Many of my current short sale sellers have been trying to sell their home before they opted to short sell with me, most have attempted to sell for many years with other real estate agents. These sellers have great homes and in great locations, so why are they at the end of their rope? They chased the home pricing spiral.
Chasing the home pricing spiral means they have been behind the curve of dropping values. When they were priced at $250k they should have been at 235K, by the time they lowered to 235K they really should have been priced at 225k. Once the seller finally agreed to lower to 225k, values were sitting around 210k.
Let’s face it, not all Realtors are like me. I am like the Dr. Phil of Realtors, telling you like it is. Sometimes my no holds barred talk gets me in trouble but in real estate it is exactly what you need to hear (whether you want to hear the truth or not)!
I would say I average 3 calls per day from sellers interested in having me list their homes for sale. I do not rush out to take these listings, rather I prequalify them over the phone. I ask them about their property, pull up comps and discuss expectations. Gone are the days of breaking ceiling heights in neighborhoods, sellers have to be realistic on where home values are. They are not where they were 2 years ago, some areas not even where they were 6 months ago. Most sellers are surprised when they say “we don’t have to sell our home, we don’t plan on giving it away” that I respond quickly with “If you do not have to sell your home then DON’T SELL YOUR HOME”. This is not the market to put feelers out to see where buyers are nibbling. I know where buyers are and they are not looking at overpriced homes. To be quite honest they aren’t looking at homes priced at fair market value either. Buyers are looking for deals and they have quite the inventory of foreclosure and short sales to choose from. If you aren’t willing to compete at or near that level then you shouldn’t be on the market. Sure there are plenty of agents out there ready to take your overpriced listing, but they know good and well that it will not sell. They are just hoping to pick up a buyer lead off their sign in your yard. I am not one of those agents, my listings SELL!
Proper pricing is crucial in this market, more crucial than ever before. While most of the markets I work seem to have stabilized (some even slowly inching up a touch in values) you still need to be realistic about your values. Every neighborhood has been affected differently, some East Cobb neighborhoods have only seen a 6-8% decrease in values whereas some neighborhoods in South Cobb have decreased more than 35%.
For a no obligation market analysis of your home, feel free to contact us for more information. Dr. Phil impersonation is optional
10. WHAT IS/WAS FOR DINNER?!? *Insert best caveman voice here* candle, incense, fragrant oils GOOD! Curry, crockpot roast BAD! Unless you are baking apple pie, keep the cooking smells to a minimum especially if you know for certain a showing is scheduled! Sellers should avoid any and all fish, fried or distinct ethnic foods that may leave a lingering scent. I have heard many a buyer discount a home over smells.
9. PETS – No one loves animals more than I do however to the buyers out there that are not animal friendly, nothing will kill a home sale quicker than the family dog or cat roaming around. While I understand that coordinating a showing around animals is very difficult (especially for last minute calls) but sellers should make every effort. Instead of a sign on the front door saying “Do not let cat out” why not put the sign on the laundry room door and leave cat in there? True Story: I once had a client that had a phobia of cats and refused to see any home that had one. When showing, sellers should remove all evidence of animals (toys, water/food bowls, kennels, etc) and most importantly remove all SMELLS and vacuum pet hair regularly.
8. LIGHT BULBS – Nothing looks worse to a buyer when they walk into the master bathroom and see that most of the lights at the master vanity are burnt out. Same goes with kitchen, dining or any other room in the house! Sellers should do a weekly inventory of every light in the house and replace as needed. Which leads me to my next point…
7. DARK ROOMS – While not every showing is scheduled in advance, when possible the seller should turn on all overhead lights and lamps. Also equally (if not more) important is to open all blinds and curtains so natural light floods the rooms. Never underestimate the power of light!
6. TEMPERATURE – whew, this is a tough one especially in the era of vacant bank owned foreclosures and seller deserted pre-foreclosure short sales where most properties do not have power turned on. What I can say from my experience is anytime there are extreme temperatures (freezing cold in winter and blazing hot in summer) buyers are in and out in a flash! Kind of hard to get a buyer interested in a property when they won’t stay in it longer than a few minutes. When possible keep temperatures at a reasonable and comfortable level.
5. FAMILY PHOTOS AS DÉCOR – I have always stood firm that sellers should not remove every photo from their walls however that statement is only reserved for the seller who uses photos sparingly. For the seller who uses family photos as décor on every wall in every room then I recant that statement. Buyers should be looking at the home not counting how many kids the seller has! Removing personal excess keeps the buyer focused.
