Renegotiation is the New Normal

Sellers may be surprised, and not particularly happy, to learn that today, more often than not, the sales price listed on the first contract signed is not the same as the sales price at the closing.  It's just a fact of life for us now, because so many issues can arise between the accepted offer and the final transaction that occurs.

Inspections come right after the offer is signed, and today's buyers are likely to expect that everything that gets pointed out as an issue in any inspections will be paid for by the sellers.  That wasn't the case years ago, when buyers viewed work to be done as something that they were taking on in the purchase, unless the problems were structural.  Although the sellers don't always agree to every item, especially when it involves questions of taste and preference, but they often are asked to give money back.

Mortgages now can also provide for funds from the seller.  Various programs differ greatly, but there is a range of items, from inspections to closing costs, that banks and mortgage companies may allow the buyers to have paid by the sellers, and that range goes up to 6% of the mortgage amount on the high end.  While everything must be disclosed in the closing documents, it can prove to be an additional hit to the sellers.

Appraisals, usually ordered for the lender, can cause changes, if the home does not appraise for the amount being requested in a mortgage.  If the sellers can't pay the difference, the sellers might decide to lower the price.  This, as with money toward inspection items, is less likely to occur if there are backup offers that could be accepted, if the buyers do not want to leave the contract price alone.

Finally, things that break or go wrong between the time of the accepted offer and the closing are the responsibility of the sellers, and, while it doesn't happen that commonly, the reason for the preclosing walkthrough is to make sure that the home is in the same condition as when it went under contract.

Although this list may strike fear in the hearts of sellers, the real lesson is that you shouldn't be angry or unprepared with an answer if any of these items are raised.  Once you know that there can be bumps along the way, it's easier to accept changes, or at least consider them rationally.

Web Traffic Patterns

We have always known that people take a few months to think about a real estate transaction, so that we need to pay more attention to visitors to our site than someone selling sneakers or office supplies, but we didn't have much empirical evidence to go by.  Now we have more.

We track all of the new and returning visitors to our site, as well as all the visitors who click on our website from a search.  Although we know that our region is education-driven, and therefore not, in many cases, the usual seasonal pattern found elsewhere, even we were surprised to learn the two-week period in which the greatest number of new visitors appeared.  Can you guess?

It was during the last two weeks in January!  That means that, despite weather and paying off tax and holiday bills, more people are starting a property search right after the first of the year than at any other time. Our greatest number of clicks from Google last year came in February and March, suggesting that the search for specific properties might be ramping up just after the new visitors started the process. 

Since all industry data suggests that most property closes in the late spring and summer, except for a surge in commercial closings at the end of the year, this would suggest that, if you are a seller who wants to have the broadest exposure for your property, you need to list it now!  Not next month, not when the days are longer or the weather improves, but now.  This is when people want to look at real estate, at least in our region, and we should be giving them what they want, when they want it.  Because that's how property gets sold!  So act quickly, for maximum results.

CoreLogic: Conn. Ranks 49th In September Home Price Appreciation

The following article is from the commercial record, please click here to go to the commercial record and read their articles

Home prices nationwide, including distressed sales, increased 5.6 percent in September 2014 compared with September 2013, according to a new report from real estate analytics firm CoreLogic. On a month-over-month basis, home prices nationwide, including distressed sales, were nearly flat, inching down 0.1 percent in September 2014 compared with August 2014.

At the state level, including distressed sales, all 50 states and the district of Columbia posted year-over-year price increases in September. Five states posted new all-time high prices.

Excluding distressed sales, home prices nationally increased 5.2 percent in September 2014 compared with September 2013 and 0.1 percent month-over-month compared with August 2014. Also excluding distressed sales, only Mississippi showed year-over-year home price depreciation in September, with prices there dipping 0.9 percent. Distressed sales include short sales and real estate-owned (REO) transactions.

CoreLogic predicts that home prices, including distressed sales, will increase 0.1 percent month over month from September 2014 to October 2014 and, on a year-over-year basis, by 5 percent from September 2014 to September 2015. Excluding distressed sales, home prices are expected to rise 0.1 percent month-over-month from September 2014 to October 2014 and by 4.6 percent year-over-year from September 2014 to September 2015.

"There has been a clear bifurcation in home price growth for lower-end versus upper-end properties in 2014," Sam Khater, deputy chief economist at CoreLogic, said in a statement. "As of December 2013, both lower-end and upper-end property prices were up 9.7 percent on a year over year basis. As of September, lower-end prices were up 9.4 percent but upper-end prices were up only 4.5 percent."

Including distressed sales, Connecticut ranked 49th among all states for home price appreciation in September, with Nutmeg State prices rising 1.2 percent, according to CoreLogic. The five states with the highest home price appreciation were: Michigan (10.3 percent), Montana (10 percent), Maine (9.6 percent), Massachusetts (8.8 percent) and California (8.5 percent).

Excluding distressed sales, Connecticut prices were up 2 percent. The five states with the highest home price appreciation were: Maine (10.4 percent), Massachusetts (9.7 percent), California (7.6 percent), Texas (7.4 percent) and Michigan (7.2 percent).

Ninety-six of the country's top 100 largest population centers, according to the U.S. Census, showed year-over-year increases in September 2014. Two of the four that did not were in Connecticut: the New Haven-Milford area and Hartford metropolitan area. Rochester, N.Y. and Little Rock, Ark. were the others.

Including distressed transactions, U.S. home prices remain 12.6 below their peak in April 2006. Connecticut prices remain 19.9 percent below their peak.

Home for the Holidays

As the year winds down toward the holidays, I want to remind people that there's one last push left for the real estate market.  Although fewer people look for property during this season, those who do are generally very motivated.  And, while sellers often don't want to have their homes subject to showings near the holidays, the truth is that some homes never look better than when they are decorated for the season.  There is a weather factor, of course, and much less daylight, but the aroma of baked goods and a display of festive decorations will often do a lot to make a house seem like you want it to be your new home.

The same principle applies to the financing and closing side of a transaction.  Even though people generally miss more working days, and parties and vacations can slow down the wheels of commerce, there is usually a strong motivation to clean off desks at the end of the year, and fewer files that have to be processed.  The tax issues involved can often lend a sense of urgency also, since many times there is a big incentive to close in one year or the next, and many jobs that begin at the first of the new year.

So, before you stop reading the Open House section of the paper, and trolling the internet for interesting homes, take a long look at your goals, and think about whether you can accomplish in less time and with less competition (and maybe even for a lower price) what otherwise will be left until spring.  Maybe a new home is the best present of all!

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.

Tough to the Finish

We had a buyer panel a couple of weeks ago, with people who'd bought their houses from us recently. I was surprised at the number of problems that came up right before, or even during, the closing. Two of the three were packed and ready to move before they knew whether or not the other party would be able to perform.

While we in the business all know that the transaction doesn't end with the signing of the contract, even we didn't quite realize that the obstacles in a sale are moving farther and farther down the pipeline. It used to be that the big hurdle was getting the contract signed. Then it was the inspection, and renegotiations after that. Next came the appraisal. Now it's the financing, which is often so problematic that the contingencies last right up until the closing day.

The good news is that all the transactions went through, even though one poor buyer started with six weeks to move and ended with two days. It was also good news that no one thought that his or her Realtor was to blame. It shows, however, that moving (no matter what we tell you) is hard to make easy. Leave plenty of time; expect things to go wrong; don't sweat the small stuff; and keep a sense of humor!