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Posts Tagged ‘Selling a home’

Low Mortgage Rates, Low Prices – So Where Are The Buyers?

There’s very little debate over the fact that this is a “Buyer’s” Market” right now.  The thing is that this time around it’s a little different than in past market cycles.  There are plenty of homes to choose from, prices are low (still declining in many areas) and interest are as ever.

By all rights, there should be lots and lots of people buying houses right now.  There aren’t!  There are buyers and they are buying houses but not at the pace that the market conditions should justify.

Why not?

Here’s a short video that may be helpful in understanding part of the reason.

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The Risks of Killer Negotiation

I’ve written before on this subject and this may or may not be my final word on the topic of negotiation (you never know what’s going to pop into my addled, old brain at any moment.) It covers the subject of why it may be in your own best interest not to approach a home negotiation with the tactics of your character in Mafia Wars.

What is KILLER NEGOTIATION?

In a nutshell it means putting the other party in a vice until they crack. Pushing them to do what you want not by vigorous “give and take haggling” to make the best deal you can, but by testing the limits at which they will “break” and bend to your will.

This can apply to either side – the buyer or the seller.  In a depreciating (buyer’s) market the seller will typically be the target and in an appreciating (seller’s) market it will most often be the buyer.  Not always – it is sometimes about the market and sometimes it’s just about exploiting the other party’s sense of desperation.

KEEP YOUR EYE ON THE GOAL.

I’m in no way urging that you should pay more or take less for a house than the market or your individual situation dictates.  This isn’t about the results of bargaining – it’s about the tactics. Remember what your objective is and why you put yourself into this position in the first place.  The goal is the same for each side: To make the best financial transaction you can in the best time frame with the least amount of risk.

The part of that statement that everyone always zooms in on is the first part – the price!  The goal, however has more than just that.  It’s about your optimum time frame and minimizing your risk.

RISK?? WHATCHOO TALKIN ABOUT?

I JUST WANT TO BUY (SELL) A HOUSE!

BUYER RISK

Unless you are paying cash for a house and are not selling another house, there are pieces of the transaction that you simply have no control over.

Most moves are part of a chain.  The number of links in the chain can vary. If you must complete the sale of your own home in order complete your purchase then you must rely on the success of your buyer.  If that buyer is also selling something then you must rely on the success of your buyer’s buyer.  And so on. The more links the more places something can go wrong.

The old adage about a chain only being as strong as its weakest link doesn’t have a better example than in a chain of home sales that rely on each other.

In addition, if you are acquiring a mortgage for your purchase there are a million things that can go wrong between the time you and the seller agree on transaction terms and the closing. The work flow of a mortgage is dependent on a number of laws that have specific intervals between critical dates as well as being dependent on the speed, work-ethic and efficiency of any number of employees and third party vendors that the bank may employ.

SELLER RISK

Unless you are selling your home with the idea of renting your next home, staying in a hotel while you travel for a while, or moving in with relatives and you do not need the net proceeds from the sale for living expenses, there are parts of the transaction that you have no control over.

The chain affects you as well – on both ends. In order to close successfully you are dependent on your buyer’s success and his buyer’s success. And so on.  In addition, if you are purchasing another home where  you plan to live, you cannot complete that transaction unless the people you are buying from close successfully – and they are dependent on the people they are buying from. And so on.

THE ULTIMATE DYSFUNCTIONAL FAMILY

Sellers, buyers, downstream buyers and upstream sellers are interdependent on each other for a successful move.   You start out as adversaries and then you all need each other to be successful. I’m not a mathematician so I can’t calculate the degree of risk but let’s just say that the more links in the chain the higher the odds that it will break somewhere along the line.

You cannot control anything that happens upstream or downstream.  You can’t even control much that happens with the two closest links, who are your buyer and your seller.  There is one thing that you can do to lessen some of the risk – at least at the closest point to you. You can control the level of goodwill between you and your buyer or seller.

SOME EXAMPLES

Work with your Realtor and come up with a price range that falls in within market value. Negotiate by making offers and counter offers. Try and learn what you can about the other parties sense of urgency and stick to numbers that you think will be accepted.  Wait them out if you have to.  Don’t go to a number that you don’t think is acceptable.  Go as many rounds as you have to, working with your Realtor’s guidance.

The key is to do it with respect.  (The following items are true – names changed to protect innocent).

