Entries categorized as ‘Home buying process’

Mortgage Rates Dropped Today!

November 26, 2008 · No Comments

I’ve received email from lenders that the mortgage rates dropped like a rock today. They’re below 6% and some programs are …

5.5%

Call either one of these two lenders for more details.

June Zepp, Real Living Mortgage at 614-825-8806
Tony Butler, Equitable Mortgage at 614-764-5071

Categories: Buyers · Central Ohio · Home buying process · Home prices · Homes · Lenders

Will an appraiser sabotage your mortgage?

October 27, 2008 · 4 Comments

I just received a phone call that really disturbed me. I often get calls from appraisers asking questions about the past homes I’ve sold. They make these calls to listing agents when they are doing comps for a lender who is in the process of approving (or not approving), a mortgage for a buyer. The buyer will be paying the lender for this appraisal and hopes that it is accurate.

This particular appraiser was asking about a luxury condo I recently sold in Golf Village (Powell). I began asking her questions, because I know these appraisals can be flawed. She mentioned that she was unfamiliar with the complex and builder of my sold listing. She said she was also unfamiliar with the builder and the community of the condo for which she was doing the appraisal.

So WHY is she doing the appraisal!

Here are the issues that are are going to impact the quality of her appraisal:

One error dealt with the two builders. Her appraisal was being done for a Bob Webb condo. The Webb family has one of the best local reputations for high quality building construction of their condos, patio homes and single-family homes. Realtors® often use “Webb built” in their MLS remarks section. While my listing was built very well, and was a luxury condo, the Webb name itself can add $$$$ to the price. (”Gee, I didn’t know that!”)
The condo she was appraising is located several miles away from my listing. It’s too many miles to use as a comp. Same school system, but different schools, different city mailing address and different zip code.
The condo being appraised is located in a township whereas mine was in a city with an extra PUD tax assessment and an income tax. So there is a difference to the property tax rate as well as whether an income tax is charged. This could make a big difference to a retiree with no earned income. That can affect the price the retiree is willing to pay. The appraiser had no knowledge of this difference. (”Gee, I didn’t know that!”)
My condo sits on a golf course whereas the condo being appraised is in a more family-oriented neighborhood near a large park. Totally different setting. (”Gee, I didn’t know that!”)

The more I spoke with this appraiser, the more troubled I became. To say she was “clueless” is an understatement. I told her that if she used my sold listing as a comp, that her BPO would be worthless and VERY unfair to the buyer. She said she didn’t know what to do because she couldn’t find other comps.

So why not just explain that to the lender rather doing an error ridden appraisal!

I’ve often wondered how appraisers are able to make an accurate judgement on the price/value of a home a buyer is wanting a mortgage for, because seldom have they been in the homes they are comparing. They have no knowledge how buyers perceive certain features/upgrades in the home because they don’t interact with buyers. This is also a concern for sellers who are refinancing because the same type of appraisal is done as part of that process.

If this appraiser doesn’t change her BPO, there’s a chance that the home being appraised won’t comp out because there could be up to a $100,000 + difference … not exactly chump change. If it doesn’t comp, then the builder or the real estate agent in the transaction will have to spend time disputing the appraiser’s ”findings” and trying to convince the lender to disregard that report or have another appraiser do a 2nd opinion.

Buyers, if your chosen home doesn’t comp out, don’t be afraid to challenge it!

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Categories: Buyers · Central Ohio · Condos, patio homes · Delaware County · Delaware Ohio · Golf Village, Kinsale · Golf course communities · Home buying process · Home prices · Homes · New home builders · Powell Ohio
Tagged: Bob Webb custom homes, North Orange Park, Orange township, Ohio

The financial mess … a true story.

October 16, 2008 · No Comments

In the past year, much has been written in real estate blogs or newspapers or on media web sites, about the HOUSING CRISIS and who is to blame for THIS MESS. Some say everybody shares some blame, and perhaps that’s true.

Ultimately, the buck stops with the buyer. They were the ones that wanted a house that was more than they could afford. They were the ones who decided to take on a mortgage payment that represented too high of a percentage of their monthly budget. They were the ones who didn’t plan for a rainy day with a savings account, or who didn’t consider what they would do if one of them lost their job or if they didn’t continue to receive increases to their salary.

When people ask me about how we got into this mess, I recite a situation that occurred several years ago. It really illustrates what occurred then and how it set the stage for so many failures.

