I've been pleased and amazed with the number of emails, calls, and comments I've received with the news of our recent acquisition of George J. Smith & Son, a Milford-based real estate firm. Everyone has been excited for us, and happy to hear that Pearce is growing. Real estate competitors have been the most flattering of all, which is a testament to our industry.
It's also a testament to the common desire for the bad economic times to end, and the hope of a better future for the economy. Although things are on the upswing for us, we know that many uncertainties remain in the outlook for the near term, including the possibility that bad news will sink the recovery before it can really take hold.
Our commitment to growing our firm into new territories and services is almost as important in reassuring those who are nervous as is the optimism and faith shown by the Smith brokers in combining with us. Their belief in the potential of our merged firms is compelling, and has prompted others to speculate that we will see more transactions like it in the fairly immediate future. That latter feeling is particularly inspiring to me, as I see it as a vote of confidence in the future of independent brokers. Just as with banks and airlines, I think that the prevailing trend toward mega-companies will be followed inevitably by the rebirth of smaller ones. Not everyone wants to be a number, either as an employee or as a client. And that is what we, and Smith, are betting on!
Monday, July 30, 2012
Wednesday, July 25, 2012
Cash is Still King
When we first heard the national statistics, that a third of all sales currently are cash deals, we had trouble believing it. Then, when it transpired that that figure in Connecticut was 39%, it was even harder to swallow. However, as the year goes on, and we look at each transaction closing, it's more apparent that those cash sales really have increased a great deal. And the difference in those deals can be huge, when the mortgage contingency is removed from the equation. Closings are faster, deals fall through less often, sellers and buyers feel more committed; however, there is the appraisal problem.
Many buyers feel--and they are often correct--that they will get a better price from the sellers if they offer cash, for all the reasons stated above. The mortgage process, though, does provide the security of an appraisal, ensuring that the seller is not overpaying. In fact, these days, with the market improving, the appraisal, as I've stated before, is more often low than high.
Without the need for an appraisal, the seller may want to check the appraisal on his or her own, and sometimes does. The fact that a deal may be called cash does not mean that the buyer won't seek a mortgage. It simply means that the buyer intends to close, and can close, with or without a mortgage in place. So, if they do apply for a mortgage on a cash sale, and the appraisal comes in low, they sometimes try to get out. Without the mortgage contingency, that can get messy. If they didn't say that a mortgage was required for them to close, or be willing to close, and they got a better price for that risk, can they now assert the same claim as a buyer who had the contingency? We're sometimes finding that out these days.
Many buyers feel--and they are often correct--that they will get a better price from the sellers if they offer cash, for all the reasons stated above. The mortgage process, though, does provide the security of an appraisal, ensuring that the seller is not overpaying. In fact, these days, with the market improving, the appraisal, as I've stated before, is more often low than high.
Without the need for an appraisal, the seller may want to check the appraisal on his or her own, and sometimes does. The fact that a deal may be called cash does not mean that the buyer won't seek a mortgage. It simply means that the buyer intends to close, and can close, with or without a mortgage in place. So, if they do apply for a mortgage on a cash sale, and the appraisal comes in low, they sometimes try to get out. Without the mortgage contingency, that can get messy. If they didn't say that a mortgage was required for them to close, or be willing to close, and they got a better price for that risk, can they now assert the same claim as a buyer who had the contingency? We're sometimes finding that out these days.
Wednesday, July 11, 2012
Hartford's Buyers' Market
Hartford is currently listed number 9 in the list of the best markets in the country for buyers. To put that in perspective, Phoenix is listed as one of the hottest sellers' markets. So what do they really mean?
The people who compile these lists rate as a buyers' market anywhere where prices are not rising, where homes sell below the asking price, and where the median home in on the market longer before selling. Now think about what that could mean. In Phoenix, where everyone knows that there are tons of short sales and there was a huge oversupply of homes built, with declining values and high rates of foreclosure, sellers are very realistic. They may even expect to lose money. Also, many people have seasonal homes there, in which they are less emotionally invested, and may just be willing to dump them to be done with things. They may rate outside advice more strongly, since they may not be Phoenix natives. And they know that they are competing with banks and corporations as non-emotional sellers.
Now compare that to the Hartford area. Most homes are primary homes, with owners living in them and feeling strongly about their value. There was not a great deal of building down in the prior decade, nor were there daily articles in national news media about the poor market and the high foreclosure rate. Most foreclosures, since Connecticut is a law state (meaning that you must go through the legal system to foreclose), are still in the works. Finally, prices went up in the past decade and a half, but not like they did in the Sunbelt, where jobs were growing and the economy was expanding.
Then, add in the factor that every home is different, so its value is subjective, and it is not a commodity (although it may have gotten close in the Southwest). It's not like buying a Honda here versus in Arizona; you are not comparing apples to apples.
However, numbers don't lie. Sellers here have not been as willing to drop prices or make concessions, so their homes have not sold. Buyers have chosen to rent and wait for values to bottom out. Also, they have probably been less inclined to put their homes on the market for what they are truly worth, since they are still hoping to get out whole, and, often, to buy another home.
When will things change? Either the market will get much better, and, like a rising tide, raise all boats, or prices will come down until those homes that have rusty For Sale signs out front are all gone. But it does seem like a stretch to say that sellers are better off in Phoenix than in Hartford, overall. Like much of life, it's just not black and white.
The people who compile these lists rate as a buyers' market anywhere where prices are not rising, where homes sell below the asking price, and where the median home in on the market longer before selling. Now think about what that could mean. In Phoenix, where everyone knows that there are tons of short sales and there was a huge oversupply of homes built, with declining values and high rates of foreclosure, sellers are very realistic. They may even expect to lose money. Also, many people have seasonal homes there, in which they are less emotionally invested, and may just be willing to dump them to be done with things. They may rate outside advice more strongly, since they may not be Phoenix natives. And they know that they are competing with banks and corporations as non-emotional sellers.
Now compare that to the Hartford area. Most homes are primary homes, with owners living in them and feeling strongly about their value. There was not a great deal of building down in the prior decade, nor were there daily articles in national news media about the poor market and the high foreclosure rate. Most foreclosures, since Connecticut is a law state (meaning that you must go through the legal system to foreclose), are still in the works. Finally, prices went up in the past decade and a half, but not like they did in the Sunbelt, where jobs were growing and the economy was expanding.
Then, add in the factor that every home is different, so its value is subjective, and it is not a commodity (although it may have gotten close in the Southwest). It's not like buying a Honda here versus in Arizona; you are not comparing apples to apples.
However, numbers don't lie. Sellers here have not been as willing to drop prices or make concessions, so their homes have not sold. Buyers have chosen to rent and wait for values to bottom out. Also, they have probably been less inclined to put their homes on the market for what they are truly worth, since they are still hoping to get out whole, and, often, to buy another home.
When will things change? Either the market will get much better, and, like a rising tide, raise all boats, or prices will come down until those homes that have rusty For Sale signs out front are all gone. But it does seem like a stretch to say that sellers are better off in Phoenix than in Hartford, overall. Like much of life, it's just not black and white.
Friday, July 6, 2012
Real Trends, The Leadership Council
REAL Trends, Inc. is a publishing and communications company considered to be a leading source of analysis and information on the residential brokerage industry. Below are three videos on the current trends in the real estate industry. To learn more about REAL Trends, Inc. please click here.
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