4. COLORS / WALLPAPER – There is no secret that I have a strict “no wallpaper policy” in place. This is 2010 people, mullets and bellbottoms are gone, so should the wallpaper. I love it when sellers tell me that it is too time consuming and/or expensive to remove and I kindly remind them that the buyer is thinking the exact same thing. I once had a seller adamant against removing her aged yellow wallpaper from the 1970’s and she told me that a home was not a home without flowered wallpaper in the kitchen. I told her I was glad she loved the wallpaper and I would be happy to sell her back her own home for a reduced commission. She didn’t get the joke! I share the same sentiments about paint color. I am so glad that you loved your red family room, yellow dining room, orange kitchen but when it is time to sell it’s time to PAINT! Never go white, it looks too institutional. Behr has an amazing color called “Indulgent Mocha” that is light and bright with just a touch of taupe.
3. SMOKING – If you are a smoker then it is time to take the smoking outside FULL TIME until the home has closed. If you have smoked in the home for 30 years then I will probably turn down your listing. Majority of buyers turn around in the foyer to leave when they smell the remnants of cigarette or cigar smoke. Nothing kills a home sell faster than smoking!
2. CLEAN YOUR HOUSE! – I do not live in a perfect model home but then again I am not trying to sell my house either. Every day you should make your bed, clean your kitchen, hide dirty clothes in laundry room. Every day you should leave for work as if you had an important showing scheduled that same day. A couple years ago I had some buyers up from Florida for a packed house hunting weekend, we had 20 viewings scheduled for the Saturday in Powder Springs and planned to submit an offer on the top pick. The first home of the day was unkept (dirty dishes in sink, pile of dirty laundry on floor, kids toys strewn around the house and seller walking around in his boxer shorts) not to mention every room was painted a different color. My buyers walked out of the home and said “gross”. Nineteen homes later we had made a complete circle and close to where we began our search. My buyers walked in, threw their hands up in the air and said “THIS IS IT! We love this home!” Ironically enough it was the same floorplan, probably from the same builder as the first home. The difference was it was cleaned, neutral and move in ready.
1. SELLER GIVES THE NICKEL TOUR – Nothing is more uncomfortable for a buyer or a buyer’s agent when the seller feels the need to guide us through their home highlighting every change, upgrade and special moment that has happened for the 20 years they have lived there. A buyer on a mission knows within a few minutes if they like the home however if the seller is there now we feel obligated to talk back and walk through observing every room even though the home was discounted as soon as we smelled cigarette smoke. I do not necessarily feel that sellers should always leave the property. Although it is more preferable, it is not always convenient for a seller to leave especially when buyer’s agent has given a wide timeframe of showing window. With that being said, I recommend to my clients that they should take a walk around the block, even just step outside on the deck to give the buyer some privacy to look at the home in peace. It’s also crucial for the buyer’s Realtor to get a good feel of what their client likes and dislikes about the home. It is very difficult to be honest about the home with your Realtor if the seller is standing right there.
There are some new terms being thrown around in both real estate and at water coolers around the country and I want to assist homeowners with what they mean.
The Obama Administration is attempting to assist homeowners stay in their homes by budgeting $75 Billion dollars in funding to help reduce foreclosures. The first program to be discussed is HAMP which is the Home Affordable Modification Program. This program temporarily allows eligible homeowners to lower their mortgage payments to 31% or lower of their pretax income through a loan modification.
Technically the adjustments are labeled as “temporary” however do become permanent once the homeowner makes 3 consecutive on time mortgage payments. As an additional bonus, if you make all of your loan payments on time for five years you will also receive a $5000 credit on your first mortgage principal balance. To qualify:
The home must currently be a primary residence meaning this is not a rental/investment property
Your first mortgage must be less than $729,750
There must be some kind of hardship (divorce, job loss, chronic illness, ARM adjustment, etc.)
The mortgage must have been obtained prior to January 1, 2009
The mortgage payment must be more than 31% of the mortgagee’s gross income.
If these qualifications are met, you must contact your service provider (who the mortgage is serviced with ie. Bank of America, Wells Fargo, Suntrust, EMC, etc) to see if they participate in the program.
Next is HAFA – the Home Affordable Foreclosure Alternatives Program. This program began very recently on April 5, 2010 and is designed for homeowners who meet the above terms for HAMP but cannot keep their homes. This program ends on December 31, 2012.
