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HGTV Effect

Sellers and real estate agents are increasingly feeling frustrated by something that's been dubbed the "HGTV effect". In a nutshell, potential buyers who have watched way, way too much HGTV not only don't want to buy anything that's not pristine, upgraded, perfect, they don't even want to look at it. Even the Washington Post has written about this.

There is almost no market any more for fixxer uppers. The market left for those is investors looking to give you a lowball price that is likely to make the average seller gag.

If you haven't redone the kitchen complete with granite countertops, hardwood floors (or ceramic tile) and the newest and best appliances, forget it.

The dilemna for a seller is that if you pay to upgrade your house you will NOT get that money back. Yes, you'll get some of the investment back. But you won't come anywhere near getting it all back. On the other hand, at least you'll get people to look at your house!

My advice, start upgrading now even if you're not going to sell for awhile. At least you can get some enjoyment out of the upgrades!

Oh, and if you're a buyer and want a deal, look for the properties that need upgrading and be ready to do the work yourself!

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Tropical Storm Lee Loans

While Virginia did not qualify for FEMA grants based on the damage from Tropical Storm Lee, we did just get approved for low interest SBA loans for damage from the storm.

There are a list of named counties and municipalities includes:

  • Fairfax
  • Prince William
  • Fauquier
  • Loudoun
  • Stafford
  • Arlington
  • Alexandria
  • Fairfax (City)
  • Falls Church
  • Manassas
  • Manassas Park

Individuals living in those locations are eligible for up to $40,000 in loans to replace or repair personal property and $200,000 in loans to repair damage to homes (for homeowners). Loans of up to $2,000,000 are available for homeowners and non-profits.

The SBA will be setting up disaster assistance centers soon. The SBA web page is not yet showing the information for Virginia, but I'd watch their web site for more information as well.

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Where's Your Buyer

Date: Sep. 26, 2011
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My colleague in Charlottesville, Jim Duncan, has a post on houses that don't sell, just because their buyer isn't currently in the market.

It's one reason why so many people want to be "the third real estate agent." (Old real estate joke. You're going to have to ask me privately!)

I think Jim's got it right, as usual. But it's a hard conversation to have with a seller. It's human nature to reject what you don't want to hear and I suspect most sellers will send you packing the first time they hear this. (And, maybe a few more times!)

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Why Sellers Won't Sell

How people think about real estate, economics and what's going on in their own personal financial situation has a lot more to do with the current state of our economy than most of us realize.

This story from the Planet Money team illustrates that nicely. Sellers can't bear to lower the price, often even if they still get a very nice profit.

Are you holding on? What for?

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Planning Ahead

We're beginning the work of downsizing. That puts me right where a lot of you are. Wondering about selling the house; figuring out what we have to do between now and when we put it on the market; and making a list of what we want in our next house.

It'll be interesting to see the process from the consumer side. Last time we bought and sold I wasn't yet a real estate agent.

So I've decided to share this process with all of you. This will be an occasional series on the blog. Our goal is to have the house ready to sell by next spring. Trust me, we'll need every day between now and then!

So, today I'll start with our initial plans for getting our house ready to sell.

It is always a good idea to get rid of everything you possibly can before you put your house on the market. In our case, it's even more important since our intention is to downsize substantially. Step one in our plan is get rid of everything we possibly can!

For us that means selling things on eBay or CraigsList when that's feasible. Giving it away on Freecycle if no one wants to shell out money for it. Donating it to charity if no one on Freecycle will pick it up. And, as a last resort (the ugly green bathtub) taking it to the landfill.

We're not good at taking stuff out of the house. We're very, very good at accumulating more stuff. I suspect we're not alone there! So every Saturday morning, hubby and I are touching base and asking each other one question:

"What did you do this week to get the house ready to sell?"

It's not a time for recriminations, just a way to keep us both focused on what we want.

I'd love to hear your stories about getting your home ready to sell. I'm prepared to believe I'll likely learn a thing or two!

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Not My Problem

A lot of sellers are coming to the settlement table these days owing money. It's got to be a bitter pill to swallow. You own a home for years and instead of gaining in value, you have to pay money to get the thing sold and move on.

But last week I ran into a new situation. Sellers came to the settlement table apparently unaware that they were going to have to pay money to sell their house in Manassas. My buyer clients and I found out when I got a phone call from the listing agent asking us for money so that they could close.

There is no reason that I can think of that any seller should not know, long before they get to the settlement table that A) they will need to bring cash and B) roughly how much cash they will need.

There were two reasons I was given as to why it happened in this instance:

1) The sellers had no idea that the costs of the repairs that were required as part of the contract would be so expensive.

Reality Check: The sellers had estimates from the workmen over a month prior to settlement. They agreed to those estimates before any work was done.

