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Category Archives: business of real estate

Wayback Wednesday… An Oldy, but a Moldy

Wednesday, 07 September 2011 08:58
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mold on bread

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Poor mold.  People are trying to save the whales and bring back the Dodo Bird, but most everyone would be happy is mold were extinct.  But it isn’t…  Mold is alive and kicking, and more of a problem than ever.  And it usually hangs out with some other unsavory characters, Rot and Termites (that are all followers of Moisture).

A couple of years ago I was involved with a moldy property and I learned a few things.  I posted up some good information about Mold, where to find it and how big of an issue it can be.  And it can be a REALLY BIG problem.

Of course, it wasn’t my first run in with the stuff.  Back when I was a reasonably new real estate agent in Gwinnett County, GA, I worked with one of my investor clients on a property that had some pretty significant mold issues.

Real estate prices were crashing around it.  The previous owner had custom built the house, and it was pretty obvious that either they really didn’t have “builder” experience (as opposed to “building” experience), or they ran out of money partway through the project.  The whole “builder v building” experience thing is another post someday, though.

The homes was large and had wonderful high ceilings, a large garage, nice flow patterns and was well sited on the lot.  But, in this luxury home in a subdivision that had homes worth as much as a million dollars, there were no crown mouldings, no granite counters and cabinets that looked like stockers from Home Depot (not knocking HD, but the house deserved at least semi-custom cabinetry).

But the basement was where our story was…  It was nasty.  The home had been unoccupied for at least 9 months and was loaded with mold.  We knew that the HVAC was going to have to be changed… it would be cheaper than cleaning it out.  But the basement was almost beyond salvation.  The solution was to gut it and leave it unfinished.  It had been finished, and was pretty well finished, but was going to have to be “unfinished” in order to remediate the mold problems.  All of the drywall was junk… and we also knew that some of the structural wood would need to be replaced.  Most importantly, we knew that it would need to spend a good long time with proper airflow.

The bank that repossessed the house had DESTROYED their collateral by turning off the power.  Because the HVAC wasn’t running for those 9 months, the bank likely saved about $3000.  But in saving that $3000, the value of the home likely dropped by $200,000.  Not a good trade…  The house should have been able to sell for $500,000, but instead barely managed to bring $300,000.  Of course, the bank wasn’t real bright anyway… they turned down our offer at one point, and then lowered the price to our offer less than two weeks later.

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Change to Local Market Reports

Monday, 05 September 2011 08:00
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Image representing Zillow as depicted in Crunc...

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As a real estate agent, I run across a lot of cool tools.  Some of them are great for me to better read the markets and help buyers and sellers to accomplish their goals.  Other tools are great for consumers to use while making decisions about buying or selling a home.

I always recommend that both buyers and sellers look at the local market where they are buying or selling.  It has a tremendous bearing on whether prices are on the rise or falling, as well as what the competitive environment might be.  Looking at a solid CMA (Comparative Market Analysis) for the home (that they are selling or looking at buying) is a great start… but it doesn’t give the wide picture.

 

Map of Georgia highlighting Gwinnett County

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Many buyers and sellers turn to AVMs (Automated Valuation Models) to get an idea of the value of a home.  Probably the most well known of these would be the Zillow Zestimate.  I have written about Zillow and their Zestimates a few times.  Zestimates are amazing tools… within the bounds of their limitations.

 

While I would quickly point out that Zestimates are a very limited tool in regards to pegging the value of a particular property, one thing I will point out just as quickly is that the Zestimates have given Zillow an amazing database of historical and current home values.  And while individual Zestimates are seldom right, I feel that their compiled data is quite accurate (1 house is too small a sample size to be accurate, but 10,000 houses can make them very accurate in pegging the market in general).

I will be incorporating Zillow’s Local Area Indexes into my Market Reports moving forward.  I think that they are a valuable tool for you, the consumer, to better assess the market value of homes that you might be considering.  Look for charts like this one for various areas within Gwinnett as part of market reports.

Atlanta Metro Zillow Home Value Index

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Wayback Wednesday… Bankrupt Subdivisions… Good Deal?

Wednesday, 31 August 2011 08:00
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Sign of the times - Foreclosure

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Two years ago, I wrote about some of the pros and cons of buying a home in a ‘distressed’ subdivision.  While there aren’t quite as many builder foreclosure properties as there were a couple of years ago, there are resales coming into the market now from people that bought builder foreclosures.