  • Unless there is a valid reason – don’t tell your Realtor to inform the other party that if they don’t respond to a counter offer within a few hours, you are pulling out.
  • If you are the buyer and in your initial offer you ask for some item that was not in the listing – don’t press the issue if the seller replies that it’s an important item to them and they need to take it when they move.
  • If you are the seller and you settle on price around the time of a holiday weekend and the buyer can’t get an inspector to come out within 3 or 5 days as detailed in the offer – don’t inform him that his inspection contingency is gone
  • If you’ve gone through several rounds of offer/counter offer and you are now $800 apart on a $400,000 home, and the other party offers to move another $400 if you’ll do the same  – do it! Don’t come back and say you’ll do $350 if he’ll do $450

You certainly have the right to do any or all of the above.  As a Realtor, my job is to advise, but ultimately present any and all offers and demands my client makes.

The odds are, whatever side you are on, there is going to be SOMETHING you’ll need from the other party after the negotiation before the closing (These are all true)

  • A buyer is going to ask the seller to extend the mortgage commitment date in the contract by a week
  • A seller is going to ask a buyer if they can rent the house back after closing for 48 hour
  • Either side might need an extra day to execute the sales contract because their attorney was sick

There are a dozen other examples but you get the idea.  The bottom line is that if you put the other party in a box and squeeze the life out of him at the beginning of a transaction – I can assure you that he will remember.

As with most of things I write or talk to clients about – the operative phrase is “Accurate Expectations”.

The funny part of it is, very few strong arm tactics actually change the outcome of your transaction.  It’s almost never about the original goal (see above). It’s about winning.  As I’ve said before a truly successful negotiation doesn’t have to have a winner and a loser.

FAST FACTS #2: Real Estate Terminology – Easements

February 23, 2010 Leave a comment

An Easement is a right granted (typically in the deed)  for use of a portion of property by someone other than the owner.

Generally speaking there are two types:  An Easement allowing one party to cross over a piece of property in order to gain access to another piece of property that is landlocked.  Sometimes this will manifest itself as a “Shared Driveway” which is actually owned by one party or the other but both have access.

The second type is a public easement or right-of-way which comes to be when a municipality/public utility has the right to cross a piece of property to provide continuous service.

There are other types of easements but these are the most common occurrences.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Spring Market in February?

February 6, 2010 Leave a comment

I know it’s still winter – in fact, just 50 miles or so south of here they’re at the tail end of a huge snowstorm – but it sure seems like the spring real estate market is revving up. I’m sitting here taking my shift at the William Raveis office in Danbury and the level of activity is definitely higher than its been in a while.

People are calling with questions about our listings, one of my colleagues just took a “walk-in” for someone who is looking to buy a home in the area, and Realtors from other brokerages are calling to set up showings for their clients.

I know this isn’t scientific but it has a good feel to it – as if the economy just might be back on track. Can I get an AMEN?

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

A Real Estate Carol: Ghosts of Prices Past, Present and Yet May Be!

January 1, 2010 1 comment

THE FOLLOWING IS BASICALLY TRUE, EXCEPT FOR THE PART THAT DIDN’T HAPPEN YET

THE NAMES HAVE BEEN CHANGED

THE NUMBERS ARE ALL ACCURATE

REALITY

John and Mary decided in the fall of 2006 to move.  The house they were in was old, and had too many steps for John’s aging knees.  They did some fixin’ up and put the place on the market in early 2007.

One of their neighbors who had a similar house two doors down had sold in the summer of 2006 and received $430K.

Their Realtor told them that prices had dropped a little in their market and they should list it at $425 and be prepared to come down a bit.  Mary and John were concerned by this.  They felt that their house was at least as nice as the neighbor’s and that they did not think they should take “a loss”.

The Realtor, who knew that they had bought the house about 10 years earlier for $325, didn’t seem to agree that if they sold for $420 it should be counted as a loss.  In fact, she said, if you sold for $420, you’d be making a considerable profit.

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John:  “HMMMmmmmmm

So Mary and John listed the house for $425 and in about 45 days sold it for $415.

They bought a new house in a different town about 20 miles away.  It was actually a bigger place but because it was a little farther out from the big city, the market was priced lower.  They bought it for $375.

With only a very small mortgage left on their original house, they were able to put $300 down on the new house and mortgage $75

As we move into 2010, home prices have NOT rebounded, in fact, they’ve continued to drop.  The home they bought in 2007 is now valued at $300 based on recent sales in their new neighborhood.

