Real Estate Information

The last few weeks we’ve offered some helpful hints on selecting a real estate agent to assist you in the process of selling or buying a home.  After sharing general insights into selecting a professional agent; and more specific guidelines on choosing a listing agent, it’s time to take a look from the buyer’s perspective.

It’s probably obvious that there are two sides to almost any transaction – representing the seller or buyer.  What you may not realize is that under Tennessee state law, a licensed real estate agent must disclose his or her relationship in the transaction in written form.  Most of the time the listing agent will represent the seller as a Designated Agent for the Seller.  Occasionally, the agent will act as a Facilitator and not legally represent the special interests of either party in the transaction.

So, why is it just as important for the buyer to take the time and select an experienced and qualified agent as it is for the buyer?  The logical answer is that not all Buyer Agents are created equal and you should want the best available to look out for your interests.  What makes for an outstanding Buyer Agent?  Well, in addition to the general items we’ve discussed in recent weeks, there are some specifics to consider – and not necessarily in the order of importance.

First of all, you should select a Buyer Agent that you feel comfortable with.  You are going to rely upon this individual to help make some very important decisions, so trust and credibility are a must.  In addition, you’ll need to feel comfortable with their communication style.  You’ll want them to keep you informed along the way, respond to your questions and requests in a timely manner, and keep their promises to you.  Furthermore, make sure that you select a Buyer Agent who will really list and understand your needs.  They may be working with several other buyers at the same time, but you want them to make you feel special… and listening is a very important ingredient.

The process of finding a home is more difficult than just searching online or driving through communities looking for any home that catches your eye.  Your Buyer Agent should be up on the latest market trends – absorption rates, average days on market, pricing trends and so forth.  After all, if they’re not experts in this area, how are they going to help you negotiate a contract to purchase your new home?  A misinformed agent can harm you either way – by misguiding you to offer too much or too little for the home.  Both extremes can sour a potential deal.  And there is more to negotiating the deal than just the price.  Terms and conditions can make of break the transaction, so you need a savvy agent that knows what to ask for… and sometimes when to back off.

You’ll also need an agent who knows vendors and professionals of all sorts who can assist you in making the transaction come together.  For example, with the financial markets in an uproar, ethical relationships between agents and mortgage lenders can spell the difference between closing on time and not closing at all.

And finally, it goes without saying that your Buyer Agent should be a great source of community information. He or she should be able to point you in the direction of almost anything you need… or respond back quickly with the details if they’re not already at their fingertips.  Don’t make the mistake of buying a home without a qualified Buyer Agent who is dedicated to your needs.

Originally posted November 30, 2008

Last week we took a look at selected characteristics – reputation, knowledge, experience and professionalism – that an ideal real estate agent should possess.  Maybe it’s time to be a little more specific and consider criteria that might be helpful in the choosing an agent to list and sell your home.  If you want it sold quickly and at the highest value, you’ll want to work with a seasoned professional.

In most instances, the listing agent serves as a Designated Agent for the Seller and has a legal obligation to look out for the best interests of the seller.  Trust and integrity are important, but so are the basic skills required to list and sell your home.  Whether you chose to interview one or several agents before selecting the right fit, there are several things that you’ll want to consider.

Asking how long the agent has been in real estate is a good place to start.  In a difficult market you should look for an experienced agent with a strong track record. Why not follow-up by asking about recent performance?  Most agents should be more than willing to discuss results such as sales vs. price ratios, average days-on-market and number of current listings or sales per month.  You certainly won’t want to rely solely on this information to make your choice, but it may be a reflection of your prospective agent’s knowledge and full-time commitment to selling homes.

Every agent should be willing to share a marketing plan and explain the various tools he or she will use to prep and market your home.  Ideally, they will have a proven process for making your home “market ready” which may including staging your home for stronger appeal to the target buyer.  Marketing plans should include an explanation of online and media resources, as well as networking that the agent will engage on your behalf.  Depending on the type and price range of the property being listed, there may be advantages to working with an agent from a real estate brokerage (company) that has national exposure.

You may want to consider an agent that has a specialization or niche marketing experience that will benefit your situation.  This could be in the form of home preparation and staging, as mentioned above, or possibly include unique training to deal with stressful financial situations, including divorces, bankruptcies or foreclosures. Additionally, it may be helpful to know if the agent has been approved to work with relocation companies.

