Are Agents Sabotaging Themselves?

Silly as it may sound, lots of real estate agents — even in buyer’s markets where little is selling — take overpriced listings. I see it every day. These agents who continually write ridiculously priced listings gain questionable reputations among their peers. I know because I talk with other agents when I tour new listings, and they tell me.

So, you might think, “Hey, who cares?” but an agent’s reputation is important, especially in tight-knit communities.

When buyers and sellers sign a purchase contract, their respective agents enter into a 30- to 45-day relationship; respect for each other and cooperation is crucial. So why do agents sabotage themselves? Or do they?

Sometimes It’s a Deliberate Lie.
As a seller interviews each agent, often the estimate of value creeps upward. Maybe the first agent knows there will be two other agents competing for the listing, so the first agent names an astronomical figure. The second agent, upon hearing the first agent’s price, beats it. The third agent comes in higher yet.
A seller who chooses an agent based on which estimate is highest is the ultimate loser.

Yet almost every seller operates in this manner. It’s a shame because so few agents take the time to educate sellers that other factors such as marketing plans and the agent’s negotiation abilities are far more important than estimate of value. The comps speak loudly if anybody looks at them. Ultimately, the market place establishes value.

Sometimes the Seller has Unreasonable Expectations.
This still doesn’t excuse the agent from explaining how appraisers determine value. A home came on the market on a storybook street in a desirable area of Sacramento, but it was priced $100,000 too high. When asked why, the agent replied, “I know it’s overpriced, but I would have lost the listing to somebody else if I didn’t agree to that price.” Turns out a home two doors down sold for a high figure, but that home had been meticulously maintained, and it boasted a newly remodeled kitchen with top-of-the-line appliances. By comparison, this home was a fixer, but the seller insisted he could get the same price as his neighbor.

Free Advertising for the Agent
Every “For Sale” sign advertises the agent’s company and the agent. Many signs contain the agent’s Web site and cell phone number. Some even sport a large color photograph of the real estate agent.

Think of it like a giant billboard for the agent.

If the home is located on a major thoroughfare, all the better. Probably thousands of drivers pass the sign each day and will see that agent’s name. And after the sign post is in the ground, it’s not costing that agent one thin dime to leave it there.

Agents Find Buyers Through Listings
Sign Calls
If a buyer wants to find out the price of a home, typically they will call the agent’s cell phone number and ask. Agents who are on the ball will try to recruit that buyer to work with them, providing the buyer is not already working with another agent.
Open Houses
Moreover, agents can hold an open house and find buyers that way as well. If the buyer is not interested in the home — and once they find out the price they won’t be — the agent is then free to show the buyer other homes.
Newspaper Ads
An agent with an overpriced listing often won’t put the address in the paper but will list the details along with the price. That way, buyers who can afford to pay that amount will call to inquire. Now, all an agent has to do is suggest other homes in that particular price range that are worth what the seller is asking and she’s off and running into escrow on another transaction. Not yours.

Real Estate Agents Hope for a Price Reduction
Even if an agent knows she is taking an overpriced listing, she might be telling herself that when the home doesn’t sell within a few weeks, she can persuade the seller to lower the price and then earn a commission when it sells. So she justifies her actions and accepts the listing. Except that studies show that interest in a home typically wanes after a few weeks, so there are fewer buyers for that home when the price falls. Buyers also think there is something wrong with a home that doesn’t sell right away or they worry the seller dropped the price because a major defect was discovered. Price reductions hurt. They hurt the seller, and they often make a buyer wonder how much lower the price could drop. So, a buyer will often offer even less after a price reduction.

Conclusion: Choose your agent based on honesty, ethics, experience, competence and marketing, and don’t chase after those tossing around pie-in-the-sky numbers.

Source: New York Times

The median amount of time homeowners live in their home rose to about eight and a half years in 2016, the longest tenure since Moody’s Analytics and First American Financial Corporation began tracking such data in 2000. Mortgage rates may be the reason owners refuse to move, which is keeping inventory stubbornly low. And economists predict homeowners will continue to lengthen their stay in a home through the next decade.

Many homeowners refinanced their mortgages in recent years when interest rates were at historic lows—around 3.25 percent for a 30-year fixed-rate mortgage. Now that interest rates have increased, mortgage payments would jump significantly for homeowners, even if they find a similar home for the same price. For example, a $500,000 30-year fixed-rate mortgage for $500,000 with an interest rate of 5.5 percent would increase a monthly payment from $700 to $3,600, including estimated taxes and fees.

After increasing and leveling off in recent years, new single-family home size continued along a general trend of decreasing size during the start of 2017. This change marks a reversal of the trend that had been in place as builders focused on the higher end of the market during the recovery. As the entry-level market expands, including growth for townhouses, typical new home size is expected to decline.

According to first quarter 2017 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was slightly lower at 2,389 square feet. Average (mean) square footage for new single-family homes declined to 2,628 square feet.

Since cycle lows, the average size of new single-family homes is 10 percent bigger at 2,624 square feet, while the median size is 14 percent bigger at 2,402 square feet.

Source: Market Watch

Homeownership’s biggest barrier to entry, the down payment, looms larger and larger all across the country. Student debt payments and high rents are formidable barriers to saving, and, while there are plenty of ways to buy a home with less than 20 percent down, all require some form of mortgage insurance, making them more expensive.

