The North Shore market continues to be hot. From January 1 to March 15, more homes have gone under contract on the North Shore than in any year since 1998 – and this trend shows no signs of abating. This market firmly establishes that homes will sell, but the primary question on seller’s minds, understandably, is “But, how much are prices rising?”
We are beginning to see a turn around in pricing, but it is important to keep in mind that Closed prices reflect the market as it was when the contract is written – which could be 60 days or more before closing. So a home that went under contract in November, before the current market upturn, will most likely have a lower sold price than a home that goes under contract today. So, please keep in mind that market appreciation could well be greater than any stats we might pull.
That said, the median sale price on the North Shore for the period from Jan. 1 to March 15 is up 4% over the same period last year. Going back several years, the stats are as follows:
January 1 – March 15, Closed Listings
|Year||Number Closed||Median Sale Price|
One more thing to remember, even though prices will continue to rise, it is apparent from the table above that we still have a long way to go before they are at pre-recession levels.
Jason Gonsalves worked hard to turn his 6,500-square-foot stucco-and-stone home in the suburbs of Sacramento into the ultimate grown-up party pad, complete with game room, custom wine cellar and an infinity-edge pool overlooking Folsom Lake. When interest rates fell recently, Mr. Gonsalves, who runs a lobbying firm, looked into refinancing his $750,000 mortgage. That’s when he got startling news—the home had dropped more than $200,000 in value while he was renovating.
Or at least, that’s what one real-estate website told him. Another valued the house at only $640,500. And these online estimates left him all the more confused when a real-life appraiser, assessing the house for the refinancing loan, pinned its value at $1.5 million. “I have no idea how those numbers could be so different,” Mr. Gonsalves says.
Right or wrong, they’re the numbers millions of consumers are clamoring for. After years of real-estate pros holding all the informational cards in the home-sale game, Web-driven companies like Zillow, Homes.com and Realtor.com are reshuffling the deck, giving home shoppers and owners estimates of what almost any home is worth. People have flocked to the data in startling numbers: Together, four of the biggest sites that offer home-value estimates get 100 million visits a month, with web surfers using them to determine what to ask or bid for a home, or whether to refinance.
Zillow, Trulia and other websites post estimates of home values. But as Alyssa Abkowitz explains on Lunch Break, these popular sites can be — by their own admission — wildly inaccurate.
But for figures that can carry such weight, critics say, the estimates can be far rougher than most people realize. Valuations that are 20% or even 50% higher or lower than a property’s eventual sale price are not uncommon, as the sites themselves acknowledge. The estimates frequently change, too—sometimes by hundreds of thousands of dollars—as sites plug new data into their algorithms.
*** What the Sites Get Right and Wrong ****
All of the competitors make it clear their numbers are guesstimates, not gospel. “A Trulia estimate is just that—an estimate,” says a disclaimer on that site’s new home-value tool. Zillow goes a step further, publishing precise numbers about how imprecise its estimates can be. And every major site urges home-price hunters to consult appraisers or real-estate agents to refine their results.
But despite the disclaimers, homeowners and real-estate agents say, many Web surfers put enough faith in the estimates to sway the way they shop and sell.
After Frank and Sue Parks put their manor-style house in Louisville, Ky., on the market, they watched as Zillow put a $331,000 value on the dwelling in May; by July it had climbed to $1.5 million. (Zillow says the lower estimate reflected errors in its statistical model.) The couple got potential buyer referrals from the site, but they fended off a stream of lowball offers before they sold this fall. Mrs. Parks says the estimate roller coaster “really affected our ability to move the place.”
Determining a home’s value has traditionally been the job of an appraiser, who gathers data on recently sold homes and compares them with the “subject property” to arrive at an estimate.
In the late 1980s, economists started developing automated valuation models, or AVMs, computer models that could analyze data about comparable sales, square footage, number of bedrooms and the like, in a matter of seconds. For years, these tools were mostly reserved for in-house analysts at lending banks.
It wasn’t until 2006 that Zillow took them to the masses, with its Zestimates, which now offer values for more than 100 million homes based on the company’s own algorithms. “Humans don’t make these decisions,” says Stan Humphries, chief economist at Zillow.
