Don't Chase the Market Down, Home Sellers

Because of the strength of the current real estate market, largely due to lack of supply, there is still time this calendar year to sell a home.  Even now, buyers are out there.  One agent at our firm listed her home yesterday, and had multiple showings within an hour.  

What's the secret to selling your home quickly?  Don't overprice.  That's it. Many people want to try for more, so they overprice, hoping that a desperate buyer will bite.  That's the wrong way to do it.  The only real way to get more than your home is worth is to list it for at, or slightly below, what it should sell for--then buyers will bid, more than one offer might well come in, and, with luck, a bidding war will ensue.  

When, on the other hand, the seller starts high, s/he misses the best two weeks to sell a home--the first two.  And, since the best offer is often the first, it's important to get that offer in.  Overpricing leads to lowering the price, which in turn leads buyers to try for even less.

It's so simple, and so often violated.  Don't be greedy, and listen to your agent.  You'll be happy you did.

Tips for Buying a Home in a Wild Market

OK, so you've decided to buy a house.  You aren't sure what you want exactly, but think you will know it when you see it.  There are some strong preferences, and a price range--actually two, one if you buy finished, and one if you need to do a lot of renovation.  Where should you start?

1--Develop a good relationship with a real estate agent.  Much of what comes onto the market now is spoken for ahead of time, if people know it is about to be listed.  You need to have a professional ear to the ground, as well as your own.

2--Get prequalified.  You may want a loan, even if you don't want a mortgage contingency.  Be sure you are right about how much you can borrow.

3--Sign up for an automated search.  This seems obvious, but don't wait until the weekend to look at everything at once.  Check your results every day.  

4--Be flexible about traveling to visit listings.  Try to be available on relatively short notice, so that you will look at homes before they are gone.  Even if the house isn't for you, you are developing a better sense of what you want.

5--Keep a running ranked list in your head.  Every time you see a house, slot it into your ranked list.  If it wouldn't make the top three, you may not even need to see it.

6--Don't get seduced by details.  Don't ignore number of bedrooms, neighborhood, or price, just because it has a nice hot tub.  Stick with what you need.

7--Have a mental budget for repairs.  Know what certain things will cost, at least in ballpark terms.  You don't want to have to put in contingencies, or run around getting quotes, if you could do that ahead of time.

8--Be prepared to act quickly.  In this market, speed counts.  Have your limits firmly in mind.

9--Don't play games. A couple of thousand here or there won't matter as much as the interest rate.  Offer what you would be sorry to hear that someone else bought it for, if you could have afforded that amount.

10--And, last but not least, keep a sense of humor and perspective.  Roll with the punches.  You will get a home eventually.  Sometimes you avoid a mistake, or gain new knowledge.  Try to have patience--you will probably need it!

Differing Reports on CT Real Estate

We get periodic updates from various sources concerning the state of the real estate market in Connecticut.  The latest two that I've read say exactly opposite things.  One said that units are way up, but prices are down.  The other said that prices are way up, but that units are down.

Could both those findings be true?  It doesn't seem likely, but it does show that the market in our area is in transition, and that it isn't all one condition everywhere.  What it most likely means is that there is a lot of interest from first-time homebuyers on the lower end of the price range, so that those prices may be rising.  Once you get to a certain price point, which varies by region, the results show that there are caps on neighborhoods, meaning that homes don't sell above a given price, regardless of quality or size.  Therefore, we can still see downward trends, particularly in the upper brackets.

There are also discrepancies in similar reports, depending on exactly what they measure, and over what time periods.  For us at Pearce, this winter was remarkably good, despite the weather.  We see a lot of "Yale effect", so that our offices are busy when Yale puts out its offers for the following year.  A more traditional pattern of spring-summer sales exists in other locations.

 I guess the real point is that you can say anything at all, and find the statistics that will back you up!  We do know, however, that when the market is changing, it is probably going up.  Downturns tend to be more sudden, and often involve dead stops.  So, if you want to bet one way or the other, I'd say that the market is one in which buyers should move, and sellers should stay flexible.

Showings and Sales

One of our colleagues has determined a linear relationship between showings in the first week of a listing, and eventual sales price.  While we all know that overpriced listings eventually sell for less than properties priced "correctly", we know now that you can tell that right away, by the interest at the very start of the listing period.  When a listing goes live, it needs to start having showings right away, in order to be statistically likely to sell quickly and at a good price.  If people notified or searching see something that they believe is uncompetitive, relative to other listings that they've seen, they won't rush to see it.  And it won't sell for as much, then or ever.  So pay lots of attention to what you list your property at, and be very wary of the argument that "it's worth trying it first, at the higher price".  You may regret it later.

What To Do About Low First Offers

One of the most frustrating situations for real estate agents is how to advise buyers and sellers about making or responding to the first offer on a home.  It doesn't come up all the time, because some homes are clearly going to move quickly, and some are so obviously priced to sell that buyers know that they cannot play around.  However, it happens more than one might think, that the buyers put in (usually with advice from outsiders and not from real estate professionals) an offer so far below the asking price that sellers are insulted, and often do not even counter it.

It's a little baffling as to why this should be so common, because I've written many times about buyers knowing what homes are worth, from doing their internet research and seeing so many that are for sale.  The buyers should have a pretty good idea, in many cases, about not only what the property is worth, but about what it will fetch on the open market (although those numbers are arguably the same, we all know exceptions).  Yet somehow, they frequently come in with a first offer twenty or more percent below that figure.  Sometimes, it's because they like the house, but can't really afford it, so they are taking a flyer, much like applying to a "reach" college.  Lot of times, though, they are hoping that they can reap the benefit of a still-depressed market, and get a bargain.

While bargains do occur, sellers also know, in many cases, what they think their home will bring.  Putting in a very low offer insults them, both from the point of view that they think their home is desirable, and should be appreciated as such, and also because they think buyers are trying to take advantage of them.  Our job then is to get them to look beyond those feelings, and deal with what's on the table.

 So many people think that the price ultimately paid will fall in the middle between the asking price and the first offer that we wonder why--how is real estate different from any other field in that regard?  Plenty of other things sell at the asking price, or near it.  However, there is a common perception that, if you lower your price up front, you will get less in the end. Again, why?  No one forces a seller to take a particular offer.  While you can always hold firm, holding firm at the asking price means that you think it will sell for that.  Unless you are confident, and your Realtor agrees, you should counter at some number--it doesn't have to be far below asking, just enough to keep the ball rolling.  We need something to work with, and we need the buyer to stay interested.  It's just the fact, unfortunately, that you can't make the buyers' first offer for them.  Remember, though, that it's often the second round that indicates what they really think, and how high they can really go.  And it's easier to get another offer, if other agents and clients know that someone is serious enough to bid.  It deals with the current problem that buyers think everything will still be for sale when they are ready to act.  Wouldn't it be nice for sellers if that weren't true?

Holding Things Together

Well, activity in the real estate market has certainly picked up, but it's very hard to keep the transactions together until the closing. Agents are reporting that people are looking, they're coming to open houses, they're making offers, and they're even signing contracts. After that point, it gets iffy. Inspections are problematic, but at this point the financing clause is proving the most difficult. Sometimes the buyers don't know how much they'll be asked to put down, and they don't have the cash they need. Sometimes the appraisals don't support the sales price, particularly in neighborhoods where demand is highest. Sometimes the rates or mortgage programs have changed, or the buyers don't have the qualifications they need to get the rate they thought they could. Even when the mortgage is approved, buyers can get cold feet if they know that the bank appraised the property for less than they are paying.

All in all, it proves the old adage: It isn't over til the fat lady sings.