One Year's Worth of Data for Prince William

Asking About Average Sales Price

In our continuing, occasional series on interviewing a realtor, I'm going to talk this time about average sales price as a percentage of list price.

First of all, let's work on some definitions. Let's say you list your home for $400,000. If it sells for $400,000 you've sold it for 100% of the list price. If you sell it for $390,000 you've sold it for 97.5% of it's list price.

If an agent averages those numbers over all the transactions they do, you get average sales price as a percentage of list. It's a number I would ask an agent for when I was interviewing them.

To give you a frame of reference, during the hot sellers market a couple of years ago, it was not at all unusual to have an agent have an average that was over 100%. Obviously, that's not true these days! For February, 2007, the last month for which numbers are available, the average for Fauquier County was 92.76% and for Culpeper County 94.22%.

Ideally, of course, you want an agent whose numbers beat the averages! And you definitely want an agent who doesn't look like a deer in the headlights when you ask them about this. They may not know the exact market numbers for last month for a particular county. But they should certainly know generally where the numbers have been. And they should definitely be able to tell you what their own numbers look like.

Changing Brokers

If it's been a couple of days between blog posts you'll all have to forgive me. I changed broker's last week and that generates a fair amount of work for a few days. That and an ugly cold have kept me from sharing my thoughts with you all.

It's not at all an uncommon thing for an agent to change brokers. But the public doesn't know much about that so I thought it warranted at least a few paragraphs here.

First of all, there are probably as many reasons agents switch as there are agents! There are personality conflicts as in any business. There have been a lot of agents who have switched in the last year or two because the market slowed and the grass always looks greener some place else. Different brokers and companies have different compensation plans and over the course of a real estate career what was once advantageous may become less so. And it's not just compensation, the amount and level of training varies widely as well. Different companies have different strengths and weaknesses and so agents change to take advantage of systems or processes that can benefit themselves and/or their clients.

And since nothing is ever quite that simple, it's often several of the above! That's certainly the case with me. Human nature seems to resist change and I did find it hard to leave old friends and a comfortable setting. But there is also something in human nature that thrives on change once we get past that initial resistance and I'm enjoying the renewed energy (once this blasted cold is gone!) that change can bring!

There is even more administrative garbage to get through to get everything changed than I had guessed. And my assistant, Carolyn, is once again proving to be a lifesaver!

So, I'm getting back to business as usual. My contact information remains largely unchanged and most of you won't even notice the switch!

As consumers, how much do you notice or care which brokerage an agent affiliates with? As an agent, if you've done this before, how painful or painless wa the transition?

A Year's Worth of Rappahannock County Data

Home Inspections for New Construction

I had a home inspection today on a new construction property that my clients are purchasing. And I was reminded of what a good idea to have an independent home inspector do an inspection, even on new construction. It's amazing to me how many people don't get this done.

This is not a question of whether or not you trust the builder. First of all, we're all human and fallible! This is a huge purchase and it's just good sense to have another, objective and experienced, pair of eyes take a look.

The best home inspectors will teach you things about your home that the builder will not. It's not that the builder doesn't want you to know these things. But they have homes to build and sell and it can take time to explain why your new furnace could use some additional metallic tape to keep potentially combustible gases from your water heater from being drawn in! A good home inspector spots these little things and will talk you through what you should be doing to protect yourself and your home.

A good inspector will know what is code in a particular jurisdiction and can catch things that the builder missed. The buyer is probably not an expert on local building codes and shouldn't be expected to be. Sometimes your realtor may know a lot about local codes as well. But a home inspector is likely to catch the nuances that can make a difference to you now and in the future. They can catch things that could prevent you from getting your occupancy permit in the time frames needed for settlement. And they can catch items that could come back to bite you when you go to resell the property in a few years.

A builder will not recommend a home inspector. They often view them as nuisance. But a smart buyer will always get a home inspection, even on new construction!

A Year's Worth of Culpeper County Data

Buying What's Not for Sale

I was out with clients yesterday who are looking for just the right piece of land to build their next home. They've had no luck looking at what's currently listed on the market.  So they asked me yesterday if I ever contacted owners and asked them if they were interested in selling. I thought that was a great topic for a blog post here!

