Buyer's Market Bad For Sellers?

On September 13th, the National Association of Realtors submitted testimony to the Senate Banking Committee hearing on the economy.  Buried among the many statistics and facts was the statement: "the seller's market is transitioning to a buyer's market."

What does this mean to you?  If you are a buyer, the implications are obvious. Stop reading now and go buy a house!

But for sellers,  this can also be good news. Most people sell their current home with the intention of buying a newer and bigger home.

Let's say you have a home in a subdivision that you know is worth $200,000 because your neighbor across the street sold the exact same home last year for $200,000.  He reminds you how smart he was to sell when he did, at the top of the market.  He says you will have to wait a few years to get the kind of deal he did.  He's almost beating his chest as he gloats and brags about his impeccable timing.

For some strange reason you want to move up to a bigger house that is right across the street from your old neighbor.  You are buying the exact same model he paid $300,000 for a year ago.

There is some good news and some bad news in this story.  First the bad news, your current house will probably not sell for what his sold for.  The good news is, you can probably buy the house across the street from him for less than he paid.

Using round numbers just to make the math easy, assume you have to discount your home by 5% to sell it.  So instead of selling for $200,000, you sell for $190,000.  But when you purchase the new home, you pay $285,000 instead of $300,000.  This means that last year your "move up" would have cost you $100,000 out of pocket and this year you get it for $95,000.

On top of that, you are paying real estate commissions, title insurance, documentary stamps, etc.. based on a lower sale and purchase price, saving you even more money.  Long term, it gets even better.  And now for my favorite, you save money on your property taxes for years to come.  For example, your neighbor paid $300,000.  The county will assess it at full market value, or $300,000.  Take away the $25,000 homestead exemption and he will pay taxes on $275,000.  With a typical millage rate of 24, his annual tax bill will be $6600.  Yours will be $285,000 minus $25,000 times 24, making your tax bill $6240.

So by waiting until this year, your net out of pocket will be $5000 less,  plus you will save money on the transaction costs, both selling and buying, and you will continue to save year after year on your taxes.  If the prices have dropped by more than 5% in your area, then your savings will be even greater.

Who's the smart one now?

If you are ready to sell your home, pick up the phone and call your favorite Realtor now.  You'll be glad you did!

 I originally wrote this article for Our Town Apollo Beach in September 2006.

Is it too late to sell?

You have probably been reading the news stories about the "real estate bubble" bursting, or how prices have flattened or how the bottom has fallen out or any number of other doom and gloom expression those in the media are fond of using.

What does all of this mean to you if you need to sell your home?  Well, take a deep breath and relax, the news isn't as bad as you may believe.

The first thing to think about is how long you have owned your home.  If you just bought it and you are already trying to sell it, you may not be in great shape.  This is the position a lot of investors and speculators find themselves in at the moment.  This is because the phenomenal appreciation we have seen for the last few years has slowed in many areas and stopped in others.  If you have owned your home for more than a year or two, you are probably going to be fine.

Statewide, the existing home median price last month was $256,400.  This is an 11% increase from the same month last year when the median price was $232,000.  In 2001, the median sale price was $125,200.

So as you can see, if you need to sell and you have lived in your home for awhile, things are still looking up!

But to be realistic, you need to realize that the market has definitely slowed down in recent months.  What does this mean to you?  Just a few months ago, anything and everything you did to sell a home would work.  Many real estate agents are now longing for the days when they listed a home on the multiple listing service (MLS) and by the end of the day the home had been shown a dozen times with multiple full price or above offers tendered.  To these agents, their primary focus was getting listings.  They listed the home on MLS and let the other 19,267 MLS users sell the home.  It didn't matter how you got it there, as long as your home was priced right, it would sell once it was listed on the MLS.

Now the market has changed and buyers are not stacked up 10 deep waiting for homes to be listed on the MLS.  Now it is more important than ever to get the price right and get the home in front of people who are ready to buy now.  Certainly, getting the home on the MLS is still very important.  But now you also need to make sure the agent has a plan to market your home and get qualified buyers to view it.

A discussion of what this marketing plan should include is beyond the scope of this article, but at the very least it should include open houses, newspaper and real estate magazine advertising, featured website placement, email and postal mail campaigns, etc...  As you interview agents, ask for specifics about how and when these marketing activities will be carried out.  Make sure you understand what you will be getting and at what cost.  Many agents' business models include discount or ala carte pricing.  At one price you get a sign in the front yard and a listing on the MLS.  At another price, you get additional services.  Other agents charge a flat commission rate and everything is included.  The point here is, ask questions and understand what you are getting and at what price.

So if you need to sell your home now, pick up the phone and call your favorite Realtor.  You'll be glad you did!

 I originally wrote this article for Our Town Apollo Beach in July 2006.

Still Renting?

How many times has your rent went down?  OK, stop laughing.  The National Association of Realtors estimates that average rents will increase by 5% this year.  I predict that this year is not the last year they will increase.  There are many reasons for this.  Apartments were turned into condos, depleting the supply of rental units at a record pace over the last couple of years.  During this same time, new apartment projects slowed down dramatically.  The population growth in Hillsborough County is still strong and is expected to continue until at least 2012.  All of these would suggest an increasing number of renters competing for a limited supply of rentals.  Prices have to go up!

So as a renter with an eye towards the future, you make the decision that you want to quit paying your landlords mortgage, lock in your payment so it can't increase every year and paint your living room any color you want.  So what do you do now?

With the current shift in the real estate market from a full blown no holds barred sellers' market to a more balanced market, you will find that the approach you need to take while looking for a home has changed.  Just a few months ago, as soon as a home was listed on the Multiple Listing Service (MLS), there would be 15 showings that afternoon and several offers tendered with above asking price offers being very common.

This made it easy for any agent who had listed a home.  Somebody else would sell it for them and fast.  And if an agent was working with a buyer, it was very difficult since you had to convince your buyer to be swift and make at least full price offers.  Agents could be very picky about only working with "qualified" buyers who would not be wasting their time.

Many agents are still stuck in this mode and if you have less than perfect credit, or little or no money for a down payment, or any of a number of other prequalifying "faults", they do not want to work with you.  If you run into one of these, pick up the phone and call other agents until you find one that will work with you. 

An experienced agent should be able to not only help you find the perfect home at a fair market price, but also suggest ways to help you obtain financing.  In addition to lendors that make loans to only those with perfect credit, most agents know a few lendors that specialize in loans to people with less than perfect credit.

Realize that you are asking this agent to spend a lot of time, probably many hours, to help you with your home search, financing, negotiations, contract preparations, inspections, closing, etc.  In exchange, he will want to know that you are  loyal and serious buyer, so make sure you let him know what your intentions are.

So if you are ready to own your own home, pick up the phone and call your favorite Realtor now.  Happy house hunting!