A couple purchased a modest home for $137,000. They put 10% down leaving them with a mortgage of $123,000. Six months after living in the home they went to a major local bank to get an equity loan so they could by a new SUV - one that would have cost over $30,000. The appraiser for the bank said the home was worth $185,000. Based on this appraisal, the bank gave the couple a $50,000 home equity loan. So six months after buying a $137,000 home, they now owe $173,000 on it.

A year after they purchased this home, the husband had a new-job opportunity in another state. They set up an appointment with me to list their home. I always do a Net Equity Estimate to show sellers what their proceeds will be if they sell at such and such price. If the Estimate comes in negative, I make sure they have the funds to bring to closing, otherwise, because without those funds, the home won’t be able to close.

Naturally, the Net Estimate came in substantially negative. I covered the results with them. The first thing the wife said was that the equity loan was really a car loan. She didn’t understand that it was a lien against the home and would need to be paid off when the home closed. I then asked them if they had the thousands in cash to bring to closing. They didn’t. At this point the wife began to cry because it finally dawned on her that they were “trapped”.

They couldn’t take the new job because they couldn’t sell their home because they had no extra money to close.
They could sell the big SUV, but would be in the same situation of owing more than it could generate in trade-in value.

So what did they ultimately do, you ask? They took the new job in the other state along with the new SUV and walked away from their home leaving behind all the debt on it.

Who is to blame for this mess? Do you blame the buyer for being ignorant of good budgeting practices and for making poor financial decisions? Do you blame the appraiser for overstating the home’s value so he can continue to get jobs from the bank so he can make his own mortgage payments? Do you blame the bank for being greedy in wanting to make loans, so they perform well for their stockholders? Do you blame the stockholders who want to see increases to their portfolios and retirement IRA’s?

Categories: Buyers · Central Ohio · Home buying process · Home prices · Home selling process · Homes · Sellers

The realities of today’s real estate market in Central Ohio

October 14, 2008 · No Comments

It’s the middle of October and we need to consider the cold, hard realities of selling or buying homes. There’s reason for buyers to be optimistic. Sellers, on the other hand, need to be realistic … in order to be optimistic. It’s time for both to take off the rose-colored glasses and get moving in a smart direction. I’m not going to review the issues in the economy and financial markets … you get that from the media on a daily basis. However, because of those events, here’s what you need to do RIGHT NOW!

Sellers

It’s October, and buyers will want to be in their new home before the holidays. That means your home must go into contract in the next couple weeks. If you miss that window, your home is apt to sit until next March.
If your home sits till March, you’ll sell it for a lower price - almost guaranteed. You might as well lower it now to get it SOLD!
If your home has been on the market for 3 months without an offer, your price is too high. Buyers are telling you that “something” is wrong with the home and they’re not willing to pay your price for it. You’ve got to lower your price to the point that a buyer is willing to overlook whatever the short-coming is. Remember, it’s how your home compares to other homes they’ve viewed and whether it offers a value versus those homes.
If you can fix the “short-coming” … fix it. If you can’t … lower the price!
Buyers don’t care what YOU want to sell it for.
Even if you have to lower your price, remember the home you want to buy will also be lower in price so you’ll still benefit.

Buyers

Visit your lender and get Pre-Approved first before you start viewing homes. The rules for issuing mortgages are totally different now than even a few months ago. You need to know how much mortgage you’ll be approved for. With that amount, plus your down payment amount, you’ll then know what price range of homes you can view.
Don’t view homes you can”t afford in the hope that you’ll be able to buy the home for the amount you CAN afford. That just wastes everybody’s time, including yours and it is so disappointing when you don’t get the home.
Buy a home to live in and enjoy for several years. You don’t buy homes the way you buy stock. Yes, you hope to have it increase in value, but your primary focus should be finding a home that meets your needs for location, schools, comfort and enjoyment.
Home prices are generally what they were in 2003-2004. Interest rates are still at historical lows. Inventories are down, but there are still lots of homes to select. If you have a down payment, it’s a good time to buy.
If you have a home to sell before you can buy, get that home in contract first. Don’t expect the seller to accept an offer from you that requires the seller to wait until your current home finds a buyer.

The GOOD homes that are priced right ARE selling to SAVVY buyers who are taking advantage of this good time to buy. Both parties just need to be realistic about their wants and needs. We had a slow 2-3 weeks with the hurricane and the financial market uncertainties, but showings have begun again so now it’s critical to take advantage of the timing.

