Monday, August 24, 2009

The Secret Housing Market Statistic

What is the one housing statistic that sellers should pay attention to? Every week new data pours out about the housing market, one article contradicts another, hundreds of statistics and charts claim to tell you about the markets:
All three articles are from the Wall Street Journal last week, and all point to different trends. So what do you believe, what insights make a difference to you when trying to sell a home?

What is the most important housing statistic for seller?

If there is one number we pay attention to at Owners, one statistic that directly impacts buyer's decisions it is this: the gap between the cost of buying and renting. Buyers don't care about regional trends or median prices. They certainly appreciate government programs that give tax breaks and favorable mortgage terms, but in the end it all boils down to one key calculation: is the monthly cost of buying a home competitive with the cost of renting.

Most renters would prefer to buy if the cost is equal or close. This statement seems obvious but it uncovers some basic facts about housing. Both renters and owners need a place to live but there is both strong emotional and financial value to owning and controlling your home vs renting. If the gap between owning and renting is small this also means investors are more willing to buy homes because the income they can generate from renting will cover or come close to paying their interest costs. In short property becomes competitive with other investments.

In markets like Las Vegas or Phoenix where prices have fallen significantly there is a rising number of possible buyers and the number of home sales are starting to pick up.

A recent Associated Press analysis of 45 markets found that the gap between owning and renting has shrunk from $777 per month to $221 in the last 3 years. Cleveland, Atlanta, Indianapolis and St. Louis all have average gaps of less than $100. In Los Angeles, New York City and San Francisco the gap remains high and it is still much cheaper to rent than own

For home sellers this information can help in two ways:
  1. Look at comparable rents for your home and mention them in your description, it might stimulate investors to consider your property.
  2. Consider targeting local renters with fliers at near buy apartment building and in, you might find someone ready to make the leap.
Here is a great calculator from the New York Times you can use to assess your market.

Wednesday, August 12, 2009

Top 5 Realtor Myths

A lot of myths have grown up around the role of Realtors for the simple reason that selling a home is often the biggest transaction in most people lives. We try to separate fact from fiction about Agent's roles and what they can or cannot do for a home seller.

Myth #5: A Broker will get you the best price for you home.

False: There is no doubt a broker will try to get a good price for you by using their negotiating skills to get the most out of any buyer. But even if they are the best negotiators in the city it hard to overcome a few hard facts. 5-6% commission is a lot of money to over come with good negotiations, on the average home priced at $250,000 that $15,000 a broker has to make up just to be even with what you could net selling FSBO.

But the real issue isn't even the commission, it's time. Brokers make money by selling homes quickly. The longer it takes the lower their hourly rate. A couple years ago it was estimated that on average a broker spends 12-14 hours on any one sale. Trying to get an extra $10k on a sale will net a broker $150 (after splits and agency fees) - not a lot if it takes a few extra weeks work.

Myth # 4: Open houses help you sell your home.

False. Open houses help brokers find new clients. Truth is the open house is a hold over from the days when the only way people found homes was through a Realtor, who would take them around to the open houses every weekend. Now everything takes place online initially. The open house exists because buyer feel good that their broker is working for them and brokers have the chance to meet hundreds of possible clients every month. But you almost never find a buyer through an open house.

Myth # 3: Brokers will not show buyers FSBO homes.

True and False: Brokers who represent buyers earn their money from commissions. Traditionally with 2 brokers involved, (one for buyer and one for the seller), the 6% commission will be split between them. If a broker thinks an FSBO seller is unwilling to pay any commissions then they have no incentive to show the home.

The reality is most FSBO sellers at some point list their homes on the MLS and offer any broker who brings them a buyer 2% -3% commission. Everyone wins, The seller finds a buyer and still saves 3% that they would owe a broker who represented them and the buyer's broker gets the sale. It's a fair transaction, and you still keep the right to sell to an independent buyer if one shows up with an attractive offer.

Myth # 2: Brokers protect you from liability.

False. This myth is strong and pushed all the time by agents but the reality is there is no additional protection by hiring an agent. If an agent fails to disclose to a buyer something material you told them then they would be libel for essentially real estate malpractice. But this happens in very few instances.

Most liability and suits arise from undisclosed items and the seller is liable. The best protection is not hiring a broker, but having a through inspection done, and offering honest full disclosure.

Myth #1: You hire a broker to find you a buyer.

False. It sound right, you hired them to sell your home , that means finding a buyer, no? No, almost all buyers, even those working with brokers start their search for homes online and ask their broker to show them the houses they find. The only substantial marketing a seller's broker does is list your home on the MLS and wait for buyers to find you.

In reality you hire a broker to show a home for you, talk to buyers, negotiate a sale and manage the closing process. For some sellers this is worth the 3%-6% commission but for many sellers going the FSBO route or Flat Fee MLS is an attractive and lucrative option.

Tuesday, August 4, 2009

How to get Multiple Offers when you sell your home

Multiple Offers - the vision of buyers competing for your home. Every broker promises many buyers and every home seller starts out picturing it - But how do you make this dream a reality. Yesterday we saw a fine article by