The answer is that I have definitely contacted owners to ask if they were willing to sell. It doesn't happen often, only a few times over my years in real estate. And it's not been wildly successful. But I have uncovered people who wanted to sell who had not yet put their homes on the market and so it is worth a shot.

I will generally send letters to the owners involved. Sometimes it's a subdivision where someone really wants to live and either nothing is currently for sale, or the right house isn't for sale. Sometimes, as with this couple, it's absentee owners of parcels of land. It's important in the letter to be as specific as I can since there's a fair amount of skepticism in the world these days when a letter arrives out of the blue asking about selling your property!

The other thing to keep in mind is that in these instances the potential buyer gives up some leverage. If someone comes to you to buy your specific property and there's already tons of property actually available for sale, odds are you can be pretty firm about price. The buyers want it very badly and the sellers clearly aren't at all pressured to sell. While it may get you the perfect property, it will almost never get you a great deal on it!

Have any of you used this strategy to buy? Have any of you sold a property when approached by a buyer or their agent? I'd love to hear your stories!

A Year's Worth of Fauquier County Data

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	489	149	64	54
03/06	610	296	91	61
04/06	692	254	94	77
05/06	732	237	107	87
06/06	781	218	78	90
07/06	816	190	62	54
08/06	823	206	79	79
09/06	794	162	62	61
10/06	821	197	51	55
11/06	723	105	59	44
12/06	643	71	36	54
01/07	656	171	60	42
02/07	676	135	71	53

How to Interview a REALTOR

Over the years a number of clients have told me that while I was wonderful, they believed that it was pretty much the luck of the draw that they got a good agent! That tells me there's a problem with the system!

So, I will begin doing occasional posts here on questions you should ask a prospective agent. I will, over time, cover questions from both a buyer's and a seller's perspective.

Today, I'll start with a discussion of the question: What additional designations or certifications do you have?

I believe this is a vitally important question that almost no consumers ask!

Do you know that old joke about what you call the guy who graduates at the bottom of his medical school class? (Doctor!) Well, it's true in real estate as well. You have no idea whether your agent passed their real estate test with 100% of the answers correct the first time or if it took them 20 tries and then they passed by one point! Either way, their a real estate agent!

And, to be perfectly honest, the training you get in order to get a real estate license has very little to do with your ability to be successful in this profession day in and day out. As my instructor told me on the first day I sat down in the real estate class, "This is not to train you to be a real estate agent. It's to train you to pass the state exam." And they did a great job of that. But as a consumer, that's not much help to you! Much of the material is made up of arcane legal matters that will never come up in the average residential transaction in the commonwealth of Virginia!

So, to do this job well, I believe it's imperative to get additional training and to get it as soon as possible. GRI, Graduate Realtor Institute, should be one of the first things a new agent works on. It's all the stuff you need to know in order to really do your job as an agent!

Another reason I believe additional training is so important is that it increases your knowledge at a much faster rate than you could ever manage on your own. If the only lessons I learn are the ones from the transactions I myself am involved in, it's a pretty slow learning curve. If I get the chance to learn from the wisdom of the instructors, the course materials and the shared experiences of everyone in the course, I become a much more experienced agent in a much shorter period of time.

And, lastly, the continuing education requirements for real estate agents are pretty pathetic. While there's work ongoing to increase the requirements, currently an agent only needs 16 hours every two years. And a surprising number of agents manage to fulfill those requirements without learning anything new!

Here's a link to a list of the designations and certifications recognized by NAR (National Association of REALTORS). I urge you to take a look for yourself and decide which are important to you. If you're curious about which ones are important to me, you can check out my own designations or ask me about what I'm working on next!

More Seller Financing?

I'm wondering if one of the results of the recent subprime issues will be an increase in offers by sellers to carry financing for would-be buyers?

While there was a time when owner financing was very common, we haven't seen much of it at all, even during the last year as sales fell. But then, interest rates are still historically low and as I've said, if you had a pulse you could probably get a mortgage!

