Friday, September 27, 2019

August Produced nearly 900 Local Home Closings

August was a solid month for residential real estate in Clark County. There were nearly 900 closings on single family and condo units. This does not include private sales or bare land. 890 units is a fair bit of volume that hearkens back to the pre-recession boom.

The market has been labeled by most analysts as warm yet the volume seems hot. That is only part of the story. When the market was really hot a couple of years ago the 'heat' was driven more by a lack of inventory than a straight rush of buyers. We were closing only 600-700 deals a month in an environment that was producing double digit year over year price growth. Right now inventory has risen faster than the pool of buyers but remains slightly in favor of sellers until you get well into luxury territory. The higher levels of inventory means more buyers can get a house and that has proven out in the sale numbers published by the MLS.

These market conditions are ideal actually for a sustainable level of growth. Year over year market price appreciation is settling in at near 50 year norms and middle single digits for the most part. This is a perfect scenario of price and value. Buyers can take a little extra time to get what the want and sellers can still count on a decent return on their investment. It is almost real estate nirvana.

Clark County did see a drop in the median price earlier in the summer for the first time in years, but that was as much about the rush of buyers at the entry price ranges as any real price softening. A house that sold last year for $400k is likely worth a little bit more this year. Overall the median price has been a bit flat but again that is driven by activity at the bottom of the range far exceeding activity at the top.

A bit part of the bottom price activity can be attributed to the recent dip in interest rates allowing buyers that were priced out of the local market last year to get a second chance this year. Judging by the numbers, they took advantage.

This is a fabulous real estate market that is very near neutral conditions with sellers holding a slight advantage at the median price point. Sub median prices are still a strong sellers market. At 150% of median it transitions to a buyers market.

Friday, September 20, 2019

Soggy September Need Not Dampen your Listing

This has been a bit of a wet month, hasn't it? If you have a fresh listing and are concerned about the soggy situation keeping buyers at bay, fear not. The rules of engagement for autumn simply need to be applied a little early this year.

I have written at length about prepping your listing for the market and it the same rules apply. You need to create and early positive reaction in the process. A big part of the marketing job has already been successful if the buyer is coming in for a showing. Keep in mind that crappy weather tends to scare off the looky-loos but the serious buyers are not deterred.

The same rule of quality professional images and a tidy and minimalist approach will get buyers and their agents attracted to the listing on the Multiple Listing Service as well as consumer sites such as Realtor®.com and Zillow.

Now that the buyer has shown up, the importance of starting off in the plus column is critical. Curb Appeal is a thing, friends and it matters. That front yard and / or entry way need to look as good as humanly possible. When the first arrive they need to get a warm a fuzzy feeling, like, "wow this is nice." If they pull up and immediately think, "this is dumpy," they will likely start looking for other negative features. If they arrive to a clean, tidy and nice property, they tend to focus on other nice things about the house.

This market is neutral right now, well priced listings will sell, overpriced listings will sit. But a well staged home will get a better price and will find a buyer quicker. When I say "staged" I do not necessarily mean profession staging, but rather personal staging which is often more than enough.

One thing that is often overlooked is clogged rain gutters. With this early rainfall, we do not want to walk under dripping or worse, overflowing rain gutters anywhere in the front of the house nor at the rear exit to the yard.

Here is a top ten tips for staging from moving.com

Stage where it counts

Not all rooms are considered equal when it comes to home staging. You want to focus your efforts on the rooms that have the biggest potential to influence buyers’ decisions, and spend less time on the rooms that won’t make much of a difference. Per the NAR report mentioned above, the rooms that hold the most importance for buyers are the living room, master bedroom, and kitchen. These are the rooms that you want to focus the most on when you’re staging a home. Don’t worry as much about the rooms that have less influence, such as guest bedrooms, children’s bedrooms, and bathrooms.

(Rod's comment, "the entryway both outside and inside are also critical)

De-personalize the space

One of the primary objectives of home staging is to help prospective buyers visualize the space as their own. The fastest way to accomplish this is to set as blank of a canvas as you can. You want the home to have style and charm, but it should be devoid of personal touches that suggest this home belongs to the seller, not the buyer.