Sellers … lower your price!

Buyers … buy now!

Categories: Buyers · Central Ohio · Home buying process · Home prices · Home selling process · Homes · Homes for sale · Sellers
Tagged: central ohio real estate market

Radon Testing is common in central Ohio

September 30, 2008 · 2 Comments

One of the inspections home buyers usually schedule in central Ohio is a test for radon. Radon is a naturally occurring radioactive gas produced by the breakdown of uranium in soil, rock and water. The test is done during the inspection phase of the Purchase Contract. The test will cost the buyer between $110 to $150, depending upon the company the buyer hires to do the test.

The inspector will place a small testing device (silver box in photo) in the basement for a 48-hour period. The device will periodically sample the air. At the end of the test, it will produce a graph of the readings, then average them for each of the two 24-hours periods. The overall average is then used to determine whether mitigation is recommended. The EPA suggests that people not have long-term exposure to radon readings at or above 4.0pCi/L. (non-scientific people shorten this to “4 pico curies”.)

If the reading suggests mitigation, then a company is hired that does such work. Costs vary according to the layout and size of the basement and the subsequent amount of materials required. The least expensive that I’ve seen a mitigation cost is around $1000.

In doing the mitigation, the company will seal the sump pump with a special cover, cover any crawl space with heavy plastic and perhaps, caulk cracks in the concrete floor. As shown in this photo, a plastic pipe will run from the pump to an exterior wall, then be extended to the exterior.

On the outside a fan will be installed that will be sucking out the air from the spaces that are likely to be contributing to radon entering the home. This is primarily the sump pump but a pipe may also be installed under the plastic in the crawl space.

The outside fan and piping is usually installed in a somewhat hidden location if possible. Sometimes there are options on placement of this equipment, so you want to discuss with the mitigation company what the location options are. Keep in mind that this fan runs all the time. While it’s not much louder than the fan on your furnace, you may not want to listen to it if it’s near your deck.

I’ve not included any of the scientific information on radon in this post. You can read to your heart’s content on this EPA page where there are many detailed articles. You can also view a U.S. map or an Ohio map (scroll down the page to see Ohio map) of radon concentrations.

Home buyers … prepare for more scrutiny.

September 23, 2008 · No Comments

In this month’s REALTOR® Magazine, there was an article alerting us to a new direction some of the large brokerages are taking regarding the buyer’s financial approvals. Buyers, you need to be aware of this new direction prior to submitting a purchase offer on a home.

Our central Ohio Purchase Offer Contracts contain a paragraph regarding the date the buyer will provide the seller with a preapproval letter. The language in the paragraph is very specific as to what is to be included in the lender’s preapproval letter. Often times the preapproval letter that the lender provides is merely a form letter and upon close examination, doesn’t provide the exact info required in the contract.

Many times that preapproval letter isn’t sent along with the Purchase Offer. So the seller is being asked to enter into a contract with no knowledge of the lender or the type of loan the buyer will be using.

Sellers have the right to know who the buyer’s lender will be, what type of loan (Conv, FHA, VA), and whether the buyer is preapproved for the amount of the price of the home. In today’s financial market, this is extremely important as too often issues later arise with the buyer’s financing that cause the Contract to be terminated. That impacts the seller as they have taken their home off the market thinking they are in a bona fide Contract.

“We’re seeing a much higher incidence of buyers thinking they have financing and finding out either at the closing table or days before that the lender doesn’t have the money or has gone out of business,” says Jacelyn Botti, head of residential sales at Weichert Realtors® in Morris Plains, NJ.

Per the REALTOR® Magazine more and more brokers are working to “bulletproof” financing for buyers. One such brokerage’s program offers their sellers a “buyer’s verification”, which lets the seller request that buyers get a mortgage approval (at no cost) from the broker’s funding affiliate BEFORE making an offer on the seller’s property. If the buyers are approved, they are not required to use the broker’s funding affiliate, but it gives the sellers the added assurance that the buyer qualifies for a mortgage prior to entering into a Contract with the buyer.

From the seller’s perspective, this extra approval process gives the seller some assurances that a questionable lender won’t be doing some hocus-pocus financing. For buyers, while they may not care to go through the extra paperwork, it will offer a better chance that they will actually be able to go to closing OR it will alert them that they were originally planning to use a disreputable lender. This would be a good thing for both parties if the ultimate result is a completed transaction.