But with that changing, I wonder if sellers will step up to fill the void? Clearly it's a risky market. How desperate are sellers or how desperate will they get?

What do you think?

Sub Prime Fall Out

Once again yesterday the melt down in the subprime market made the news. With the stock market down over 200 points, at least in part because of the problems in the subprime market, it's definitely the talk of Wall Street. And it's also getting lots of attention in the real estate community.

If you're not familiar with the background on this let me fill in a little bit of the picture. During the real estate boom of the last few years it seemed like just about anyone could get a mortgage. Now some of these weren't the kind of mortgages anyone in their right mind would have signed up for. But desperate people do desperate things! Many of them were adjustable rate mortgages. Some of them adjusted gradually. Some of them ballooned suddenly after a year or two. If you borrowed 100% of the purchase price of the house and were barely scraping by and now you're payments are suddenly increasing substantially, you may have a problem.

Nationwide, there is clearly a growing number of foreclosures. Despite the stock market performance yesterday, this is nowhere near a panic situation right now. In Virginia for example, in the 4th quarter of 2006, 3.7% of all mortgage loans were in delinquent status. While that's a higher percentage than we've seen in a very long time, the sky is not falling.

Here's what I will be watching and worrying about in our local market. If the number of foreclosures increases dramatically, that will mean lots of additional inventory for sale. In a market that's already drowning in excess inventory, that would definitely be a bad thing.

The other piece of this is that this situation has forced lenders to tighten up the requirements on borrowers. Many lower end borrowers may find themselves unable to qualify to buy a home now. Let me just say, that this is a good thing from a big picture perspective. Many of these people should never have been in a position to buy a home and to do so would subject them, eventually, to terrible financial pressures. But the subprime borrowers were a big enough part of the market that their absence will definitely be felt in the form of lower demand.

These two factors together could mean a rougher 2007 than most economists and housing industry experts had predicted until now. This is a story to keep an eye on!

Local Development

Am I the only one who thinks that there's a problem with the vast majority of new business coming into Culpeper and Fauquier counties being retail?

Where are the businesses that will employ people who could actually afford to live here, buy homes here?

Why the focus on minimum wage employers?

How about some businesses that could employ locals and save them from commuting into Northern Virginia or DC?

Maybe there are secret negotiations going on to do just this. Or, maybe our elected officials have tried and failed. Or, maybe this is the normal pattern of growth and retail always comes before commercial/industrial jobs.

But I need to be convinced that there's a sensible plan here!

Any of you know something I don't?

Always A Great Time to Buy

I occasionally take some grief for not being optimistic enough about the real estate market. The grief never comes from buyers or sellers! It comes from other real estate professionals. And when they say I'm not optimistic enough what I hear is they'd like me to be blindly enthusiastic about everyone's prospects in every market.

I'm not here as a cheerleader! I'm here as professional, sharing my expertise! Whether you're a buyer or a seller, you need to know the truth in order to make wise decisions. You definitely do not need a cheerleader.

I read a blog today that set me off. In it the husband and wife team talk about how they always tell all buyers it's a great time to buy! That's ludicrous!

I had a military family contact me last year about buying in this area. As military folks often do, they move often. There was a strong possibility that they would be in their home for less than two years. There's no way I can advise a family in that situation that now is a great time to buy! I strongly recommended that they rent and that we watch the market closely to see how things would change in the next year. I still believe that was the best advice I could have given them.

If someone is telling you this is a great time to sell your house and there's more inventory available in your neighborhood than there has been at any time in the last 20 years, you should question what facts they're using to reach that conclusion.

Sometimes it's a great time to buy. Sometimes it's a great time to sell. It's fairly rare for it to be a great time to do both!

By the way, for those of you who want me to be more optimistic...

If you're looking to buy and you're going to stay in your new home for more than three years, it's a great time to buy!

Two Builders Discuss Housing Market

Two of the largest home builders in the nation addressed their shareholders this week. Obviously the state of the housing market is very, very important to them and they keep a close eye on things. So there is generally something to be learned from what they say.