Start by removing any personal photos, making sure to take down both framed photos on walls and surfaces and anything that’s hanging on your fridge. Keep clothes stored away and out of sight, and clear bathroom counters of personal items, like toothbrushes and contact solution. Remove anything overtly religious as well. While it’s true that de-personalizing your home makes it a little weird to live in, it is extremely useful for helping buyers better connect with the property.

(Rod's comment, "minimalism works")

Get rid of clutter

Clutter takes up space, and space is what sells. Make your home look bigger and more desirable by editing down to just the basics. You don’t have to get rid of things forever, but you should certainly be packing them up and getting them out of the house. This includes any un-seasonal clothes (no need to crowd your front hall closet with winter coats in the summer), most of your d├ęcor (you can keep a few select pieces if they’re subtle or minimalistic), papers, games, and pretty much anything else that you don’t need on a day to day basis. Buyers will be opening your closets to look at their storage potential, so take your time there removing as many miscellaneous and non-crucial items as you can. The less clutter you’ve got in the space, the bigger it will look and the more appealing it will be to buyers.

Clean like you’ve never cleaned before

Spring cleaning has nothing on the cleaning you should do when you’re putting your home on the market. You want every square inch to shine, from the baseboards to the corners of your ceilings and everywhere in between. A squeaky clean home suggests to buyers that the current tenants took good care of the property, a notion that extends beyond the kitchen counter tops to the entire house. If you’ve neglected certain tasks, like cleaning the inside of your refrigerator or regularly dusting your window blinds, now is the time to tackle them.

The cleaning you’ll do for staging purposes has similar steps to the deep clean you do when you move into a new home, so start with those and add on as you need to.

(Rod's comment, "people tend to be a bit judgmental, cleaning is a big deal, buyers are often emotional so do not under estimate the importance here.)

Patch and repair

Home staging is a good time to tackle the tiny nicks, scratches, holes, and other impurities that signal neglect to buyers. Start with a melamine foam eraser pad and go room to room removing any scuffs from walls. Keep an eye out for any areas that could use a little TLC, then spackle and caulk as necessary. You may need to do some paint touch ups too, if you notice areas where previously applied paint has chipped. Just like with cleaning, the purpose is as much about showing potential buyers that you’ve put effort into maintaining the property as it is about making the place look nice.

(Rod's comment, "sometimes a property may be a bit rough, maybe even a 'fixer' so this part may be skipped if a fixer upper is part of the strategy, however, even a fixer needs to follow the the rest of the 'rules')

Go neutral

This staging tip is a bit more time and cost intensive, but it can make a major difference when it comes to your sale price and time on the market. Bright colors on walls help people express their personality in their homes, but they can be a major turn-off for buyers. When you’re staging your home to sell, one of the very best things you can do is paint over any garish colors with neutrals, like gray, white, and taupe. Bold colors can distract from a room’s assets, and like photos and clothes, are bold signifiers not of the home’s future, but of its past. Buyers might want bright colors themselves, but a neutral home gives them the option to do that – or not.

(Rod's comment, "same as above")

Make a good first impression

The first thing a buyer is going to see when they walk up to your house is the front entrance, so you want it to make a strong positive impression. Remove any sort of seasonal decorations, which can date a house in both pictures and during viewings. If you have a front stoop, consider power washing it, or at least scrubbing off any dirt. Then add a touch of hominess with a simple doormat and perhaps a potted plant or two, provided they are in perfect condition (a dead or dying plant will do you no favors). Keep the space simple but welcoming to start buyers off on the right foot and suggest good things to come inside.

(Rod's comment, "This should be number one. Remember, we want them looking for pros, not cons")

Focus on fresh

While too many extraneous items in a home can detract from its perceived value, a few healthy, well-placed plants and flowers can add life and freshness into the space. Space them out so as not to clutter any one particular area, but try to have a couple fresh items in areas that matter. Place a vase full of big, bright flowers in the center of your kitchen table, a small potted plant or some succulents in the living room, and perhaps a larger potted plant in the corner of the living room as well. Don’t have the time or green thumb to maintain fresh plants? Fake plants will set the same atmosphere with less work.