2) They couldn't have known how much the loan payoff amount would be.

Reality Check: Actually they could have known that number at any time. Almost all lenders now have an automated system where you call, give them a date of settlement and they tell you how much your payoff will be. If they couldn't get that info themselves, they had a settlement company that certainly could have easily gotten this for them.

In the end, the sellers and their agent found a way to come up with the money and get the deal done. Neither my buyers nor I were out of pocket any money.

If you're selling your home, make sure that once you have a ratified contract (if not before) you have an estimated cost of settlement from your real estate agent that gives you an idea of what you will take away from settlement OR how much cash you'll have to bring!

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How To Absolutely, Positively Sell Your House

Date: May. 16, 2010
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I lived in New Jersey for five years. Coming from the midwest I found the bluntness a little hard to get used to.

And this blog by Scott Friedman , a New Jersey real estate coach gets right to the point. More agents should be this blunt with their sellers.

If you price it right, it will sell. If you don't want to sell it for what the going market price is, don't put it on the market.

 

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Photos You Don't Want in the MLS

Date: Apr. 14, 2010
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The #1 way buyers find a house to buy is the internet.

The #1 factor in a buyer choosing to look at your house is the photos.

Is this what you want representing your house?

 I get a little crazy when I see these photos. (By the way, every photo of this listing was atrocious!)

If you're interviewing a listing agent, ask to see photos of their current/most recent listings. Not just the front photo, but interior as well. Ask how many photos they'll upload. (Hint: if it's less than 10 and you have a single family home, ask why!)

 

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Video The Way It Should Be

Date: Mar. 28, 2010
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The vast majority of videos or virtual tours of listings do not impress me at all. I think most of them are no more impressive than if you'd taken really good photographs.

This shows how it could/should be done:

 

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What if That's All There Is?

If you're selling your home or thinking about selling your home, your biggest question is probably "when will prices get back to where they were?"

According to a new study by Moody's and Fiserv the answer, in Virginia, is after 2023. They recently published a study showing, by state, when housing prices would rebound to their 2005-2006 peaks. Virginia is in the worst category in this study with prices not rebounding for over 12 years. If they're right we likely won't even see any sizeable increases over the next five years.

Note that I'm not saying they've got it right. None of the financial institutions or economists did a very good job of predicting what's happened to the economy or real estate in the last few years.

But you should ask yourself, what if...

What if they're right? How does that change the decisions I'm making for myself and my family? If you've been staying in place assuming that a return to higher prices was just a year or two away, do you now just go ahead and sell?

My two cents, for what it's worth, is that appreciation will be miniscule for at least the next three years.

By the way, in case you're wondering, Maryland beat us. Prices there are expected to return to their peak between 2018 and 2022. (If you're curious about any other states, let me know and I'll get you the numbers.)

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Pro Bono

After hearing some examples around the country of other real estate professionals pitching in to help some distressed sellers, I've been moved to do the same. I won't make a huge difference in our local real estate market. But perhaps I can make a huge difference in the life of a few local families.

So, effective immediately I'm going to be taking on one pro bono client each quarter. This will be a seller, someone with their back up against the wall. While I can waive my fee, I can't do the same for the cooperating broker. So this is not a transaction with no commission. But I'll waive my half.

If you know someone who's stuck, who feels hopeless, have them get in touch with me. This offer will only apply to owner-occupied properties, not investment homes. And, unfortunately, I'll have to limit it to one per quarter as I still need to make a living!

But I look forward to the opportunity to help!

 

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VA Compromise Sale

Thanks to Lenn Harley at Homefinders.com for bringing this to my attention.

For those homeowners with a VA loan who find that they owe more than what they can sell the home for, the VA has what's called a Compromise Sale.

From their web site:

If the borrower is unable to sell the property for an amount that is greater than or equal to what he/she owes on the loan, including closing costs, VA may pay a “compromise claim” for the difference in order to allow the private sale to go through. The borrower can sell the property to a buyer who gets his/her own financing or to a buyer who wants to assume the loan. However, with a compromise assumption, the lender does have to agree to have the amount of its guaranty reduced by the amount of the claim payment.

 This program does not automatically relieve the borrower of all obligation for the shortfall. However, they may be able to wrap the deficiency, closing cost assistance for the buyer and the real estate commission into a loan at a very favorable interest rate.

There are detailed instructions for both the homeowner and the real estate agent on the web site. It may not be the perfect solution, but it'll be the help some families need in order to move on.

 

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Bad Real Estate Photos

A little fun, first of all today. It's BAD real estate photo day!

Blurry House

Warning: This house may make you dizzy! At least looking at the photo could!

I wonder what they didn't want me to see? Or was this taken by one of those nocturnal real estate agents?

"Red sky at morning, Buyer take warning?"