———–

ALTERNATE REALITY

Mary said “But if we had sold last summer we would have gotten more!”

The Realtor said “But you didn’t sell last summer?”

Mary: “Well, should we wait until prices come back up?”

Realtor: “I can only answer that if you can tell me when they will go up?”

Mary and John: “HMMMmmmmmm”

So Mary and John held on to their house, waiting until the market came back.  As of the beginning of 2010 it had not, in fact, prices continued to drop.

In January of 2010 John had had it with the stairs.  He told Mary they needed to sell now – even if they had to give the place away.

So they called their Realtor who, after doing a Market Analysis, told them that their home should bring between $330 and $340.

They listed it at $349 and after 45 days sold it for $340

After looking around they found a new home in another town (the same home in the first part of the story).  They purchased it for $305.

Since they had a very small mortgage on the house they sold, they were able to put $235 down and had a mortgage of $70.

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So – if you put aside unimportant things like sale price and market value – at the end of the day,  in both scenarios John and Mary leveraged the equity in their home to buy another home that they liked better – and they ended up with virtually the same situation – with one exception. In the second scenario, they stayed in the house they didn’t like for three additional years.

WHAT IF…….

The whole thing was just starting now.

  • What if you have a home that no longer fits your needs?
  • What if you decide not to sell it because you are waiting for prices to come back up?
  • What if prices don’t rise, and you stay where you are for years?
  • What if, after that time, you make a move and end up with essentially the same financial situation?

Of course, as in any good space-time continuum story, the future is unwritten. Just ask good old Ebeneezer and he’ll tell you  The Ghost of What Will Be, is actually The Ghost of What MAY Be. Prices could go up or down dramatically in the next three years.

The point, I guess, of my little fable is that if prices go up or down on the house you want to sell, they will likely go up or down proportionately on the house you want to buy – so if you want to make a move, what is it you gain by waiting?

Just some food for thought.

God Bless Us Everyone!

Realtor Expectations – Part One: THE LISTING AGENT

NOTE:  This is a pretty long post but worth reading – print it out.

With so many Realtors to choose from, this is intended to help you look at some of the things you might want to clarify with an agent when selecting the one to sell your house.  Realtors, like any group of people, have many different styles, work ethics, and philosophies.

There are a lot of homes on the market today – some sell, some don’t.   Working with the right Realtor can definitely have an impact on which group your home falls in to.

Every Realtor should have the same objective when listing your home.   The objective, put simply, is this: To help you sell for the highest possible price, in the shortest amount of time, with the least amount of inconvenience for you.

This  objective should be the basis for everything else in the Realtor’s Strategy:  Highest – Shortest – Least  or HSL.

Every plan and every action should be geared towards one of those three components.

PRICING: A Realtor’s first responsibility to you is to help you decide the right asking price.

You agent should perform a detailed analysis for you of your local market, including sold properties, active listings, properties that did not sell, as well as information on how many homes have sold in your areas recently and the pricing trends.

Once you know the right price, it is the responsibility of the Realtor to advise you not to overprice your house.   Why  you should not overprice your home is covered in THIS POST.  The subject at hand today is that your Realtor should not be telling you what you want to hear. Brutal honesty should gets high marks.

The tendency for many sellers is to ask about listing above market value for  “a while” and then lower it if doesn’t sell.  Doing this is rarely in the best interest of the seller and usually ends up with months of anxiety and ultimately nets the seller less money for their home.  Look for a Realtor who will stand by his analysis and work with you towards HSL.  It may be the path of least resistance for a Realtor to simply go along with the client on this issue – but it may not be the best thing for the client.

MARKETING: I’ve heard it said that no one “sells” a house, people look at at and choose to buy it.  If that’s true then the key to finding that buyer is to get as many people to look at the house as possible.  Not everyone that views your home is going to want to buy it – that’s OK.  You only need one buyer.  The odds of finding that buyer are greatly increased by the Realtor’s ability to generate interest.    Ask your Realtor for his Marketing Plan.  What are the specifics thing he’ll be doing.  What will be done in the first few days, the first week, the second week.  What will be done on an ongoing basis.