Buyers, if you want a better chance that the sellers will consider your offer, then …

Select a reputable, well-know lender. A local one is better (no online aggregators).
Don’t just get pre-qualified, get PREAPPROVED.
Send the preapproval letter with your offer.
Be prepared for the seller to ask for an alternative approval.

Categories: Buyers · Central Ohio · Home buying process · Home selling process · Realtors® · Sellers

Home buyers & sellers … friend or foe?

September 13, 2008 · No Comments

Selling or buying a home can be a wonderful experience … or a troublesome one. It all depends on the parties involved. Naturally, having it be a wonderful, joyous, exciting time is the preferred outcome and that’s what happens in the majority of sales.

HOW TO BECOME A FRIEND

First of all both parties should rejoice in the fact that they share some things in common - they both like the house and they both want to move to a different home than where they are living now. Having a buyer choose a seller’s home is a complement to the seller. Likewise, having a seller trust the buyer enough to allow them to walk through the home and investigate its innermost corners during an inspection, is a complement to the buyer.

~~~~~~~~~~~~~~~~~~~~~~~~
Follow the GOLDEN RULE!
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Both parties should recognize that the Contract for the purchase of a home MUST be a win-win for both parties or it won’t become a Contract. The negotiation process to settle on the details of the Contract will attempt to find a common ground between the two parties. To some people, the closing/possession date is more important than the purchase price. To others the price may be more critical and they are more flexible on other terms. It’s a give & take to find which terms are acceptable to both parties. Keeping an open mind and looking for workable solutions during negotiations will result in both parties being satisfied.

What it really boils down to is having RESPECT for the other party. People that remember that the others are people as well - with feelings, emotions, and maybe some financial concerns - will usually do much, much better in the negotiation process. Often, when both parties work together and respect each other, good things happen. A seller may decide to leave something for the buyer that the buyer otherwise would have to purchase. The buyer may be willing to overlook some moving dust if events happen to cause the seller to run out of time during the moving process. I’ve even had sellers plan a neighborhood BBQ to introduce the buyers to their new neighbors. That’s wonderful!

HOW TO BECOME A FOE

Start out with an attitude of it’s MY way or the highway!
Make DEMANDS rather than suggest SOLUTIONS.
Treat the other side as if they were an inanimate object - not a real person with feelings.
If you’re the buyer and the seller gave you a good price for the home, add to the seller’s financial pain by submitting a 2-page list of remedies you demand be fixed.
If you’re the seller and the buyer paid full or nearly full list price, refuse to do ANY of the requested repairs even though they may be legitimate.
Threaten to pull out of the Contract every chance you get. That keeps everybody on their toes, keeps stress levels high and makes you feel powerful.

WHICH WILL YOU CHOOSE?

If you’re a seller and have friends in the neighborhood, do you really want the buyer telling your friends what an arse you were? Likewise, if you’re a buyer, do you want the seller to alert your new neighbors such they decide it’s best to not get acquainted with you or welcome you? Obviously neither is the desired situation. So go into your home buying or selling process with a positive attitude and you’ll eventually be so glad you did, when everybody has a great time at the closing table.

Categories: Buyers · Home buying process · Home selling process · Homes · Homes for sale · Sellers

Call your mortgage broker … NOW!

September 9, 2008 · No Comments

With the recent government takeover of Fannie and Freddie, mortgage interest rates have declined. If you have been considering buying a home, the time to act is now.

Don’t let this opportunity pass you buy!

There’s plenty of inventory of homes for sale, so you’ll have a good selection.
Sellers have reduced their prices to below market prices in many cases.
Low home prices combined with low interest rates is the best of both worlds for a buyer.

If you don’t already have a preferred mortgage broker, here are two that I highly recommend:

Tony Butler, Equitable Mortgage Corporation. Call him at 614-764-5071
June Zepp, Real Living Mortgage. Call her at 614-825-8806.

Get off the fence and act now or you’ll be sorry later.

Categories: Buyers · Home buying process · Home prices · Homes · Homes for sale · Lenders
Tagged: Equitable Mortgage, Real Living Mortgage

Survey Plats & Easements - how they affect you.

August 30, 2008 · 2 Comments

When you go to the closing table, the person from the title company will be covering all sorts of important documents with you. One of those documents will be a survey plat of the property you are buying. It will show you what - if any - easements are on the property.

There are several types of easements with the most common being utility easements. These easements give permission to utility companies, (such as electric, water, etc.) to come on your property to maintain or repair their lines. They don’t need your permission to do this or to DIG! If your prize roses or a fence are located in this easement, count on having them removed if the utility company needs to do so.