Usually you have to start by filtering out the spin, but that wasn't the case with D R Horton's CEO, Donald Tomnitz. He said the market will "suck" in 2007. No spin there! Mr. Tomnitz' biggest concern is the tremendous amount of inventory still sitting out there.

His counterpart at Toll Brothers was much more optimistic, however. Robert Toll noted that in the last five weeks contract cancellations have dropped from 36% to 16%. He hopes Toll Brothers can burn off most of its excess inventory within five months if this trend continues.

Now, neither of these predictions is ridiculously rosy. So no one should assume that the spring market is going to make everything sell like crazy again. But it is interesting that Robert Toll now talks about the market "approaching" bottom since six months ago he said it had hit bottom. It's also interesting that Robert Toll's brother, Bruce, has sold $47 million dollars in the company stock since September. He certainly doesn't seem to believe a turn around is right around the corner!

I'll put a little asterisk on all of this with another warning that all real estate is local. But both Toll Brothers and D R Horton do business in this area.  And the greater DC market definitely figured into the predictions they provided.

My own prediction is that 2007 will be, once again, a bumpy ride!

Settlement Companies

There is a lawsuit going on in Minnesota. The suit alleges that a real estate company and its agents directed clients to use a particular settlement firm without disclosing that other settlement companies had lower fees. The real estate company in question had a relationship with this settlement company and the agents whose clients used this company also received their commission checks more quickly.

I don't have all the facts in this case so I won't be judging what's true or not in this instance.

But it seems like a good opportunity to discuss how settlement companies are chosen.

First you should know that real estate firms and settlement companies alike are bound by something called RESPA (Real Estate Settlement Procedures Act). This act mandates that consumers receive disclosures detailing things like relationships between companies and also says that kickbacks are illegal! If you want more information on RESPA, HUD has a good site with detailed information.

Every client or potential client gets, early on, the RESPA form detailing all the relationships my brokerage has with other affiliated companies. I give them time to look through the list. If I know at that point in time that I'm going to be recommending a particular vendor on that list, I let them know. I also let them know that the choices are always entire theirs and that I receive no incentive to steer them one way or another.

When I'm sitting down to discuss settlement with a client I ask them if they have a settlement company they'd like to use. 99% of the time the answer is no. Since typically the only experience consumers have with settlement companies is when they close on a real estate transaction and since settlement companies typically don't nurture those relationships with buyers and sellers over time, most consumers have no idea who the settlement companies are.

If my clients don't know a settlement company or don't have a specific preference. I will give recommendations. Those recommendations are based on my knowledge of the companies and how they do their job. The most important consideration to me is that the transaction moves smoothly to settlement and that there are no unpleasant last minute surprises for my clients.

When I have a client for whom I know every penny is precious and could mean the difference between getting the house or not getting the house, I work diligently to choose the best settlement company with the lowest costs. Sometimes settlement companies will offer discounts or coupons and that's a great time to make use of those.

The bottom line is that consumers always have choices. It is a real estate agent's responsibility to disclose everything! It is also the consumer's responsibility to read the mountain of paperwork that they get. Neither agent or consumer should be let off the hook for not doing their part in this!

Verifying Lenders Letters

It's been pretty common in the last few years to get a contract in with a letter from a lender that you've never heard of. Lenders have proliferated at perhaps even a greater rate than real estate agents!

Unfortunately, many lenders will give an approval letter to anyone who can fog a mirror! That doesn't mean they're actually willing to loan them any money to buy a house, just that they like writing nice letters!

As a real estate agent representing the seller, you're put in a tough situation. There are certainly legitimate lenders that I haven't heard of. But my job is to protect my clients, not just to cross my fingers and hope it all goes well.

In situations where I feel uncomfortable with the lender and/or the letter in question, I've been adding a phrase to the contract under "Other Items". The phrase says "Buyer agrees to pre-qualify with lender of seller's choice. Buyer is then free to use either their original lender or the one chosen by the seller."

What this does for my sellers is ensure that a legitimate lender has looked at this person and has given some indication that they're likely to qualify for some kind of mortgage program. It takes a little bit of the uncertainty out of the process and helps protect against ugly surprises close to closing!