While these are so ridiculous they're funny, they're a lot less funny if it's your house! It's almost impossible to over emphasize the importance of good photos online. It can be a tough market to sell your home. Having photos like these is shooting yourself in the foot!

And, lastly, a bit of blatant self-promotion.

The Fauquier Times Democrat ran a story today on my new property management business, as well as my thoughts on the local market.

 

 

 

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Cutting Your Losses

Robert Bruner, the Dean of Darden School of Business at UVA has a blog that I often find interesting. His latest entry is based on a quote by the famed investor Bernard Baruch "If you have made a mistake, cut your losses as quickly as possible."

He talks about the difficulties of doing that in the business world, specifically using the AOL/Time Warner merger as an example. But one of the points he makes about why it's so difficult seems applicable in real estate as well.

He talks about "sunk cost" thinking. In other words, a seller says "I bought this place for $400,000. I'm not selling it for less than that."

The problem becomes that if you really do need to sell there's no guarantee you can hold out long enough for prices to go back up, or even to stabilize. If you're a seller who's moved on and you're paying two mortgages, how long can you continue doing that?

If you refuse to lower the price or let an offer get away for $10,000 difference, what happens when it's still on the market six months from now and you've paid that much more out in mortgage payments and prices have continued to fall?

Sometimes, cutting your losses is the best advice, in business and in real estate!

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Stinky!

Date: Jul. 27, 2008
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More and more often these days I walk into a house and the first impression is.....

OMG! Phew! What is that awful smell?!

Now, to be fair, most of these homes are vacant. (Over 3/4 of the homes I show these days are vacant!) And, a closed up vacant house will always start to smell, over time.

Some of the smells I regularly encounter:

  • Mildew
  • Mold
  • Pet urine
  • Cigarette smoke
  • Dead, rotting animals

There are plenty of others, many of them not easily identified.

If you're a homeowner, selling a vacant home, either you or your agent should be checking from time to time to see if the home has acquired any unfortunate odors.

Keep the air conditioning running! I know you're not living there and hate paying the bills, but, believe me, what you'll net in a better offer is more than you'll lose on paying those bills.

If there are some stubborn odors, take steps to remedy them. Get rid of drapes, have carpets professionally cleaned, consider getting an air purifier.

By the way, adding really smelly air fresheners is not the same as taking care of the problem!

Remember, the sense of smell is powerful and has a major influence on our emotions. No one falls in love with a stinky house! Even if they still buy it, the price went down the minute they opened the door and smelled the place!

If you're considering putting your house on the market, consider having a friend or neighbor give you an honest assessment of what they smell when they first walk in the house. This can be a delicate area so make sure they know they have your permission to be brutally honest!

And, if your agent tells you there's an odor problem that needs to be dealt with, don't waste any time in dealing with it. There's a house down the street that smells just fine and is also for sale!

 

 

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Getting Into Your House

When I want to show a listing to a buyer, I use a lockbox to enter the house. Typically, in this area (Prince William, Fauquier, Culpeper, Rappahannock and Warren counties) that generally means an electronic lockbox that often looks like this:

To access this box and get the house key out, I use an electronic device that's been updated with a special code within the last 24 hours. It's an extra level of protection for the homeowner in case my "ekey" is stolen. Within 24 hours it's essentially worthless unless you know my passwords in order to get it updated.

The other advantage of this lockbox is that I know who has shown my listings. If something is missing, left unlocked, etc. I likely know who to track down to ask about the problem.

There have always been a few holdouts who still used combination (combo) lockboxes:

These boxes require only an alpha or numeric code in order to open them and access the key. If I know the combination I could, theoretically, give that information to someone else and that's all they'd need to access the keys to your home. It's a less secure method of access. The advantage in some agents' eyes is that if someone from outside our area wants to show the house, there's no problem if they don't use the same lockbox system used in this area.

With the large number of foreclosures in our area, we're seeing a big increase in the use of these combination lockboxes. Most banks will mandate that a combo box be used on their listings. I've had trouble coming up with a good reason for this. The only thing I can think of is that they want bank personnel to be able to access the property if necessary, without a real estate agent present.

I was troubled this week to learn that a local agent had mentioned that if he's unable to show a home when his buyer clients want to see it and he can't find any other agent to cover for him, he'll simply give his clients the combination and let them go in the house on their own.

Hmmmmm! The number of reasons this is a bad idea is very long. The liability to the agent should anything go wrong, is huge. It could be that his clients are good people with the best of intentions but they have trouble getting the keys back into the lockbox. It happens all the time. It is, of course, highly unprofessional and, I'd suggest, unethical. The listing agent should definitely be making a phone call to the agent's broker at the very least, to protest this behavior.

By the way, when the agent was confronted with what a bad idea this was the response was "Everybody does it." I never got that one by my Mom. And, I'm not buying it now!