In summary, HAFA is designed to provide incentives to homeowners to short sell their properties as opposed to allowing the property to go into foreclosure. The following are some outlines of the program:
Borrowers must be HAMP eligible however unable to keep their home
Allows homeowners to receive pre-approvals for short sales (including the minimal acceptable net proceeds the bank will accept for a short sale)
Allows homeowners to be fully relieved of responsibility for the first lien. What this means is that the first loan cannot ask the homeowner/seller to be held liable for the loss, sign a promissory note or bring additional cash to closing. It is important to note that this does not cover any additional liens such as second loans, home equity lines of credit, etc.
Provides financial assistance for homeowner relocation costs (up to $3000); $1500 for service providers to process the short sale; up to $2000 for investors who allow a minimum of $6000 short sale proceed distribution offered to a subordinate lien holder (2nd mortgage)
Loans must be conventional loans, the HAFA program does not apply to FHA or VA (both government backed loans)
What does this mean to home owners, home buyers and Realtors? The HAFA program is set up to assist in streamlining the short sale process (which in some instances there is nothing “short” about it). Shortening approval processes, higher short sale approval success, guaranteeing Realtor’s commissions and eliminating future liability for Seller’s first liens.
If you have any questions regarding any of these programs OR want to discuss the possibility of avoiding foreclosure with a short sale, please contact us for more information.
Every short sale has its own unique challenges but to try and simply the complicated, here are the six steps to a short sale:
Initiate the Short Sale - Every lender is different as some lenders will want the homeowner to call and verbally initiate it whereas some lenders will not initiate the beginnings of a short sale until an offer has been submitted.
Collecting Homeowner’s Financials – Gathering a bunch of financial documentation isn’t always easy, especially if you are packing up the house or have already moved. What banks are looking for are two years of taxes, 60 days of bank statements, last couple pay stubs, all other financial statements (investments accounts, retirement accounts, etc). You will also need to provide a hardship letter stating why you are seeking a short sale. Hardships can include: job loss, chronic illness or injury, reduction in income, increase in interest rate, divorce, death.
Submitting the Offer – Most of my short sale listings are taken immediately after first contact so upon listing the property for sale, I immediately introduce the homeowner to my short sale coordinator to obtain the above stated financial documents ASAP. I try to set the goal to have all documentation in within the first 48 hours of listing the property. Sometimes an offer comes in before we have all our financials uploaded and sometimes an offer comes in after everything has been submitted and properly uploaded into the system.
Valuations Process – This is the very slow and quiet time, typically the time where uneducated buyers and buyer’s agents with unrealistic views of the process walk away. The valuations process can take 30-60 days with little or no contact from the bank. During this time the lender is ordering appraisals and/or BPOs (Broker Price Opinions) and evaluating the current state of market, local comps and getting a very specific idea of what the property is worth at the present time.
Offer Review and Approval – this is what I consider “Rock n’ Roll time”. After periods of long silence from the lender a flurry of activity ensues. Lenders ask for updated seller financials and updated Buyer’s preapproval letter. This is typically the second tier negotiator who is getting the file complete to present to the investor of the loan for final short sale approval.
Closing – Once final short sale approval is granted, there is typically a 30 day window to close the sale. This is the period where the buyer will inspect the property, lock interest rates, order appraisal and generally get the loan ball rolling. A good short sale agent (like myself) will begin all contingencies (appraisal, financing, inspection, etc) at time of final short sale approval. In essence, the last 30 days are what typically happens in a normal resale closing.
For more information on Short Selling your home in Georgia, please visit our Short Sale FAQs for Buying Short Sales and Selling Short Sales. There is also a lot of information in previous Short Sale Blogs. The Walker Derby Team specializes in short sales throughout the following areas in Georgia: Acworth, Atlanta, Austell, Canton, Douglasville, Hiram, Kennesaw, Lithia Springs, Mableton, Marietta, Powder Springs, Roswell, Sandy Springs, Villa Rica, Vinings and Woodstock.
Most of the last 2 years made your typical “resale” listing the ugly stepchild of real estate. (Note “resale” is defined as a reselling of a previously owned home by a seller/home owner). The hot commodity of real estate since the downturn of the market has been the distressed market which is comprised of foreclosure, bank owned REO, pre-foreclosure and short sales. While April showers may bring May flowers, April will also bring a huge (albeit temporary) sell off in resale inventory!
There are tons of first time and return home buyers who have straddled the home purchase fence for months. Now that the tax credit deadline looms, buyers are becoming frantic! Short Sales are time consuming and this late in the game cannot be guaranteed a June 30 closing date to meet tax credit deadlines. With the influx of foreclosure offers, some banks are now taking WEEKS to respond to offers leaving many buyers worried that they won’t have enough time to find a back up property in the event their foreclosure bid loses.
Enter the beautiful position of the average home resale.