Sometimes there are drainage easements or identified preserve areas. What you can or cannot do in these easements are usually governed (explained) by the deed restrictions.

In the diagram to the left, I have highlighted in yellow the various easements on a particular property. It has more easements than is found in many plats, but it does a good job of showing the restrictions this particular owner will need to keep in mind when landscaping or building a deck or patio.

To the back of the property is a 20 ft preserve and drainage easement. For this particular lot, the preserve easement states that the owner can’t do anything to that section other than look at it. No mowing, no picnic tables, no plantings. Look but don’t touch. This owner owns the land but can’t use it.

Along the sides of the property, there are drainage easements. This particular lot is sloped so that means that the slope must be maintained such that if there is a very hard rain, any excess water has a natural flow back to the preserve area, to prevent flooding.

It’s not uncommon to have one plat have an easement that the neighboring plat doesn’t. As a buyer, if you are concerned by what easements might be on the home you are considering, you can ask the seller for a copy of the plat survey they were given when they closed on the home. Or you can visit the county Auditor’s office where you can see the plats for neighboring homes as well, to see the BIG picture.

Categories: Buyers · Home buying process · Homes · New home builders · Surveys
Tagged: central ohio real estate market news, easements, plat maps, survey plats

How will property tax rates affect your choice in homes?

July 16, 2008 · No Comments

Several years ago I began tracking the multiple real estate tax rates by school districts for Columbus suburbs. I did this so buyer clients could get a feel for differences that the tax bill portion of their mortgage payment would make to the affordability of the homes we would be viewing.

When buyers have a lender pre-qualify them, the lender will tell them the maximum home price the buyer can select. They’ll also give them a maximum monthly payment. Because the tax rates among school districts can vary quite a bit, a buyer who has been approved to buy an average priced home of $200,000 may be able to be approved for that home in one district but not another. The reason is that the monthly tax portion of the mortgage payment may put them beyond the ratio set by the lender.

The other issue that may come into play, is that a school district with “lower” tax rates, may have higher priced homes. The Olentangy school district is an example of this. This district’s rates are lower than some other established suburbs, but the average home price in the district is much higher. If a buyer is approved for only $200,000, they will be hard-pressed to find a home at that price in the Olentangy district, yet, may find many such homes in that price range in Worthington, even though Worthington’s property tax rates are much higher.

Here is the chart that I’ve prepared to visually show the differences to school district property tax rates by several suburban school districts. The bars within a district represent the various taxing entities within the school district. (click on the graph to enlarge)

Of course, it goes without saying that buyers should budget for their tax rates to increase over the years they live in the home. This is especially true for the newly developing areas, like the Olentangy school district, where the growth in housing has and is creating a need to build new schools.

Categories: Buyers · Central Ohio · Delaware County · Home buying process · Home prices · Homes · Housing stats · Lewis Center Ohio · Powell Ohio
Tagged: central ohio real estate market news, property taxes

New-build home vs existing home … which is best?

July 13, 2008 · 2 Comments

A couple months ago, I met with a young couple who would be first-time home buyers. For certain reasons, they thought they only wanted to buy a new-build home. They had even met with a lender to become pre-qualified. They had very specific requirements for the floor plan of the new home and they knew exactly what section of southern Delaware County where they wanted the home to be.

Sounds like they’re doing everything right, doesn’t it! Well, yes, sort of.

The specific requirements they had for the new-build home and the location they wanted to be in, would place the price of the home about $25-$50,000 more than they had been pre-qualified for. There would also be an issue with how they wanted to use the home in that it would be forbidden by most new subdivision’s deed restrictions.

I suggested that they consider an existing home that is not located in a subdivision, because it might be more likely that we could find something more closely aligned to their budget and requirements - and not get them in trouble with their neighbors by violating deed restrictions.

During our discussion of “new vs existing homes”, I mentioned that many of the after-costs of a new build are avoided by purchasing an existing home. One of the first major expenses required in a new-build are the blinds or window treatments which can easily add up to thousands of dollars. Another unexpected cost may be the water bill required to keep the new sod alive until it’s well-seated into the soil. Want a garage door opener? It’s probably yours to put in after closing. Dishwashers come with the home since they’re built-in, but the range and fridge may not, especially if people don’t want them added to their 30-yr mortgage.