While all of the criteria we’ve discussed are important, maybe none is more important than selecting an agent who will work diligently on your behalf and communicate on a regular basis.  It is unreasonable to expect daily progress calls, but a good listing agent will keep you informed of prospective buyer feedback on a regular basis.  Above all, they will do everything possible to negotiate an acceptable offer from a ready, willing and able buyer.

Originally posted November 23, 2008

What advice would you give to a friend on choosing a real estate agent to help buy or sell a home?  Let me offer up some suggestion based on my own experience with professionals in other fields.  After all, you don’t trust your personal health and financial well being to just anyone without doing a little research.  Hopefully, you did your homework before choosing a dentist, an accountant or a day care for your child or grandchild.  Why should choosing a real estate agent be any different?

There are four general areas that you will likely consider before engaging any professional on your behalf – and selecting a real estate agent should be no different.  You will benefit by researching and choosing an individual who is qualified and committed to taking care of your needs.  In simplest terms, you should choose a real estate agent based on reputation, knowledge, experience and professionalism. 

Your friends, work associates and others that you know might be a good resource for determining if your prospective agent has a good reputation.  If you’re fortunate enough to know individuals who have been a client of the agent, you may want to inquire about their level of satisfaction. Was the agent responsive to the client?  Did the agent set performance expectations and live up to them?  Did the client’s needs always come first?

Just like in any business, some agents are more knowledgeable than others.  It would be wise to select an agent who is up to date on the market trends – both locally and nationally.  Market knowledge is critical in relation to home values, neighborhood and community services, property appreciation, financing and much more.  Most of this knowledge comes from real world experiences learned over time…only a small portion can be learned by spending a few days in a class or online research.  Many agents have earned designations that indicate successful completion of specialized study.  But be sure to ask questions if you’re looking for proficiency in a certain area.  For example, if you need an agent with an expertise in providing services to seniors, ask questions and determine if they really do know their stuff.

In these difficult times, you will benefit from choosing an experienced agent with a track record of being a problem solver.  A majority of today’s transactions require creative strategies to work through marketing, negotiation and financing issues. You may want to ask your prospective agent if they are engaged as full-time or part-time real estate agent.  It might surprise you to learn that only a small percentage of agents close more than 10 transactions in good year.   

Your objective should be to select an agent with the reputation, knowledge and experience to represent your best interests whether you’re selling or buying a home.  If you’ve chosen well, you will have found an agent that demonstrates professionalism at every turn – prompt, courteous, honest, organized and capable of delivering on their promises.

Originally posted November 16, 2008

It’s no secret that the struggling real estate market has been especially tough on the home building industry.  After all, home builders count on selling homes at a profit in order to feed their families and keep their companies financially viable. 

In recent weeks we’ve seen a wave of steep discounts approaching 20% (in some cases more than $50,000) on some new homes.  Many of you are now asking, “What effect is this going to have on home values in my neighborhood?”  The real answer is complicated, so let’s talk in very simple terms. 

No one likes to see a new home in their neighborhood being sold at prices way below market value, or for that matter, foreclosures on existing homes.  Both can have a negative impact on neighborhood appraisals and your ability to sell your home in the short run.  When builders sell a new home at outrageous discounts, chances are the property is selling at a substantial loss.  In other words, the builder is sacrificing more than just their profit.  They may be writing a check that reduces the company’s capital or comes out of their personal savings.  And the main reason they’re willing to sell at a loss is to stop the bleeding and get out from under the interest expense that continues to grow – month after month.

When a builder unloads a home way below market value the only possible most likely benefactor is the new homeowner.  But even then, the prospective buyer of such a home will need to exercise caution.  Some new homes selling at huge discounts may not be completely finished or hiding unknown problems caused by delays in the construction process – especially if the home was not properly dried in.  If the builder is going out of business, the buyer will want to know who (if anyone) will assume the liability for call backs and warranty work. 

In the short run, if you’re trying to sell your home in the same neighborhood, you may face stiffer competition until the builder’s home is sold.  However, the long term outlook is still positive.  The sales price of a new home is comprised of several items –land, fees and permits, materials, labor, overhead, financing costs, sales or marketing expenses and profit.  Historically, land prices have always continued to rise and should in the future (in fact some experts predict a shortage of building lots as early as early 2010).  Same story on materials.  Although the inflation adjusted cost of some materials has been reduced over time, new innovations and features continues to drive the effective cost of materials  higher.  Labor is the same.  It seems that every improvement in efficiency in the home building industry has been met by an increase in cost imposed by local, state or federal regulations.  For example, by 2011 it is likely that all new homes will be built with a code-required fire sprinkler system that will add several thousand dollars to the average home price. 