How will he be promoting the home to the other Realtors in the area?   Remember, it’s the other Realtors who have the buyers.  So  while advertising your home to consumers is important, it is equally important to know the specifics of how your Realtor will be communicating with the other area Realtors – or even Realtors not in your area.  Your buyer may live  down the street or thousands of miles away.  In our area of Northern Fairfield county, there are multitudes of folks who move across the state line from NY.  How will your Realtor approach the NY Realtors with information about your listing?

Part of  the marketing plan includes preparing your home for showings.  This may include staging advice, which again calls for brutal honesty.  For certain homes, it might be appropriate to bring in a professional home stager, but  even without that there will be things that your Realtor will likely notice that will make your house more appealing to buyers.  Again, what you want here is for the Realtor to look beyond saying what’s comfortable – he needs to point out anything he notices to you that will help reach the prime objective.

In addition your Realtor should make a point of preparing marketing materials for your home that will point out “the high points” to visitors.  Remember – neither you nor your Realtor will likely be present during showings and the buyer’s Realtor does not know as much about your home as you or your own Realtor.  “Call outs” which are small signs can be placed throughout the house to draw attention to certain features.  If there’s a cedar closet for example, buyers will only see it if they open and look inside – so a small sign on the outside of the closet can help.

There are a variety of other materials that can be placed in the house, co-located with the agent sign-in sheets.  Property and subdivision maps, neighborhood information and transportation options are just a few.

FEEDBACK: Ask yourself how often you want updates from your Realtor about  “what’s going on”.   Will your Realtor provide weekly written summaries of all showings and re-showings of your house?   What is the Realtor’s plan for following up with the agents who bring buyers for showings?   With today’s electronic key boxes, your Realtor can have the capability of knowing very quickly what other Realtors showed your home.  Does he have a systematic plan to get feedback and follow up with them?

NEGOTIATION: Your Realtor should have a negotiation strategy which he goes over with you before the house is ever shown.  While he will bring you all offers and you will ultimately decide,  he should be discussing likely contingencies and options with you.  When an offer comes in, it begins a series of fast paced back and forth telephone conversations that should lead you to a successful sale. If you’ve discussed the strategy in advance, you’ll be prepared for and can come up with well thought out positions on things such as:

  • What will you do if you get a full priced offer on the first day of the listing – before you’ve had an open house?
  • What are your options if you get multiple offers?
  • How should you respond to “lowball” offers?
  • What if you get an offer form someone who has a healthy down-payment but needs an extended closing date?

None of these things should be surprises if and when they come up.

POST SALE: Once an offer is accepted, the primary point of contact will likely be your attorney but that, by no means, says that your Realtor’s responsibility is over.  Your agent should be prepared to follow up with all the various parties to make sure that everyone else is doing everything they are supposed to.  There is an old adage among sales people  that applies here:   “A salesperson’s job begins when the buyer says yes”.   Everything that happened prior to your finding a buyer will mean nothing if the deal falls through.  There are many things over which you or your Realtor have no control, but he can stay informed and at least try to avert any one of the many things that can go wrong.

SUMMARY: Generally speaking, you should choose someone you feel comfortable with but that comfort should come from you knowing that your Realtor has a plan which involved more than taking the listing and waiting for the buyers to come.

What if the Other Guy Won’t Play?

I’ve had several comments and questions regarding the subject of a previous posting on Fair Negotiation. The common question is this – What if the other guy doesn’t want to play fair?

It’s a great point and the answer is very straightforward. Whether you are the buyer or the seller, if the other party in the negotiation is “playing hard ball” with a price that is significantly outside the range of the fair market value of the house, then you probably aren’t going to come to terms with that party.

Although it might be emotionally discouraging to begin a negotiation and then have to walk away from it, the bottom line is that you aren’t really losing anything. The value of the house you want to sell or buy, is determined by the market.

Sellers who stand firm on an unreasonable price are not likely to sell their house until they adjust their position. As I’ve written before, there are four things that are irrelevant in pricing a house for sale. “What you paid; What you owe; What you want; and what you need.” All of these things are important considerations in determining whether or not to sell a house but they have nothing to do with the value.

It’s the same with buyers. What a buyer can afford has nothing to do with the value of a house he wants to buy. How large of a down payment, the amount of his pre-approval and how much his current home will sell for all have nothing to do with the value of the house he is trying to buy.

So, as I wrote in the last report, work with your Realtor to come up with a range that represents the fair market value of the house you are trying to buy or sell. If the other party and his Realtor do the same, the negotiation should be a simple process.