Most likely a resale home comes with all these items already installed. Plus, you may also get a deck or fence or mature landscaping. So overall, an existing home can offer a better value than the same-price new build home.

When I began discussing these after-cost differences of new vs existing, the expressions changed on this young couple’s faces. They said they had never considered the things they would have to add to a new-build after they moved in. So not only could they not afford the specific style of home they wanted, they couldn’t afford to live where they wanted, and they didn’t have extra cash to be able to add the necessary extras after they moved in. Obviously, it was a disappointing realization for them.

So, if you’re a first-time home buyer, meet with your favorite Realtor® early. Have your wish list in hand, but be flexible to fine-tuning based on your pre-qualification amount, and keep a substantial amount of cash behind in order to be able to add all the extras that make a house a home.

Categories: Buyers · Home buying process · Home prices · Homes · New home builders
Tagged: buying a new build home vs an existing home

… But … I’m not ready to move!

June 19, 2008 · 2 Comments

I’m not sure what’s going on. Maybe it’s the way the market has been the past year with it taking longer for some homes to sell. This year it seems a few sellers are putting their homes up for sale without being ready - mentally or physically - to move within 30 days.

If the seller has listened to their agent and priced the home right, and the home is in great condition and well-staged, there is a possibility that the home will go into contract quickly with the buyer asking for possession within 30-40 days. That’s always been the norm and in past years, it didn’t seem to be an issue.

When sellers aren’t willing to adjust their timing to move (give possession) within that 30-40 day timeframe, it causes all sorts of problems.

First of all, it can cost the seller a “ready, willing and able” buyer if the buyer needs to be in the home by a certain date to meet employment or school dates or a possession date on the buyer’s current home’s contract. The buyer may need to select another home that does agree to meet their required possession date. In today’s market, sellers cannot afford to let a buyer slip away!!
The buyer may want to lock-in an attractive interest rate to avoid a projected rate increase. They will want to close on the home quickly.
Sellers who are being managed by a 3rd party relocation company are required to give possession at closing because title transfers from the seller to the relo company to the buyer. The purchase contract is between the relo company and the buyer, so a delayed closing isn’t even up for discussion.
Buyers don’t particularly like the idea of the seller living in the home after closing. In some areas or states, it’s standard practice to turn over the keys at closing and delayed possession is not given. Here in central Ohio, it’s more common to give the seller 2-3 days to move out and turn over the keys. That way, the seller is assured the closing actually occurred prior to loading the truck. However, both parties need to be aware that there are certain insurance liabilities in doing this.

I’ve found that some sellers, who haven’t sold or purchased a home for 20 years or so, are still under the impression that they can stay in the home for up to 30 days after closing. NOPE, NADA, NOT GONNA HAPPEN! That’s as relevant as 50¢/gal gas!

So … sellers … when that sign goes in your yard, you need to have already made plans on where you’re going to live IF your home goes into contract quickly and you need to give possession at closing.

Categories: Buyers · Central Ohio · Home buying process · Home selling process · Homes · Homes for sale · Sellers

Who Sets A Home’s Price? Sellers or Buyers?

June 13, 2008 · 2 Comments

Well, home sellers won’t like to hear this, but it’s well recognized in the industry that the buyer actually sets the price.

Just as with any retail product being sold, whether it’s a car, a cheeseburger or clothes for the family, buyers vote with their dollars and their feet. They make choices based on the price of the product, its overall current value, perhaps its long-term value, how well the product meets their specific needs and they decide to buy or not buy. The buyer doesn’t consider what the manufacturer paid to produce the product or the margin the store might like to earn when they sell the product.

Think about that the next time you buy a gallon of paint. Do you really care what it cost to make the paint? Or do you decide based on the price of various brands, and which one offers the smoothest application or the potential for a one-coat application? It’s no different when buyers are shopping for homes. Like it or not, buyers don’t care what the seller paid for the home, or what it cost to add the upgraded fans, or how much the seller needs to net in order to buy their next home.

