In December, I posted a blog regarding housing starts approaching all time lows. You can read that post here.
The post mentioned a bankrupt builder, Levitt & Sons, going out of business after almost 80 years in business. The New York Times has just published an article on that very builder here. A sad story really. Just goes to show you what worked in 1950 may not work in the 2000's. We're all speculators, folks.
Some win, some lose.
Friday, January 4, 2008
another article regarding Levitt & Sons
clutter and its effect in a down market
When the conditions in your local real estate market are poor, even the little things can make a huge difference. I was showing a property just before the new year, and it seemed as though it met all of the requirements of my customers. They agreed, except for one glaring issue we could easily recognize the moment we entered the home: it was oozing with clutter.
This particular transaction was a rental, but it rings true for sales as well. My customers were instantly turned off by the amount of 'things' that were littered throughout the house. This was a fairly large house, over 2000 sq ft under air. It was so cluttered that we developed a temporary case of claustrophobia and whisked off to the next house.
My customers thought long and hard about making an offer on the cluttered mess in question, but decided against if for a number of reasons, the most glaring reason being if these homeowners were to become my customers landlords', were they going to treat the next 12 months as landlords like they did living in their complete train wreck of a home? The answer is probably. People can claim that they will change or make the situation better, but they rarely do. I often say that if we as humans sold the same efforts during the courtship as we do in the marriage, the divorce rate could approach zero. Instead we change, become lax, fall into bad habits, you get the point. I digress....
So the issue in question is clutter. The New York Times wrote an article recently about clutter as a human behavioral problem...you can read it here. My solution to the problem is basic but it could very well make the difference between you selling your home or someone making an offer on your neighbors home.
First, get rid of all of the religious trinkets that you have scattered about your home. You are moving after all, so get a head start and remove those items first. Believe it or not, we still live in a prejudice, single-minded society and having these items out can and will kill your deal. While I could comment all day and night about a nation of followers, that is not the basis of my blog.
Next, the family pictures. The nice thing about moving is even though you will never again own that home that created so many wonderful memories for you and your family, the memories go with you. When potential customers come to view your home it is imperative that you make every effort to make those customers feel as if that is THEIR home. Pictures all over the fridge and walls are cute but it blocks a fundamental personal feeling of potential ownership when customers start gazing at the photos. Remember...that home is essentially THEIR home now, not YOURS. Make those customers feel at home. Trust me when I say this works.
Lastly, any other trinkets of any kind....box them up immediately and get them ready to move. The feeling of claustrophobia is real, and it can make your home feel a lot smaller than it may actually be. When I bring customers by, I want them focused on where they're going to be placing furniture, how much fun the kids will have in the backyard, so on and so forth. If all they can think about is all the junk laying around, they immediately associate your home negatively. And unless these customers I bring by are interior decorators, they rarely see past the mess.
I don't think I need to speak about how the home needs to be spotless also, especially if you are reading this from a suffering local market (which represents the majority) but I have heard and seen it all these days. So get to cleaning! Oh, and while you're at it, lower that price!!
Monday, December 31, 2007
Sunday, December 30, 2007
Selling 'For Sale By Owner' in a declining market
There is an abundance of information published by the National Association of Realtors (of which I am a member) that I disagree with. All too often the Association does nothing more than apply lipstick to the proverbial pig by stating that the housing market/mortgage crisis is not as bad as the media makes it out to be. Sure, the spin put forth by the association may ring true in the 5 best performing markets nationwide, but overall that is not an accurate portrayal of what is really going on in the world. It's like saying 'even a broken clock is right twice a day'.....no matter how you sugar coat that saying--it is still a broken clock.
That said, there are still bits and pieces of solid advice that the NAR does put out (once in a blue moon). The advice to homeowners on why it doesn't make sense to sell your home 'by owner' is actually good advice in a declining market, and I will explain why in MY words.
First, lets take a look at some for sale by owner websites and who is actually searching those sites for homes to purchase. Some of those websites are http://www.forsalebyowner.com/, http://www.fsbo.com/, and http://www.byowner.com/. I'm sure you've probably seen the clever television ads by some of these sites where the homeowners describe how much money they saved while thanking the site for a job well done. I do not know the cost associated with using their services, but I assume it's less than the 6% it costs to sell your home through a residential brokerage.
