but I recommend the AARP website www.AARP.com and their excellent booklet entitled “Home Made Money.” The website also lets you access a reverse mortgage calculator to find out how much you could receive if you were to take out a mortgage today: for instance, if you’re 72 years old living in a house valued at $225,000, you could obtain $133,048 in a lump sum, or $845 monthly until you sell your home.
It seems like a simple step to help keep many older people in their homes, if they choose to do so. With a CMA I can provide you with at least some of the information you need to make the decision. And for those of you who have already decided to sell, I urge you to read my article “Flip Off the Flippers” at www.riverrealty.net. Please, do not let these people through your door. Get a CMA from a legitimate, recommended Realtor to determine the true value of your home.
I’ve lived in my house for 38 years, and I’d like to stay here for as long as I’m able. I’m 72 years old, in good health, and my family is nearby in the neighborhood. I have no mortgage to worry about, but taxes and heat bills are eating up my Social Security income. I know you offer house appraisals for free, and I’d like to know the value of my house so I could look into a “reverse mortgage.” Can you do this for me, or are your appraisals just for selling?
---Homebody
Dear Homebody,
I offer a CMA (Competitive Market Analysis) to anybody who wants it, for whatever reason. And I think you have a terrific reason: if you know your home’s current value you can make better decisions about your future. When I’m first in the home I note the age of roof, gutters, mechanical systems and appliances that may need to be replaced as the years go by, and current conditions that may need attention to satisfy a bank appraiser (and to increase sale value, when the time comes). Then I’ll provide “comps” (listing information on comparable homes to yours) which have sold nearby within the past year. It’s likely I will have listed several of these homes myself, or been inside them—so I can usually make a clear and easy comparison to determine your home’s value.
I’m glad to hear you’re already aware of reverse mortgages, Homebody. They were invented for people in just your circumstances. And many people are starting to consider them as a valuable component of a sophisticated retirement plan, which might include a company pension, stock holdings and real estate, as well as social security. For the uninitiated, a “reverse” mortgage pays you a monthly income for as long as you own the home, or a lump sum payment, or a combination (you may need some cash to pay off any existing mortgage—a requirement—or to make a major repair). The amount of money you can receive is based on your home’s value, current interest rates, and your age—the older you are, the more money you can get.
You’ll still own your home and pay your own taxes and insurance. Details and qualifications of these mortgages are too complex to discuss here, but I recommend the AARP website www.AARP.com and their excellent booklet entitled “Home Made Money.” The website also lets you access a reverse mortgage calculator to find out how much you could receive if you were to take out a mortgage today: for instance, if you’re 72 years old living in a house valued at $225,000, you could obtain $133,048 in a lump sum, or $845 monthly until you sell your home.
It seems like a simple step to help keep many older people in their homes, if they choose to do so. With a CMA I can provide you with at least some of the information you need to make the decision. And for those of you who have already decided to sell, I urge you to read my article “Flip Off the Flippers” at www.riverrealty.net. Please, do not let these people through your door. Get a CMA from a legitimate, recommended Realtor to determine the true value of your home.
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