Some companies now are offering buyers money for a down payment in exchange for a share of equity in the home, to be paid back when the owner sells.

One company contributes up to 50 percent of the down payment, or 10 percent of the total cost of the home, and, then, when the owner sells, the company takes a share of the profit, usually 35 percent — or a share of the loss, also usually 35 percent.

Because the companies make money only when a home is sold, assumptions about lofty price gains must be met. (It’s also possible to buy out the equity stake before selling, according to the terms of the agreement between the company and the borrower.)

There are additional considerations that may apply to a mortgage on a home with an equity stake that aren’t an issue for most homeowners.

It’s also difficult to know how the shared equity relationship will withstand the normal milestones that make homeownership challenging enough with just one owner. One company notes that if a property has not been “properly maintained” at the time of sale, it may use a third-party appraiser or inspector to assess how much of the lost value is due to improper upkeep in order to allocate that lost appreciation to the homeowner, not the company.
Experts say borrowers may want to tread lightly with equity-sharing schemes

Housing inventory continues to drop amid tight credit and a growing tendency toward becoming a landlord.
The number of homes for sale in America has been falling steadily for the past year, but the situation is apparently getting much worse as spring demand heats up.

“The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out — it’s affecting our business; it’s limiting our sales,” said Glenn Kelman, CEO of Seattle-based Redfin, a real estate firm. “We’re going to be fine in terms of market share, but I think the overall industry for the first time is seeing sales volume really limited by the inventory crunch.”

Kelman considers Redfin more as a technology company and touts his ability to track closely the more than 80 metropolitan markets it covers. He blames the lack of inventory on a new dynamic in housing.

“It’s a new landlord nation where everybody is renting out their basement. When somebody moves up they don’t sell their old place, they rent it out to somebody else, and it’s because they want to keep that 30-year mortgage for 30 years, and it’s because they can easily find somebody on Airbnb who will take the place,” Kelman said.

Homes in April sold the fastest since Redfin began tracking the market in 2010. The typical home went under contract in just 40 days, 10 days faster than April 2016. As a result, 1 in 4 homes sold above their list price, which is the highest percentage Redfin has recorded.

Home prices continue to move higher as well, but, “It’s not a bubble,” said Kelman emphatically, who cites tight credit as keeping the bubble at bay.

Inventory of homes for sale fell about 7 percent nationally in March, compared with a year ago, according to the National Association of Realtors. Like most, Kelman blames the problem on a lack of new construction. On the single-family side, homebuilders are still putting up 18 percent fewer homes than the 25-year average.

“Cranes fill the sky in every town, but they’re building office buildings,” he said, noting that while employment is going up, there’s no commensurate increase in the number of houses. In fact, he added, when people do construct housing, they’re opting to build apartment complexes because tight credit is keeping many would-be buyers out of the market. “There is so much demand in terms of rent that it doesn’t make sense to build properties for sale.”

With warmer weather and longer days on the horizon, now is the perfect time to get your yard in shape for summer. Keep this year’s top five landscaping trends (according to the National Association of Landscape Professionals) in mind as you get started.

1. Going green (the color)

Combine different textures and shades of green for a more dramatic lawn. Think of mixing leaves of different size and shape as well as plants with a variety of verdant hues.

2. Going green (the earth-friendly strategy)

More sustainable landscape designs have been becoming more popular over the past few years. Why? They’re better for the planet and can reduce maintenance costs. For example, more homeowners are planting “smart” lawns – varieties of grass bred to stay green with less water.

3. Giving bees a chance

With bee populations in trouble, people are actually starting to welcome the stingers in their yard by planting native plants that provide the nectar they feast on. The efforts to save vital pollinators is another sign of consumers seeking more green, sustainable practices for their yards.

4. Going Danish

The Danish concept of hygge is about creating an atmosphere of coziness by embracing life’s simple pleasures. How do you implement hygge in your yard? Add features that promote mindfulness, such as water fountains or aromatic flowers, and arrange seating in a way that encourages conversation. And don’t forget to include spaces that inspire play – for kids and adults. The experts at Gardendesign.com note an uptick in requests for things like bocce courts, fireplaces and hammocks, features to help home owners relax and play outdoors.

Americans say now is a good time to buy

Many consumers grew more optimistic about the housing in April, rebounding from March’s dip in confidence, according to the Fannie Mae Home Purchase Sentiment Index.

The index increased 2.2 percentage points in April to 86.7, and five of the six components saw an increase.

Americans who said now is a good time to sell a home was the only component to decrease, dropping five percentage points to 26%, however those who said now is a good time to buy a home increased five percentage points to 35%.

Consumers were also more optimistic about the stability of their jobs, with that component increasing by seven percentage points to 77%. Respondents who reported a household income that’s significantly higher than 12 months ago increased by two percentage points to 13%.

Americans who said mortgage rates will go down over the next 12 months rose by three percentage points to -57% and the share of those who say home prices will increase jumped one percentage point to 45% in April.

“The Home Purchase Sentiment Index returned to its longer-term trend line after reclaiming ground lost last month,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “This is aligned with our market forecast of about 3% sales growth in 2017.”

“Historically strong inflation-adjusted house price gains are tempering consumer sentiment, whereas consumer optimism regarding the ease of getting a mortgage reached a survey high,” Duncan said. “On balance, housing continues on a gradual growth track.”