So, you decide for whatever reason, you would like to sell your home 'by owner' and utilize the services of one of these websites. Immediately, you increase your exposure through top search engine positioning via one of the aforementioned websites. You do this presumably to save money. Well guess what type of 'market' shops for homes to purchase on for sale by owner websites? If you guessed BARGAIN SEEKERS you hit the nail right on the head!
When I speak to a homeowner who has tried or is still in the process of trying to sell their home through one of these outlets my first question to them is 'have you had any offers?' and their answer to the question is usually 'yes'. I follow that up with 'well what did those offers look like?', to which they ALWAYS say (not sometimes, ALWAYS) too low. WELL NO KIDDING! The people making offers on your home know you are trying to save 6% by not selling through a traditional brokerage!! Any idiot with a pulse is going to knock that right off their asking price BEFORE they make an offer. Just like you are trying to save money--they are trying to save money also. Whether you think you are offering fair market value or not makes no difference when you consider WHO these websites were REALLY created for in the first place. In a declining market, an experienced bargain seeker will CONVINCE you to accept his/her terms now before the news gets worse. If they are as good at negotiating as I know some of them to be, you are about to give up your place for a song!
I mean really.....why would a buyer/investor not use a Realtor to find the perfect home/investment for them when the service is free? (home sellers are the ones who pay Realtors their commissions). Because they want to try and get a DEAL!! They know they will out negotiate you (and yes, they will) and get you to agree to THEIR price and THEIR terms. No way, you say!! They'll never get us down from this price!! We can see you coming miles away, you say!! Uh......okay. Then your home sits on the market like all the other McMansions on the street and you end up listing it with a Realtor anyway. What a royal waste of money/time for you I say. For sale by owner websites were created for INVESTORS/DEAL SEEKERS......NOT YOU!!!!
Every so often, someone will sell their home by owner for a decent price (to that seller). And, at dinner one night out, you will overhear this conversation from another table as the other couple sips champagne and eats chocolate covered strawberries while laughing and smiling and otherwise acting as though they hit the lottery. You will remember this isolated case. It will stick in your head FOR MONTHS. You will subsequently forget about how 1000's of other not-so-fortunate 'by owner' sellers could not sell on their own and either gave up or listed with a brokerage. And your listing will languish. It will become unfairly stigmatized because you could not pull the wool from your eyes and face reality. What was reality again? The reality is that for sale by owner websites were NOT CREATED FOR YOU. They were created for bargain seekers and people who know how to get deals.
Monday, December 17, 2007
wake up and smell the roses
Sellers, please wake up. Smart Realtors know how many mortgages you have outstanding on your home, what your mortgage payoffs are, and what you stand to make or lose at the end of the day. Smart Realtors know what other properties you may own, if they are close to foreclosure or not, and we know how much cash you think you will make at the end of the day after this sale. Problem is my job is NOT to make you money and you need to know this. I sell homes based on current market conditions; good, bad, and ugly. If you profit on the deal, consider yourself lucky and congratulations.
But if I hear 'well this is what we MUST net at the end of the day' one more time I may laugh off of the chair I'm sitting in. Good luck with that. I'll be glad to refer you to an agent that thinks he or she can help you. I won't even ask for a referral fee (translation: your home won't sell). If this was your retirement plan, I do feel sorry for you to an extent. But my condolences end right there.
When you hire me to get a home sold, I plan on selling it. If that requires you to lower your asking price significantly, I will tell you. Only we have this conversation before hand, before I take the listing. If we are conversing and I suspect that you will not be willing to reduce your price to a realistic level, I will move on. There is no more room for another delusional seller. Consider the reduction as if it were money you never had.
People like to count their money before its in their hands and that 'figure' sticks with them throughout the home selling process. I exist to eliminate that 'figure' since it never existed in the first place. You reduced your price $50,000, but that was money that didn't exist. Not yesterday, not today, and certainly not tomorrow. This might come across as harsh, but trust me, most of you really need to read this and take it to heart. You will thank me later--every seller I have had this year (in your shoes) has.
housing starts approaching all time lows
The definition of a housing start according to the National Association of Home Builders is:
Defined as excavation (ground breaking) for the footings or foundation of a residential structure. For a multifamily structure, all units are counted as started when the structure is started.