Another aspect of freshness is making sure there are no odors. A deep clean should take care of any lingering smells, but also be sure to always clear out your trash bin before showings so buyers aren’t hit with any offensive scents. You may want to install a small scented plug-in in a couple of rooms too (or just one may be okay, depending on the size and layout of your home). If you do that, keep it on a low setting – you want the smell to be pleasant, but subtle.

(Rod's comment, "fresh, fresh, fresh, pet odors and other lingering odors can lead people to conclusions that are likely unfavorable to purchase or pricing attitude.")

Let there be light

Dark rooms are sad rooms. Brighten up by letting as much light shine in the house as possible. Open the blinds on all of the windows, which in addition to letting in more light will also make rooms seem bigger. (If your yard needs a bit of work, keep blinds down but open the slats to get a similar effect without showcasing any problem areas.) Turn on all the lights in your house for showings, including lamps and closet lights. This well help make your home more welcoming, and also saves buyers from having to stumble around figuring out which switches turn on which lights.

(Rod's comment, "This is critical, although some people like dark spaces, most do nit, those who do will make the space dark when they move in. It is nearly impossible to make your listing too bright. This rings especially true in the notoriously cloudy, Pacific Northwest)

Rearrange your furniture

You want there to be as much open, walk-able space as possible. This helps buyers navigate the space, and also helps them better visualize their own furniture in each room. Put extraneous furniture in storage to get it out of the way, focusing on getting rid of any over-sized pieces, damaged pieces, and those that that don’t match the rest of the room. With the furniture that’s left, rearrange it to make the room look and feel as spacious as possible.

Staging a home to sell doesn’t require spending a lot of money – just making smart decisions. Your agent should be able to help you make specific changes that will add value to your home and entice the buyers who come for viewings. Once you know you’ve done everything you can to show your home in the best light possible, you can sit back and wait for the right buyer to stop by.

(Rod's comment, "This is cheap and easy, if you don't have the money for an external storage area, the garage is fine. The garage is an important part of the home but is also the most generic part as well. If there is one area that has to be cluttered the garage is it, ideally you get an external storage location.")

Some of these tips are low cost to no cost options and could lead to better offers. Spend a few hours prepping your home so you can reap the reward of thousands of dollars on the offer(s).

Friday, September 13, 2019

Some agents get in their own way

Every now and again I run across an agent that negotiates his way right out of a deal. Only to find out later, his clients wanted to buy that property. Buyers have to be clear with their agent about their feelings on a particular property. The agent should also take great care in giving advice. If a property is well priced, it will sell. If it is a little overpriced it will still sell, it just takes the right buyer that REALLY wants it.

I have had listings that were priced up near the top of the comp range. Not way overpriced by any stretch but not a screaming deal either. Occasionally an agent will show the property, his clients love it and they write it up. The offer comes in really soft but not necessarily insulting or anything. The property has been on the market for just a few days and the seller isn't ready to go low yet. So we counter. Agent advises client to move on.

Here's where things can get messy for that buyers agent. If the agent is aware of the market conditions she knows the property is a bit high on price. She may advise the client to look elsewhere for a better deal or let her negotiate a "fair" price for the house. She needs to really find out how much they like that house and the buyers need to be very honest with the agent about how they feel as well.

So the scenario ends up playing out as the buyer comes back around after viewing a few other properties and decides to offer the full price because they REALLY want that house. But someone else already did that and it is in contract. The buyer is likely somewhere between disappointed and heartbroken. The agent and/or buyer could have avoided this by being clear about the property, it's relative value to the buyer and the nature of the market.

Relative value is a BIG part of a buyer's motivation. If a house in a neighborhood is priced in the middle of the value range say $300,000 - $330,000 the lower number sells it in a day that latter takes longer than average marketing time a buyer that really wants it probably ought to offer full price. If it is priced at the top of the range then the buyer has to consider "relative value." Relative value is the value the buyer places on the home irregardless of the actual market value. If the house is perfect for the buyer, and it checks all their boxes, reminds them of their favorite grandmas house, yada, yada, yada... it's probably worth the asking price. Of course if they are using a loan  it still has to appraise.