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Selling Agent Bonus

A client of mine who is selling his house has decided to offer a bonus to the selling agent. These are becoming quite common in the Virginia real estate market as sellers look for a way to sell their homes quickly without giving up too much money.

I strongly dislike these bonuses. Here's why:

1. It's not about the agent! Buying a house is supposed to be about what's best for the buyer. At least if you're an agent representing the buyer. It's never supposed to be about what's best for you!

2. In too many cases, they're not disclosed. Agents must tell the buyers about these bonuses. To not disclose this information is unethical!

3. If it is disclosed, it's surely evident to the buyer that this is money that could instead have been taken off of the listing price and that, therefore, the house is overpriced. It's like the "buy the house, get a car" gimick. Any savvy buyer figures our immediately that this means the house is overpriced by at least the value of the car. (Usually more!) As a buyer's agent I'd tell my clients to knock the amount of the bonus off of the price when we make an offer.

3. If it works, what does that say about the ethics and professionalism of the agents? Would they really show a house that's unsuitable for their client, in hopes of getting the cash? Would they try to influence their buyer's decision in order to cash in?

4. Many of these bonuses come with deadlines. "Good for offer before July 1st" for example. Really?! So, if the house isn't sold by July 1st you're going to be less desperate to sell than you are now? I'm betting I can get that money out of you after that date, one way or another!

5. I don't believe it works. Bottom line, it's another gimick and these almost never work. Sellers are dealing with the savviest, best informed buyers ever, thanks to the internet. Very few are going to be taken in by this kind of thing. Let's be honest, you're offering the bonus because your house is overpriced and you don't want to lower the price. You're not fooling anyone!

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Zillow is Coming!

Date: May. 20, 2008
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Zillow made a big splash when they first showed up a few years back. Mostly it grabbed people because it was so much fun to enter your neighbors' addresses and see what Zillow said their homes were worth. Mind you these days that exercise is mostly depressing! And, those "zestimates" were never very accurate.

I told sellers then, and still believe, that you need to know what Zillow says about your house. Because there's a pretty good chance that potential buyers will know.

And, an article in today's Realty Times emphasizes why Zillow is continuing to gain in importance. REALTOR.com has been the big boy on the block forever. But from a technological perspective it's been a long time since they had anything approaching a technological edge. And, while, theoretically, REALTOR.com exists to serve me as a member of the National Association of REALTORS (NAR), for most of us it feels like it exists to gouge us!

While Zillow (and other sites) will allow me to upload unlimited photos, virtual tours and other good stuff, all for free. REALTOR.com charges me for everything, including having my name on my own listings! For example, to link a virtual tour (using VisualTour.com) REALTOR.com charges me $19.95. But linking that same tour to Zillow is free!

Consumers still prefer REALTOR.com, but only because not enough agents are taking advantage of the free stuff at Zillow. Trust me, that's going to change!

So, if you're a consumer and haven't yet checked out Zillow, you should. And, if you're an agent and haven't checked it out, what are you waiting for?

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Ignoring a Potential Buyer

Date: May. 5, 2008
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I was showing a home to a client a couple of days ago. We had just finished and were getting in our cars when someone drove up. He got out of his car and asked if I was the real estate agent. I told him I was "a" real estate agent, but not the listing agent for this property.

This gentleman went on to explain that he's been calling and leaving messages for the listing agent for months, trying to get in to see the house. All his calls have gone unreturned.

Have I mentioned that this house has been for sale for more than 450 days?

Real estate agents get discouraged too. I understand that. But a potential buyer who is this determined would certainly seem worthy of a returned phone call.

I wonder if the owner knows there's a potential buyer who's having trouble getting to see the property.

By the way, this is one more reason (if you needed one) to never, never call the listing agent on a property!

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Just Because You Like It...

Date: Mar. 25, 2008
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It's funny how you see things differently when you look at someone else's home. A surprising number of the homes I've shown in the last week have had a feature that is often less than desirable for potential buyers.

 

Now let me say first of all, that I have nothing against hunters. And, you should be able to decorate your home any way you choose, WHEN YOU"RE NOT TRYING TO SELL IT!

But most Americans these days are not hunters. That's true even in our area. The percentages are pretty small. And, a lot of non-hunters are going to be less attracted to a house full of dead animals hanging on the walls. You may not think it's fair. But it's the truth.

I'm not singling out only hunters. If you have a hobby that's not exactly main stream, it's a good idea to send stuff to storage. Don't leave the handcuffs on the bed post! (Even if you're in law enforcement!)

The goal here is for the buyers to identify with your house, to see it as their own. That's hard for them to do if they see something that makes them uncomfortable.

So, stash the stuffed animals. If you question whether it's appropriate, assume the answer is "no". You want every edge you can get in this market!

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