While we may eventually see a reduction in the size of future homes, it is unlikely that the average cost per square foot will do anything but increase over the long run.  Sooner or later, the economy will stabilize and new homes will be selling at or above historical values.  Your community will recover and life will go on.

Originally posted October 19, 2008

Today’s unpredictable real estate market has some prospective sellers considering an alternative to the conventional approach of listing a home for sale.  While only a small percentage of residential home sales are transacted through an auction, it might be helpful to explore potential circumstances and benefits that support the use of the auction method to sell a home.

More often than not, the auction process is chosen when a seller is seeking immediate action to divest of the subject property.  Maybe the heirs are primed to cash out the family estate after the passing of a loved one.  It is also possible that some other personal circumstance (bankruptcy, divorce or dissolution of a business partnership) is motivating the decision to sell the property at auction.  Whatever, the reason, the seller may have determined that selling their property in a public forum, through open and competitive bidding, offers potential benefits over conventional approaches.

While the seller will likely be required to pay an advance fee for advertising expenses, there are potential benefits that may offset the risk and make this approach appealing.  First, under normal circumstances, selling a property at auction exposes the real estate to a wide number of potential, qualified buyers.  It also allows the seller to set terms and conditions with the expectation of a quick turnaround.  In other words, a seller can plan when the property will sell (assuming the bids meet the terms and conditions) and, eliminate numerous and unscheduled showings.  Hopefully the property will attract competitive bidding and yield its targeted selling price and net proceeds.  Best of all, auctioned properties are usually sold “as is, where is” and there are no contingencies to the sale.

Are all properties suitable for auction?  No, but most properties, including residential homes, commercial buildings, farms and lots can be sold at auction.  However, not all properties that go to auction, actually sell.  In some cases, the seller reserves the right to accept or decline any and all bids.  In an Auction with Reserve, the minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time period. Some properties are sold at Absolute Auction, which means that the property is sold to the highest qualified bidder with no limiting condition or amount.

So, if the idea of selling your home at auction sounds appealing, maybe its time to call your real estate agent and discuss the pros and cons as they relate to your particular situation.  Once you determine that an auction is your the best approach to a quick sale, your agent will assist you in selecting an auctioneering firm to guide you through the process.

Originally posted October 19, 2008

If you’re up on current events, you know that our economy and financial system is experiencing tough times.  But, what does that really mean to you – especially if you’ve been considering the sale of your home?  

It’s been said that history repeats itself.  If that’s so, is there an historical perspective that might give all of us hope that an economic recovery and brighter future will return?  There certainly is. 

While I’m no economist, I am an optimist and encourage you to consider the past as we look to the future. Chances are that you have forgotten or never experienced the real estate troubles that throttled our local and national economy almost 20 years ago.  In the late 80s and early 90s, the U.S. economy was mired in a downturn that eventually led to the failure of more than 3,000 banks and savings and loans (S&Ls)… and our nation survived it.  The Resolution Trust Corporation (RTC), a U.S. government-owned asset management company, was organized and authorized to liquidate the assets (primarily real estate-related assets, including mortgage loans) of failed S&Ls. Eventually the real estate market recovered, home values began to appreciate and everything returned to normal for a period of almost two decades.

In some ways, today’s problems are similar to the situation that our country faced in 1989.  There is an oversupply of new and existing homes on the market. Our country is in or nearing an economic recession.  But there is one huge difference – mortgage interest rates are about half of what they were 20 years ago.  Back then rates were hovering around the double digit mark.  That’s right, when our nation worked its way through the  real estate valuation correction of the late 80s and early 90s, mortgage rates were around 10% for a 30-year fixed rate. 

So, is now a good time to sell your home? That depends entirely on your personal financial situation.  If you’re inclined to view the glass as “half-full” and are looking for a larger or more expensive home, there may never be a better time than now to make your move.  For example, let’s say that you’re able to sell your current home for $210,000 and realize a loss of $20,000 compared to what you could have sold it for a year ago.  Its understandable that this is discouraging, but you haven’t considered the whole picture.  Stop and consider the potential savings on the home you can now purchase.  Let’s say that you then purchase a new home for $430,000, at a savings of $45,000 compared to what the same home would have cost only a few months earlier.  Simple math says that you have made $25,000 on the transaction ($45,000 savings on your new purchase, less $20,000 setback on the sale of your home).  And depending when you purchased the home you’re selling, there is a strong possibility that the interest rate on your new loan is less than the rate on your previous home.  You might actually win on two fronts.