Home buyers may be viewing homes in several suburbs, in various school districts, in multiple neighborhoods and of varying styles. Often they narrow their selection down to 2 or 3 homes then evaluate the pluses and minuses that each home offers to them. They’ll compare the price of the home along with the money they’ll need to spend to fix it up or to redecorate to their preferences. They also consider the price that other homes have sold for in the neighborhoods of these homes. They’ll consider whether their total price paid (price plus fix-ups) will place the home in the low, middle or high-end range of the neighborhood. In today’s market, they may (or should) consider whether the neighborhood prices are declining, staying flat or increasing.

If the buyer considers the price or money the seller has invested in the home, it’s only to evaluate the likelihood of the buyer being able to buy the home for the amount they have decided it’s worth. If the buyer decides the home is only worth $300K and it’s priced at $330K because that’s what the seller owes or has invested, then the buyer may decide it is futile to make an offer and instead merely takes the home off the table for consideration.

When sellers are considering how to price their home, they need to remember three things:

Their listing agent has seen the inside of hundreds of homes, done hundreds of CMA’s for both buyers and sellers, has heard hundreds of buyer feedback comments on their listings, and has a pretty good feel for what a home will sell for.
The buyer has more knowledge of market pricing and seen the inside of more homes than the seller has, thus is in a better position to judge the price of a given home as compared to all the other homes they’ve viewed.
The seller has the least knowledge because they’ve not likely been in other similar homes to compare upgrades or condition.

A few months ago, I read a blog post where the blogger suggested that an overpriced home actually helps sell their neighbors’ homes … rather than their own home … because the overpriced home becomes a benchmark comparison that “legitimizes” the value of the lower priced homes. Barbara Corcoran, real estate guru that frequently appears on The Today Show, addressed this issue this week by saying that a seller could achieve the most money by pricing the home 10-15% below market. I don’t think the price needs to be quite that low, but certainly pricing the home within 1-2% of what it is likely to sell for, WILL generate more money for the seller because the seller will get an offer much faster and often at or close to list price because the buyer will know that it is a good value and that the home may receive competing offers from other buyers that also recognize the value.

I attended a seminar last year on home pricing strategies. The speaker mentioned that sellers can price their home in one of two ways: (1) they can price it to sit, or (2) they can price it to sell. The buyer will then decide which one of those two choices it will be.

Categories: Buyers · Central Ohio · Home buying process · Home prices · Home selling process · Homes · Homes for sale · Media · Sellers · Television
Tagged: Barbara Corcoran, NBC, The Today Show

What if the appraiser doesn’t agree with the seller?

May 18, 2008 · 2 Comments

In working with one of my buyers, we’ve been viewing homes around a popular upscale suburb. A new listing came on the market recently and while it offered many of the amenities of others we’ve viewed, its price was about 13% higher than the others … and higher than my buyer wants to spend.

Prior to setting up a showing of the home, I ran comps, checked pricing and purchase history for the home. We compared the interior photos of the home to other similar homes looking for something that would indicate a reason for the higher price. The home seemed ‘nice’, but not especially different than others that happened to be in-contract or that had recently sold for nearly $25K less than this home’s price … and they were larger homes. I also looked at the price per sq ft of those homes that had the same major amenities and size. Considering price/sq ft, this home was priced at an 18% premium to much larger homes on the “most expensive” street in the subdivision. We analyzed recent sales, in-contracts and active listings.

Every type of analysis that I did, indicated that this home was overpriced by $30-40K … AND that it really should be priced at a price that would fall within my buyer’s desired range. So I set up a showing.

The home was nice, but there were some things that weren’t quite as nice as the in-contract or sold homes. We weighed the pros and cons of this home versus a couple very similar recent sales. Our opinion of the price didn’t change. We just couldn’t find justification for the price.

So we submitted an offer at the price we thought it ’should’ be. Now in our market, homes typically sell within 96-97% of the list price - especially in this suburb. We knew that submitting an offer that was only 88% of the list price on a new listing would be viewed as a low-ball offer - something that seldom works in our market.

The listing agent and seller came back with justification for their price based on the price the seller paid for the home plus inflation rate for the many years the seller had owned the home. IMO, that is irrelevant in today’s market. One must consider what homes are CURRENTLY selling for.

If/when this seller gets the home in-contract at a price that the seller wants, will that contract be at risk when the buyer’s lender orders an appraisal? The appraiser will be more likely to do the anaysis in the way my buyer and I did - recent sales and $/sq ft of livable space plus major amenities. If the home doesn’t appraise for the purchase price, that buyer will either have to make up the difference in CASH or terminate the contract because they couldn’t obtain financing.