Likewise it can go the other way as well. A house priced at the bottom of the value range may be the hottest listing in town, but if the buyer doesn't like it, it has an even LOWER relative value. That person shouldn't be pushed to put in a puffed up offer on a house they don't like.

Agents often forget that their buyer may not like the same houses as they do or may have a completely different "relative value" they place on any given listing. Buyers need to let the agent know exactly how they feel about a property, negative or positive. The buyer's agent is working for the BUYER and needs to know these things. Some buyers act like their agent is on the other side and withhold information. DON'T do that! If you don't trust your agent, fire them and find another that you do. Your agent can't help you if you are not forthright with her. Likewise some agents forget what their client wants and/or needs and tries to impress with their knowledge about the market only to lead their client into losing the house they really wanted.

Agents: listen to your buyers, find out how THEY feel.
Buyers: tell your agent how you feel about a property you are considering

Simple really it's called communication and it really works.

Friday, September 6, 2019

Rates Have Tumbled!

Turmoil in markets and a flow of cash to the US have created an opportunity for home buyers. Rates fell last week to near all time lows, although not quite as low as a few years ago. That said this will be a temporary lull in rates as things settle out in the markets, rates will normalize again. Buyers should consider taking advantage of the low rates as even a 1/4 point reduction in loan rate can add thousands of dollars in purchasing power.

I have written ad nauseum about the virtues of rate over price. Price is fleeting but rates are forever. Well, 30 years of forever at least. Saving a few thousand on price is nowhere near as important as capitalizing on a rate savings of 1/4 to 1/2 percent. Do not underestimate the power of low rates.

This article I wrote back a few years ago and it still holds true today. I even dedicated an entire chapter to mortgage rates and home prices in my 2010 book, Don't Panic.

originally published July 6th, 2018 by Rod Sager

I have spared no lines of text on the issue of higher interest. Rising interest rates will severely effect buyers ability to purchase a home if they are not using cash. Buyers will enjoy a a flattening price market, but they will not enjoy having their dollars stretched thin by rising rates. 6 of one half-dozen of the other?

Let's say we offer $350,000 on a house now with rates at 4.5% FHA. Buyer will need $12,250 cash down. The PI payment (principle and interest) is $1,711 per month for 30 years. Now the property taxes and mortgage insurance will be added to the payment as well, but interest rates do not directly effect those values. If a buyer waits a couple of months to offer they may find a similar home priced at $355,000. Now if rates remained the same the down payment is now $12,425 and the new estimated PI payment is $1,736 per month for 30 years. That's not so bad, right just $25 a month more. Well, sort of, over thirty years that's $9,000! But this year rates have been slowly climbing so it is far more likely rates will have risen over the next couple of months and probably that 4.5% now will cost 4.75%. With the higher rate, the payment moves up to $1,787 per month. That's $76 per month MORE for 30 years which adds up to $27,360.

Most importantly is that the rising rates was more damaging than the rising prices. The amount of additional monthly income required to qualify for an extra $76 a month payment is going to be $160-$230 depending on the loan type and credit profile. Many buyers get priced out on rates rather than actual home appreciation values.

It is important to remember that loan officers will give an approval based on the price of the house, but the underwriter is actually approving a monthly payment not a purchase price. The loan officer converts the payment into a price to make shopping a little easier for the buyer.

It is very important to understand that the average mortgage rate has been very low for nearly 10 years. In fact The 46 year average Freddie Mac 30 year fixed rate dating back to 1972 is over 8% So even as rates rise into the fives they are still historically low.

The chart below shows the loss of purchasing power as rates rise. Please note the chart is only looking at Principle and Interest and not the combined payment including taxes and insurance. Rising or falling rates won't directly effect the taxes and insurance. The chart shows an FHA loan with a maximum approved PI payment of $1,500. The actual payment on this loan with taxes and insurance would be closer to $2000. The moral of this story is buyers should take advantage of these low rates while they can.