Now, does the above scenario work for everyone?  Obviously not, but for some it will and that’s the perspective we need to see and understand as the market transitions through this period of correction. That’s the experience we need to carry forward if the old axiom holds true… and history repeats itself.

October 12, 2008

Over the last few weeks, we’ve been discussing some of the ways to improve the likelihood that your home will sell at its highest possible price, given market economic conditions. Last week we considered the importance of reasonable updates and repairs to help your home better compete against new construction and communities, in addition to the obvious and not so obvious reasons for pricing your home to sell quickly. Are the right updates and pricing enough to make your home stand out in the crowd? Probably not.

There are more than 2500 homes listed on the MLS in Rutherford County – including new and “experienced” (more often referred to as existing homes) single family homes and condos that span a wide array of price ranges. What can you do to separate yourself from the pack? The answer may be as simple as staging your home.

Staging refers to a process that neutralizes your home with the intent of appealing to as many prospective buyers as possible. In other words, you’re trying to eliminate as many objections as possible so that no one will be turned away when they first open the door. You might need to temporarily put away some of your prized possessions, if there is any chance that someone else may find them les than desirable.

Most homeowners will need to engage the assistance of a professional to guide them through the process. Our unique StagingMagic^SM service begins with a “market ready” list of action steps designed to help your home sell faster at the best possible price. National surveys have shown that staged homes sell for up to 7% more than homes that have not been staged… and more than twice as fast! For the most part, we discussed the general principles behind updating your home last week. One of the most important considerations during the freshening of the home is paint, flooring and/or counter upgrades. It is critical that selected improvements are neutral and in style with current trends (including any accent colors and finishes).

Once all of the updating is complete, the staging team merchandises your home by carefully positioning small furniture and other home accents to present a look and feel that will generate stronger buyer interest – even in a tough market. The objective is to create an atmosphere that appeals to the senses of as many prospective buyers as possible. The desire is to create an emotive connection that enables them to visualize themselves living in your house. It helps when the staging coordinates and ties everything together.

While staging may look easy, be careful not to confuse the concept with decorating. It is very important that you select qualified professionals to stage your home and guide you through the entire preparation process. To round out our series on preparing your home to sell, next week we’ll explore ways to identify the right people to help maximize your value.

If you’re in the process of trying to sell your home, or even considering the thought, determining and setting the proper price is a critical step.  But, as we touched on last week, that alone is not enough.  Today’s buyers have too many houses to choose from – and your home needs to be positioned to make a great first impression.

Over the last several months, the Rutherford County market has moved from a balanced market (relatively equal number of buyers and sellers) to what is commonly referred to as a sellers market.  Several market conditions have changed during that time, including a reduction in new homes starts and a tightening of the financial markets.  The slow down in new home sales has forced builders to lower prices to a point where new homes compete even more directly with existing homes based on price. 

So what can you do to maximize the equity and relative value of your home prior to offering it for sale?  Regardless of the age of your home, you need to make any obviously needed repairs to damaged walls, squeaky doors, leaking faucets, etc.  Almost 100% of homes sold today are contingent upon completion of a home inspection, so while you’re at it, you might as well repair anything and everything that you know will be of importance to the future homeowner.

If your home is more than a few years old, some items may need to be freshened, replaced or even updated in order to compete against newer homes.  You’ll need to make sure that all light fixtures are in working order including exterior lighting.  Overgrown landscape must be trimmed (in some cases removed or replaced) and a fresh layer of mulch added.  Be sure to clean away dirt and grime from the windows, entry ways, and exterior siding.  Prospective buyers often make a discerning judgment about your home within the first minute or two – sometimes even before walking inside the home.

At a minimum, you should consider upgrading outdated light fixtures, faucets and cabinet hardware.  You will also need to touch-up heavily trafficked areas with a fresh coat of paint and in some cases update with accent colors.  Counter tops and flooring upgrades may need to be considered if your home is priced above $250,000.  It is very difficult to compete against newer homes in the upper end without solid surface counter tops (granite or other) and some tile or hardwood flooring. If you’re handy with tools and a paint brush, many of these touch-ups may be do-it-yourself projects.  If not, there are reliable specialists that focus on these types of home updates.  No matter which route you choose, make sure the job is done well.   