Appraisers are taking a much harder view in determining their values due to the “issues” Ohio has had with foreclosed loans. While sellers may be apt to view their pricing more emotionally, the appraiser will merely be looking at the hard numbers. Therefore, no matter how great the seller thinks their home is or how much the buyer wants to buy the home, the hard numbers must support the purchase price in order for the Purchase Contract to stay intact.

Categories: Buyers · Central Ohio · Home buying process · Home prices · Homes · Sellers
Tagged: home appraisers

Showing Feedback … “price is too high”.

May 5, 2008 · No Comments

Listing agents solicit feedback from buyer’s agents after they’ve shown a property. Most agents do this via their broker’s automatic email feedback form because it’s easier than playing phone tag to get the agent’s comments.

One of the sections on this form is “what did buyer think of the price?” Too high? Just right? Too low?

Now, I’ve yet to EVER have an agent check the “Too Low” box! DUH!!!

I’ve also learned that agents check the “Just right” box ONLY when the buyer isn’t interested in the home.

Therefore, the “Too high” box is checked 99% of the time.

Should the listing agent and the seller pay any attention to the “Too high” comment? Well, that depends because it can mean several things.

It can mean that the buyer is looking at homes that are higher priced than the buyer has been lender-approved to purchase. This type of buyer is hoping to buy according to THEIR budget without considering what the home is really worth. The buyer may only be approved for a mortgage no higher than $170K, but is viewing homes priced in the $180’s hoping to select a home where the seller may accept their planned low-ball offer. Thus, the home is priced “too high” for this buyer to buy. It doesn’t mean the price is “too high” versus comparable properties.

It can mean that the buyer is comparing the absolute price point of non-comparable homes. Perhaps, a buyer is wanting to locate in a given area, school district, or community. The buyer may view numerous homes that have a price range gap of $50K-$100K difference. I had a listing where the buyers typically viewed upscale homes within a $100K range. My listing had upgrades/location/size/amenities of homes priced $60K higher. But it’s absolute price was being compared to homes priced $50K less with none of the benefits of the size, location, amenities, or privacy. Had the buyer’s agent analyzed the comps, the buyer would have realized that the price/sq ft was competitive (or lower) with other similarly appointed homes. I feel sorry for these buyers because they are comparing prices of apples-oranges not oranges-oranges and as a result, they are very likely to miss out on a “good buy”.

It can mean that the buyer is interested in the home, but the agent wants to set the stage for contract negotiations to help the buyer buy the home at a lower-better price. Even if the buyer and agent think the home is “priced right“, the agent won’t reveal that in order to protect the buyer’s negotiating position. So the agent gives feedback that the price is “too high“, when in reality it isn’t.

It can also mean exactly what it says … that the home is priced “too high“ when price/sq ft is compared for comparably appointed homes. The listing agent knows when this is the case, and will use this information in their discussions with the seller.

As a buyer, what should you do?

First of all make sure you’re comparing apples-to-apples. Calculate the price/sq ft and consider the total finished living space of the home and extra features or upgrades that the home has versus others to get a feel for the range of similar homes. After you’ve done that, then consider the absolute price within the nearby area or community. It may have a good price/sq ft but if it’s absolute price is much higher than others, then you must consider whether you want to buy the most expensive property in the neighborhood. Always think about RESALE when you buy.

Examples from my showings this weekend …

I showed five homes to a buyer over the weekend that illustrates this “too high” price very well. All the homes were in close proximity to each other - same general neighborhood and similar amenities with some differences. Three had finished basements. The price range was $299 to $350K. Of the 5 homes, the one with the highest absolute price ($349,900) had the lowest price/sq ft ($110). The lowest priced home ($299,900) had a mid-range price/sq ft ($122). The home with the highest price/sq ft ($144) was priced at $309,900. The price/sq ft range of the three with finished basements was $118-$144. The absolute price range of those three was $299,900-$337,500.

Knowing the general pricing range now will allow the buyers to better consider the amenity differences each home offers and they can use that info in deciding what a fair price is for the home they liked best. The next step for ME will be to do this same analysis for them on recently sold homes. That way, they’ll have all the info they need to make a good buying decision.

Bottom line, before writing off a home as being “too high priced“, do your homework - and have your agent do theirs - then decide what a fair price would be for the home you like the best.

Categories: Buyers · Central Ohio · Home buying process · Home prices · Homes · Homes for sale
Tagged: New Albany homes for sale

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