Sellers are available, motivated and ready to make it happen! A good listing agent has advised their sellers that it is do-or-die time until April 30, 2010. Today (Saturday April 17) I received an offer for a resale listing of mine at 1:09 pm and had it binding with a counter offer by 4:25pm. Definitely a refreshing change from the typical bank’s snail like pace and the buyer met the tax credit deadline! That makes THREE of my listings that have gone under contract this weekend and it is only Saturday afternoon!
Metro Atlanta (including suburbs) typical peak spring market runs from late January through Memorial Day weekend. With the tax buyers credit deadline (which said tax credit is not expected to extend) at the end of April, we may actually see an early end to what has really been an amazing spring selling season! Only time will tell however at this moment through the end of the month, resale sellers have become the belles of the ball. Enjoy this brief moment to shine and SELL, SELL, SELL!
About two years ago one of my neighbors (who was also a Realtor and investor) was hit hard by the turn in the market. The rumor was that his family was so upset that the housing market declined that upon their move out, they dragged garden hoses to the top level of the home, turned on water and left. The house sat vacant for about 8 months after their move out. While that part is rumor, I can confirm that I saw workers in HAZMAT suits demolishing the property: stripping all floor coverings, drywall, AC units, cabinetry. When I say the home was a shell of what it once was, I am not exaggerating one bit. From the exterior one would never know but peer inside a window and all you could see were wall studs and water pipes. Sad to say the home sold to an investor for less than 1/3 of what the value would have been if not destroyed. As neighbors, that selfish and defiant act hurt all of us and our property values. (more…)
Does Big Brokerage Branding Matter to the Consumer?
Lately I have been reading a lot of blogs asking this very question. To those unfamiliar with the terminology of what I am asking I can simply re-ask as Does it matter to the consumer which company the agent works for: Re/Max, Century 21, Coldwell Banker, Keller Williams or a local mom & pop shop (ABC Realty)? Tons of blogs and video rantings offer different opinions. I will give you mine.
When I came into real estate, I spent my first few years at a local boutique brokerage. Was I successful? Absolutely! Do I think I had to work twice as hard for that level of success with a no name brand? You betcha!
I really enjoy the listing (seller) side of real estate. Therefore I can speak from experience that the first few years at the small time brokerage I spent half my listing presentation strictly on why I could sell their homes just as fast and efficient as those “big name agents”. While I remained the #1 agent in my office for those years, I did encounter two issues that tell me that Branding DOES matter to the consumer:
1. No matter how hard I tried, I could not break the $225,000 housing barrier (meaning sellers with homes valued over $225,000 did not trust my “no name brokerage” with the sale of their home). My first listing call after joining ReMax was for a $450,000 home.
2. While a 75-80% success rate in obtaining the listings I competed for is impressive, since joining ReMax my conversion rating is now over 95%
Let me ask you a simple question. When you go to the grocery store and cruise down the aisles, do you pick up Coke or RC Cola? Kraft Mac & Cheese or the store brand? As a society we tend to put more trust in the brands that we see advertised, hence the “as seen on TV” verbiage on packages as if the simple fact the product was on television gives it more credibility.
Now from this point on the following is my personal opinion and in no way defines all agents but what I feel is a good summary. I may ruffle a few feathers, but oh well – here goes! Not only do I think that consumers like recognizable branding, I also believe that the type of brokerage can define the high/low level of agent production. Do you know that in metro Atlanta, 90% of ALL real estate is sold by the top 10% of agents in town? What that also means is that 90% of licensed agents in Atlanta and suburbs combined only close 10% of all local sales. What most consumers do not know is that different brokerages offer different programs for their agents. Let’s take the no name small brokerage which I will refer to as ABC Realty compared to the powerhouse that I work for which is ReMax.
*ABC Realty spends nothing on advertising which means that the average home buyer or seller will not see their TV ads, drive past their billboards or not find their ABC Realty website anywhere near the first few top pages of Internet search engines. Most of their agents are low to medium producers, they sell a couple houses a year usually from friends or family. Most of these agents are part time and use real estate to supplement their income. The broker does not require expensive desk fees and instead just charges a minimal “transaction fee” for every home they close. Let’s take an average of $69 a month in desk fees and $350 for every deal they close. What this means is that if a couple months go by without selling a house the agent is out a couple bucks for desk fees and that is it. On the other end of the spectrum, if the agent is a top producer and close 10 deals in May at $350 per transaction, they just paid $3500 to work there one month. While there is nothing wrong with working real estate part time (I could only dream of that thing called “free time”) why would a top producer pay so much to work there? There are exceptions to this rule, specifically if a top producing agent leaves their big name to start their own smaller brokerage but once again, still lacks the above mentioned branding. The last tidbit to mention is that most smaller brokerages are not members of their local Board of Realtors. This means that they are not governed by a Code of Ethics and cannot use the term “Realtor”.