Numbers like these have become weapons in the arsenal of consumers like Simms Jenkins, an Atlanta marketing executive, who has recently relied on online estimates to help him both buy and sell homes. “I can’t imagine 25 years ago, when people would just go out and spend their entire Saturday looking at homes,” he says. “You don’t have to do that now.”
But appraisers and real-estate consultants say the online models can veer off target with alarming frequency. Most data for the models come from two sources: records from tax assessors and listing data for recent sales. Collection is a challenge, however, because not every county tracks properties the same way—some calculate home size by number of bedrooms, others by overall square footage. And automated models aren’t designed to account for the unique construction details that often make or break a deal, or for intangible factors like a neighborhood’s gentrification. “You cannot use a computer model in certain areas and expect the value to come out right,” says John May, the former assessor of Jefferson County, Ky., which includes the state’s largest city, Louisville.
For all these reasons, models that banks use often add a “confidence score” to their estimates. Consumer-oriented sites, meanwhile, rely on disclaimers, some of which are eye-opening. Zillow surfers who read the “About Zestimates” page find out that the site’s overall error rate—the amount its estimates vary from a homes’ actual value—is 8.5%, and that about one-fourth of the estimates are at least 20% off the eventual sale price. In some places, the numbers are far more dramatic: In Hamilton County, Ohio, which includes Cincinnati, it’s 82%.
The sites argue that, over time, edits and corrections will help them perfect their numbers—with many fixes coming from their customers.
On Homes.com, anyone who knows a homeowner’s surname and the year the home was last purchased, can edit the details of a property listing in ways that can eventually change the estimated value.
Zillow has accepted revisions on 25 million homes—perhaps the strongest testament to how seriously consumers take its estimates. Today, the site says its figures are accurate enough to give consumers a good sense of any home’s value. In the meantime, says Mr. Humphries, its economist, “We’re always tweaking the algorithm or building a new one.”
Your buyers have found the home of their dreams, started packing their stuff and have mentally moved in when suddenly a challenge arises that could put a serious wrench in the home buying process. In today’s market, finding the home is only the start of a transaction that can have many stumbling blocks along the way.
Here are the top 10 deal breakers buyers and sellers encounter that can impact the sale of a home:
1. Fixtures and Personal Property Pitfalls
I can’t tell you how many times I have seen deals falter because of disagreements over silly stuff like who gets the fireplace screen, the wall sconces or the appliances. For some buyers and sellers it can be difficult to distinguish between personal property and fixtures that come with the house. I once had someone try to take a beloved bathtub. Like the buyer wouldn’t notice?
How to avoid it- Disputes over fixtures and personal property are common. It is important to educate your client about the difference between attached appliances and personal property but there are times when the lines get blurred. Wall mounted flat screen TVs are frequently an issue. If something is really special to a homeowner, recommend the sellers remove the item before you put the house on the market. Have a beloved chandelier? Replace it before you start showing the home with an acceptable alternative. If this isn’t possible, exclude it in MLS along with frequently confused items like that flat screen and make sure it is excluded at the time the offer is written as well. Buyers should investigate and include any items that are important to them.
2. The dreaded ex-wife/husband
There may be many reasons to dread an ex, but when it comes to selling a property, it can impact the sale of a home. We often see situations where the owners got divorced but he/she didn’t sign off. Finding this out late in the process can be problematic, especially when one of the parties no longer has a financial interest in selling the home. This scenario along with other clouds on the title can take time to clear. Bank owned properties often come with title issues such as unpaid garbage fines that can impact your closing.
How to avoid it: Get a preliminary title report as soon as possible and be sure to ask your seller if there are any potential claims on the title.
3. Buyers Buying “Stuff”
Your first time home buyers are moving into their new home. They don’t have a washer and dryer of their own and the local appliance store is offering a smoking deal – get a store credit card, and save 15% on the purchase of your new appliances! Sound like a steal? It might just kill your deal.
Time and again we counsel buyers not to make major purchases before close of escrow such as a new car or major appliances, and time and again, some appliance store has a great “deal” that kills the deal. Any major purchase the impacts your credit can also impact your loan being funded too.
How to avoid it: Regularly remind your buyers to wait on appliance purchases, new car purchases, furniture and more until they the loan has been funded. Tell them to put those credit cards away until the paperwork is recorded.