Are any of the other agents out there doing this? If you've sold a home recently was this a discussion point at all with your agent?

A Guide to CMAs

A CMA is a Comparable Market Analysis. I've also seen it called Competitive Market Analysis. Regardless of how you define it, it's purpose is to give a potential seller an idea about what their home will sell for.

Many real estate agents routinely offer to do a free CMA as a way of getting their foot in the door with a potential client. And, a CMA can be a very valuable tool for the seller. But I don't believe most sellers have enough information to accurately determine if what they're looking at makes sense.

You've probably heard the quote about "lies, damned lies, and statistics".  Well, then there are CMAs.

I can get a CMA to say just about anything I want it to. But a proper CMA, while not an actual appraisal, should take into account the methods an appraiser will use when choosing which homes to use as comparisons for yours.

First of all, if you live in a good sized subdivision and there have been recent sales, that's what will be used. It doesn't matter if you think the people down the road don't have as nice a house. The rules that appraisers follow will almost guarantee that the most important comparables he or she will look at will be in the subdivision where you live.

And, they're only going to look at recent sales. In this market, if it sold more than six months ago it's insane to consider it as a guide to pricing your home. No appraiser worth their salt will use it. Prices in this market may have stabilized. But there's also a pretty good chance they're still dropping.  The more current comparables you have, the better.

The comparables used should be as close to your home as possible in terms of age, style, number of rooms, garage, lot size, etc. Think apples to apples!

And the comparables should be focused on what has sold, not what's active. It doesn't matter what someone asks for their house. It only matters what they can actually sell it for!

CMAs can be manipulated to pull the data that supports the price a seller wants. And there are plenty of agents who want or need business badly enough to tell a seller what they want to hear. That's a disservice to everyone in the long run!

So push back and ask the hard questions when you look at the numbers. If you think those numbers look too good to be true, you're probably right!

VA Broker's License

I'm celebrating because I've just passed the test to get my VA Broker's license. In VA you must have at least three years as a licensed sales person, 180 hours of course work and pass the test in order to get your broker's license.

Before I go into anything else, let me assure everyone that I'm absolutely thrilled to have gotten it!

However, I'm not so sure that we're doing a good job of training brokers. By and large the course work is a rehash of what you have to memorize to get your salesperson's license. There's no harm in a refresher course in that material. It's largely a course in legal definitions, real estate related laws, etc. It was a good idea to learn much of this to pass my salesperson's exam. (Although much of it never gets used again!) And a refresher course along the way is probably a good idea.

But I have to say I expected a little more depth in the material covered. I expected in depth analysis of the tough issues facing the industry today. I expected case studies of areas that have caused heartburn for brokers over the years. I expected to know a lot more from the 180 hours invested in course work and many more invested in studying.

In fact, mostly what I've gained is more rote memorization of facts, many of which won't be relevant to me ever again. (I don't foresee any property management role in my future, for example!)

I hope to see some changes in the course work and in the exam for a broker's license.

Meanwhile, I'm going to enjoy the fact that I'm done with all that studying and memorization for awhile!

Washinton Post on Dominion Battle

For all of us who live here in this amazing place and who are fighting the battle against Dominion's newly proposed power lines, this article in the Washington Post says it well. It gets to the heart of the matter, more eloquently than I've seen or heard anywhere else.

Take a look for yourself. And print a copy for your grandchildren in case we lose! So they'll know what was lost here and what it meant!

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/04/AR2007030401432.html

A Little Good News

I know sellers are waiting anxiously for how February numbers look.  And while it's too early to have all the data, here are two quick items to make you feel a little better!

Overall inventory fell this month from 1903 to 1793. These numbers cover Fauquier, Culpeper, Madison, Orange and Rappahannock counties. I can't tell you yet how much of this is attributable to new contracts and how much is attributable to the wintery weather that plagued us for much of the month.

There's also good news on the interest rate front with rates falling again this week for the second week in a row! That's good news for buyers and sellers!

Stay tuned to this space for more data as it becomes available!