Most of the time, today’s buyers want to purchase a home that is ‘move-in ready.”  Those who don’t have that desire will expect to purchase a home at discounts well below what sellers wish to sacrifice.  Therefore, you need to carefully evaluate the upgrades and improvements necessary to bring your home up to a level that will favorably compete with other homes for sale. Next week we’ll discuss how “staging” relates to these improvements and maximizes your investment.

Originally posted September 21, 2008

Are you wondering why your home has a For Sale sign in the front yard and not a Sold sign?  If so, there might be several reasons why your home sweet home has been shown over and over again without even a single offer coming your way.

Many objections such as architectural design, location or school zones can’t be modified to attract a buyer.  You can’t just pick up and move your home to a different school district.  Instead, you’ll need to be patient and wait for the right buyer to come along and fall in love with your home.  Better yet, you can take an aggressive approach and try to avoid common mistakes and missed opportunities that would have hastened the sale.

There are at least four positive steps that every buyer can take to increase their chances of a quick sale even in a buyers’ market.   Properly pricing the home is a must.  In addition, if you’re your home is more than a few years old, some items may need to be freshened, replaced or even updated in order to compete against newer homes.  Even then, the home must be properly staged for presentation to connect with the prospective buyer. Finally, you’ll want to improve your odds by working with an experienced real estate professional who will work hard for you and look out for your best interests.

Determining the right selling price is one of the most crucial decisions you can make.  Too often emotion gets in the way and we try to squeeze just a little too much out of our home – and fall into the trap of chasing the market.  In other words, the comparative sales in your area might suggest a price of $250,000, but you insist on listing your home just a little higher at $265,000.  Unfortunately, after a few weeks or months your home has not sold so you lower its price to $255,000.  Yet during that same time period, the comparable home price has declined by 3% to $242,500.  Even as you lowered the price on your home, you lost ground in relation to your competition – in other words you’re chasing the market trend but never catch up to it.  In most cases, the longer it takes to sell, the lower the price. 

If your home is priced right, you will normally receive highly interested and qualified buyers during the first four to six weeks after listing. If you have little or no traffic, the home is almost certainly overpriced.  Another rule of thumb is that after 15 showings with no offer, you can assume that the market has rejected your home.  If price is not the factor, something else is... and we’ll take a look at other possibilities next week.

Originally posted September 3, 2008

Over the last few weeks we've taken a look at some of the crucial ingredients that will help you maximize the value of your home if you've decided to sell. It's important to price your home to the market and not fall into the trap of "chasing the market." Making your home "market ready" by completing reasonable repairs and updates a must. And if you really want to stand out in a crowded market, then staging your home to create an emotive connection with prospective buyers is a must. So what is missing? If you're serious about selling your home, you will want to seek  a professional to help you sell your home faster and for more money.

There are several things that you may want to consider before selecting a competent real estate professional to represent you. In Tennessee, real estate agents must be licensed by the Tennessee Real Estate Commission to represent buyers and sellers in real estate property negotiations and transactions and receive any type of compensation. However, not all licensed real estate agents are REALTORS. Only real estate professionals who are members of the National Association of Realtors and agree to uphold its Code of Ethics and Standards of Practice earn the right to be called REALTORS.

You'll want to know how many homes your prospective agent sells on an annual or monthly basis. Did you know that 80% or more of all homes are sold by less than 20% of all agents? The reasons are many, but in simplest terms the top producers in any market are dedicated full time to their business. They are also keenly aware of changing trends, especially as it relates to pricing and marketing your home.

You should find value in many resources that most active real estate professionals bring to the table. They should have knowledge of the reputation and abilities of other industry providers that will help you through selling or buying a new home (painters,movers,landscapers, etc.) and are usually willing to recommend two or three for you to talk with. While it's helpful to have a recommended list of contractors and vendors who will help make your home market ready, it's even more important to know that your agent has a good track record of working with industry professionals ( home inspectors, mortgage originators, closing attorneys, etc.) in addition to fellow agents. In this day and age, you never know when your agent's relationships, professional to professional,  might be the glue that holds your deal together at the closing table.

Finally, and maybe most important of all, you'll want to consider the professional skill level and integrity of a prospective agent. Does he or she appears knowledgeable? Do you trust them? Can they answer difficult questions? Do they ask good questions of you? Are they willing to go the extra mile? Do they suggest innovative ideas and approaches that you have not considered? Do you have the confidence that he or she can get the job done? And in the end, maybe the most important question... does this agent really care about me?