Starts are estimated by the Census Bureau based on a survey of permit holders. Each month, Census Bureau representatives ask holders of outstanding permits whether they have started construction. The same survey also determines whether the home is being built for sale (as a package including land), and if so, whether it has been sold. The Census Bureau continues to contact the permit holders each month until the structure is completed (or if completed but still for-sale, until a sale occurs). For single-family homes, about one in every 50 permits is selected for the survey.
Although about half of single family homes are started in the same month that the permit is issued, and more than 90 percent are started within 2 months of the month of issuance, the Census Bureau will continue to track unused permits for 60 months. For multifamily units, more than one-third are started in the same month as authorization, and about 80 percent are started within 2 months.
The “Survey of Construction” forms are filled out by Census Bureau personnel, with most data collected by phone. Construction sites are visited only where the permit holder cannot be contacted or is uncooperative. The survey also collects other characteristics of new homes, such as the size, number of bedrooms, exterior wall material, type of heating system, lot size, estimated current lot value, and sale price.
Institutional structures and group quarters, such as dormitories, nursing homes, or transient hotels, are excluded.
For the few places where permits are not required or reported, the Census Bureau sends representatives to a random sample of land parcels, to see whether any homes are being built.
Single-family structures are distinguished based on information collected in the survey, even if the permit was characterized as multifamily by the permit-issuing jurisdiction.
The link to this definition is here.
The PDF file for the actual statistics can be found here.
Why is this significant? Because it further points to a real estate market that we've never seen. The housing starts statistic is generally regarded as an indication of national builders' confidence in the strength of the real estate market. Translation: they think we're in some trouble based on fundamentals.
A local builder, Levitt & Sons filed for chapter 11 bankruptcy in November and although a smaller builder (compared to some of the larger outfits) it represents a possible trend for the near future in our local real estate economy.
Yikes!
Wednesday, December 12, 2007
low ball offers are a good thing
I was perusing my competition's blogs in the area (Southeast Florida) to catch a glimpse of additional perspective on current market conditions. I think most people equate declining home values to negative news when really, all the market is doing is correcting itself to healthy, more stable levels. Certainly, if you bought a home one year ago and you were forced to sell your home this year (only to realize the home values in your neighborhood have been declining for those 12 months passed) you would declare a depreciating market a negative thing. I think this is all perfectly healthy, if not a bit scary for some, as there is still equity for long term homeowners.
I came across a blog from another local Realtor who published a blog discouraging us (other Realtors) to bringing her (and her customers) low ball offers. You can read the blog here. Her reasoning is that 'low ballers' must 'just make up numbers' and if we do keep bringing these offers we 'bring prices down more'.
Now, this retort isn't designed to bash another Realtor, but she is wrong on many fronts. The blog she writes is written to other Realtors explaining that we need to 'stick together' in the business and we should not participate in bringing down the real estate market. Why anyone would write a blog designed for an audience of other Realtors is beyond me. It may be a marketing tool she uses to show potential customers at listing appointments, saying 'hey, I'm the type of Realtor that simply won't stand for low offers! I'm here to get you TOP dollar!' to which I would say she is doing a major DISservice to those very customers.
First, low ball offers are a good thing. If Realtors had anything to do with escalating home values (as opposed to the individuals who actually BOUGHT those properties at escalating prices, but what do I know) then they'll have a hand in the declining prices as well. Unless your customer gives you his or her absolute bottom line price, and tells you to publish that price to the world, we have no idea what our customer would or would not be willing to accept. We have no business telling others in our business where our offers should land. If you do not have the ability to negotiate a low ball offer, that should be your problem and not your customers'.
If you see a listing that seems reasonable today and you want to offer 20% below that price, MAKE THAT OFFER. Do it with a smile. The worst that home seller can say is no. As a Realtor, we have to present any and all offers in a timely manner to our customers, even if they are $1. That's right...if you tell me you want to offer $1 on a home that is listed at $400,000, the listing agent for that listing MUST present that offer to their customer, as absurd as it may be.
If you follow the Case Schiller Index of home values, you can see that we are in a declining market that looks as though it will continue to decline. By making a low offer, you could argue that you are simply trying to protect yourself as best you can in the event life happens and you are forced to sell that home a year later. It is as simple as that.
So go right ahead and make a low ball offer if you must. You will only be contributing to a market that already existed.
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