4. Failure To Disclose
“But Ginger, I didn’t know I had to disclose that the hill behind the house next door came down last spring. It didn’t impact my part of the hill.” I have had to fight with sellers to get them to disclose certain facts about their home, but it is almost always better to over share when it comes to disclosure. Inevitably, a neighbor is going to tell the prospective buyer about the sliding hill, the formerly moldy basement or about the meth lab around the corner.
How to avoid it: When in doubt, disclose, disclose, disclose. Problems always seem much bigger when they are uncovered by a buyer after they are in contract.
5. Appraisal Nightmares
We went through a period of time when appraisals always magically came in at the offer price. For the most part, those times are gone. Appraisals are common deal breakers, and in many transactions, you don’t just have one. Review appraisals of the first appraisal are commonplace.
How to avoid it: Make sure the lender has a qualified appraiser. When possible, accompany the appraiser on the inspection. Prepare your clients in advance that the purchase price may have to be renegotiated or a higher down payment may need to be brought in if the appraisal comes in low.
6. Who Owns What?
Your buyer thinks they are getting a 6000 square foot lot, only to find out that the fence is built on the neighboring property. Or they think they own the driveway, but it is really an easement on property owned by the cranky old neighbor. Lot lines, shared driveways, and fences are common stumbling blocks in a transaction.
How to avoid it: Review the preliminary title report carefully. Legal descriptions aren’t always easy to read, but take the time and effort to have your client do so carefully. Have a title officer walk you through the title report to explain anything unusual. You should have your client go to the city/county authorities to review the items on file. If your client is concerned about the lot boundaries, have them perform a survey. While surveys can be costly, not knowing the actual boundaries can be costlier says Diana Rugh, a Realtor with David Lyng Real Estate, in Santa Cruz County, California. If a client is only concerned about one side of the property, she has her clients perform a partial survey for just the side in question.
7. No permits
In many areas, un-permitted additions or remodels have become serious deal killers. Many cities and towns have implemented pre-sale inspections to fill their dwindling coffers.
How to avoid it: If city/town inspections are required, get them in advance, correct any required issues, and get your clearance. Some municipalities don’t operate on the swiftest timeline, so start as early as you can.
8. Unexpected inspection findings
I used to work with an inspector that other agents called the deal killer and honestly, he was. But he was also a lawsuit saver. When you have a client paying hundreds of thousands if not multiple millions of dollars for a house, they should know what they are buying. I call inspection periods the second negotiation phase of the deal. Inspections are common deal breakers when agreement cannot be reached over repairs. Sarah Stelmok, a Realtor in Fredericksburg, VA almost lost a deal when the home inspection uncovered numerous dead felines in a crawl space. Amazingly enough, she was able to hold it together, the felines were removed and she closed the deal.
How to avoid it: Get inspections before the property is actively on the market. Buyers will probably still get their own, but at least you can resolve serious problems that may send a buyer running in advance. Repairs almost always cost a seller less if the buyer knows about it before they write their offer.
9. The lender changed the rules
This may be hard to imagine, but sometimes you are ready to rock and roll, you got your buyer pre-approved, not just pre-qualified, you are in contract and everything looks great until- poof- the lender changes the rules. Suddenly your buyer can’t meet the lender documentation requirements. This would have been helpful to know in advance.
How to avoid it: Unfortunately, there is not much that can be done to avoid it other than working with a reputable mortgage broker or lender with a solid record of closing transactions. If you represent the buyer, you may want to recommend the buyer leave their loan contingency in place until the loan is funded. If market conditions don’t permit this, make sure your buyer is aware of the ramifications if the loan doesn’t fund.
10. The bank doesn’t care
If the property being purchased is a short sale, the bank is pretty much in charge and they simply don’t care about your timeline. I have heard of people celebrating two and three year anniversaries of working on a short sale. When it comes to short sale timelines, anything goes, or better yet- who knows?!
How to avoid it: The best way to save a deal when a bank is involved is to make sure your buyers have appropriate expectations about the process. Educate them of the pitfalls of working with a bank. You might want to share the handout found in this article on the 5 Most Common Complaints of Short Sale and REO Buyers.
One of the best ways to avoid killing a deal- educating your clients about the entire home buying/selling process to make sure everyone is properly prepped goes a long way to holding deals together.