*To work at ReMax, it is what I consider “advanced Realtor-ship”. Not many newly licensed real estate agents sign up with ReMax, typically they start out somewhere else and graduate to ReMax once they have proven themselves successful in the game. ReMax charges a large monthly desk fee that is payable whether you close a deal or not. That desk fees helps pay for the TV ads between your favorite shows, the dozens of billboards you pass on your way to work, top search engine placement when you type in Google keywords such as “Marietta GA Real Estate”. What this means is that if a couple months go by without selling a house at ReMax, the agent is out several thousand dollars. In other words, you have to be a top producer to remain at ReMax. ReMax (as well as the other big name brokerages) are all members of their local Board of Realtors which means continued training, Realtor title and following the strict Code of Ethics. Violations can include reprimands, fines and being kicked out of their local board (which means they would have to leave their big brokerage and join a firm that isn’t a member of a Board).
Today I received another lowball offer on one of my listings. The agent wrote on the cover letter that this was a CASH buyer, as if that would soften the blow. This made me realize that perhaps I should write a blog on why CASH is not king and break open this myth! So this is an open letter to all Cash buyers:
Dear Joe Q. Cash Buyer,
Thank you so much for your interest in my listing. I see you have cash that you want to purchase a home with, Congratulations! Sure it is nice that there is not a financing contingency attached to your offer, but what makes you think it makes your offer any better than the other offers I receive? At the end of the day it is all about the NET that the sale brings to the seller. This means:
Sales price – costs (closing costs, commissions, etc) = NET
Cash does not have any effect the net, all it does is make the closing possibly happen a little sooner. Curious how you find that is worth HALF off the list price? Just because you don’t have to qualify for financing doesn’t mean it is a done deal! We still have to get through inspection and your appraisal (if you want one), the soonest we could close is in about a week compared to another offer than will close in 30 days. At the end of the day the seller (whether a homeowner or bank) only cares about their bottom line. Neither myself or my sellers could care less if you have a loan or pay in cash, blood or pennies, what we care about is the net to my seller!
Respectfully-
JWD / Realtor Extraordinaire
On a side note, the risk of the cash buyer is that it is easier for a cash buyer with $250,000 in the bank to walk away from a binding contract losing their earnest money rather than a financed buyer who saved up for months for their earnest money deposit.
Every day I receive calls from homeowners looking to sell their property. In my initial phone interview, one of the questions I ask is whether they have made any upgrades, changes or additions to the property. This is where, much to my seller’s dismay, they learn the school of value vs. maintenance.
Homeownership is maintenance! With that being said, a lot of sellers believe that maintenance costs add value to their property when in fact what they have done is maintained their value. So when a seller answers my question with “Yes, we have done a lot to the property over the last 7 years. We have painted the interior and exterior, replaced rotten wood around the windows, installed a new roof 3 years ago, replaced the hot water heater back in 2006, spruced up landscaping and added a privacy fence” they are shocked that those items didn’t add $$ to their home. I ask a simple question: “Mr. Seller, did your walls need to be painted, wood, water heater and roof NEED to be replaced?” I think it is important for all homeowners to understand the difference. Had you not repaired or replaced these items, your property value would have declined. No one wants to pay “fair market value” for a home that has roofing leaks, rotten window sills, no hot water and missing paint chips. Investing money kept your value stable, it did not increase so put the calculator down!
Another sore subject is when homeowners realize that some areas where they spent money paid off and some areas did not. Kitchens and baths are a great place to “sink” your money in to upgrade and renovate. Studies show that you can re-coup up to 99% of your investment in these rooms! Spending $30,000 for a landscaped backyard may make it beautiful but doesn’t mean you will see an increase of $30,000 to your home value, depending on location you would be lucky to see a return of around 30% on that. Swimming Pools? In Florida it’s hard to sell a home without one! In metro Atlanta, you can spend $50,000 on the most stunning oasis with waterfalls and stone walls but return? Next to NADA!
Your home is where your heart is. I’m not saying you shouldn’t upgrade certain areas of your property, what I want to share is that you shouldn’t keep a tally of every cent you spent and hope to add that to the comparable sales in your neighborhood. If you want an island oasis swimming pool then put one in (I did!). I don’t expect to recoup that cost when I go to sell and you shouldn’t either!