April new home sales rose 7.3%
New homes sales crater 17% in February to lowest level yet
New homes sales jump 11% in March
Census Reports New Home Sales Up 14.8% in April
December new home sales up 17.5% from prior month
Housing starts fell 10.6% in April
Tuesday, May 24th, 2011, 9:19 am
Sales of new single-family homes rose 7.3% in April from a month earlier, easily topping most analyst estimates.
The Commerce Department said the seasonally adjusted rate of 323,000 units last month was up from 301,000 for March, which was revised upward slightly. April new home sales were down 23.1% from 420,000 a year earlier.
In February, new home sales fell 17% from the prior month to 250,000, the lowest level ever recorded.
The seasonally adjusted estimate of new homes for sale at the end of last month was 175,000 in February, representing a 6.5-month supply and at the lowest level in decades. A healthy housing market usually carries a six-month supply of single-family homes.
Analysts surveyed by Econoday expected home sales of 300,000 for April with a range of estimates between 285,000 and 320,000. A Briefing.com survey projected home sales of 290,000 for the month.
The median sales price of new homes sold in April was $217,900, up 4.6% from March.
Jerry Howard, chief executive officer of the National Association of Home Builders, believes the housing market is still “bouncing along the bottom.”
He said on Fox News Tuesday morning that prices, as well as home sales, can only go up from here.
Capital Economics said April’s increase in sales “may even underestimate the recent rebound since the data exclude condo sales, which are probably performing better than sales of new single-family homes.”
“Nonetheless, total new home sales are still worryingly close to record lows,” analysts at the Toronto-based research firm said.
Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here’s why it pays to work with a REALTOR®.
1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
6. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
8. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
For the first time ever, U.S. Web surfers visited the Facebook social networking site more often than any other site in 2010, beating out Google, now in the number two spot, according to a report from Hitwise, an Internet analytics firm.
As a real estate virtual tour provider, we spend a lot of time on social networking activities both for the company and to promote our clients. But what is social networking and how can it help sell real estate, you ask?
Using Wikipedia, “the online encyclopedia,” “Social Networking” is described as: A social network service is an online service, platform, or site that focuses on building and reflecting of social networks or social relations among people, e.g., who share interests and/or activities. A social network service essentially consists of a representation of each user (often a profile), his/her social links, and a variety of additional services…”
It goes on to talk about the types of social networking, networking groups, communities, etc. For a more detailed definition, go to: http://www.Wikipedia.com .
So how can social networking help you sell more homes?
Real estate is a contact sport. You want to be networking with people, both those you already know (your sphere of influence), and those you have yet to meet. Social networks such as Facebook, Twitter, LinkedIn, ActiveRain and RealTown are the new online elbow-rubbing (virtual), story-telling, cocktail parties of the new social world.
Don’t be late to the party
You can add your virtual tours and property listings to Facebook, Twitter, LinkedIn and others. But for every virtual tour or listing you post, you should be writing six or seven non-selling messages or “tweets” as they are called in Twitter. Write about what you are doing outside of business or what is happening in the neighborhood. Write about local sports, market conditions, local fairs, farmers markets or anything you might talk about with a group of friends. Think of social networking as a “virtual cocktail party” and remember your manners—let others talk and then respond; back and forth.
What social networking is not
Social networking (in most cases) will not replace your traditional methods of prospecting and networking such as “farming,” Open House, Just Listed and Just Sold postcards, phone calls, cold calls, letters (snail-mail), Chamber of Commerce or the local MLS Marketing Groups.
How to get social in 2011
Let’s start with Facebook. Facebook has been thought by many people to be just for young people or something that our kids use to communicate with friends. Well, this “was” true several years ago. However Facebook has evolved into much, much more. Today, Facebook has more subscribers than the entire population of the United States. In 2010, Facebook passed the 500 million member mark. Yes, that is 500 MILLION! And it is still growing at a rate that appears to be unstoppable.
Take action – it’s free
So, sign up for a free Facebook membership and create a personal profile with basic information about yourself—nothing too personal, keep it simple. The important thing is to get started today. Create a profile with a minimum of your name, contact information, picture (yes, include your picture), business, and some personal information such as hobbies, pets, etc. But remember to only share information you would be comfortable having shared on the front page of the newspaper…since virtual content “could” be seen by more people than ever read your local paper, even the New York Times.
Next, start searching for your friends, associates and clients who are also on Facebook. You may be amazed at how fast your friends list grows. Congratulations, you are now social networking! Now that wasn’t so tough was it?