As with many things, all that is old is new again.  I’m hearing from buyers more than any time in the last year and a half that they are thinking about buying a home in an abandoned subdivision.

As I said in the original post, there are both pros and cons.  It would be a great post to go back and read.

Oddly, a couple of months after writing the post, I got a call from a local TV station that wanted to interview me on camera regarding this situation with a specific subdivision.  Unfortunately, I was on vacation with my family and out of town.  I wasn’t important enough to warrant a satellite interview…

Homes had originally been marketed at $600k to $800k in the neighborhood.  As the market started to slide, the prices offered by the builder started to drop.  They weren’t able to sell many units though.  Eventually, the bank took over and was selling the homes in the $400k to $500k range.  Just after the last existing home had been sold, another builder bought the remaining lots and began selling homes under $300k.

Some of the owners in the neighborhood that had purchased at higher prices were VERY upset with the builder and everyone else involved.  One owner had purchased for just over $800k, and needed to relocate.  Her house was not likely to sell for much over half that.

The bottom line is that there is potential for a VERY good deal… and there are some major pitfalls that could make that deal go very sour.  Step in with your eyes wide open…

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Wayback Wednesday… Police Response, 15 Minutes…

Wednesday, 24 August 2011 08:00
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Special Response Team of the US Mint Police

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Every job has it’s hazards, and one of the ones we face in real estate is the occasional police call…  and my last one was two years ago this week.  It was an alarm.  It has happened a couple of times.

It actually happened twice on the same house on different days.  I wrote the post, and then we went back out to look at the house a second time… my buyer was pretty serious about it.  The seller had actually changed the code between our visits.  So, even though I had left the information in the lockbox (per the Listing Agent’s request) it was wrong.  The seller also didn’t bother to tell the agent that they had changed the code. Gee… thanks.

On the second call, the exact same officer showed up.  He didn’t even stop the car.  Rather, he recognized us, made a radio call and just rolled by, waving to us out of the window.  I guess we had made him pretty comfortable with us on the previous visit.

Should I also mention that the house was vacant and cleaned out?  There wasn’t much to steal… but vandals could have had a field day stripping out copper.  I understand the fears on the part of the seller, but they were actually making it difficult to show their home.

For sellers, the piece of advice I would pass along is this…  Make your house easy to show.  Communicate with your agent if you are changing alarm codes, and trust your agent to have a fail-safe code if the normal one is lost. 

 

Picture of the

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For buyers, I would say this…  Stuff happens.  Keep a cool head.  Your agent should be cool under pressure, too, but ii helps if you aren’t flipping out.  

 

And for other agents…  You are the pro.  Don’t get flustered.  Getting angry won’t help.  No person involved in this little event woke up that morning looking to pee in your oatmeal.  Stuff just happens.  If it is an alarm, walk outside, relax, gather up any papers you might need and stay in view.  Keep your buyers calm and with you. 

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Pricing for Sellers…

Monday, 22 August 2011 08:00
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DSCN2847

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When you are selling real estate, there are generally two competing needs that have to be balanced while deciding on a price.

Getting the property sold (low price).

&

Maximizing the price.

It’s a no-brainer that if you price your property at a ridiculously low price, it will sell very quickly.  We see some of those amazing deals pop into the MLS… the seller needs to get out of a property immediately and is in a position to be very aggressive with price.  Undoubtedly, an investor will swoop in and buy the property if a owner/occupant isn’t fast enough.

 

On the other hand, it is just as much of a no-brainer that if a property is ridiculously over-priced, it will hang out in the listings long enough to actually be stigmatized.  Even with a new MLS number and a new brokerage handling the property, it will have a cloud hanging over as buyers wonder why it has been on the market so long… wondering what must be wrong with it.

And yet… there is almost a mantra from some real estate agents that they will “sell your house for the most money in the least amount of time.”  Of course, it is an easy thing to say, and an impossible thing to prove…  but just look at the statement for a moment.  The least amount of time generally means the least amount of money.  And in order to maximize sales price, sellers have to be willing to wait a long time.  (Lightning could strike and a cash buyer could drop out of the sky and decide that they HAD to have the property, regardless of price… but not likely).

So, what is a seller to do?

  1. An unidentified seller in an unknown location....

    Image via Wikipedia

    Price competitively.  No matter what else, the price HAS to compete with the comps in the neighborhood and area.  In the unlikely event you can get a buyer to pay a price that is too high, the property will not likely clear an appraisal if the price is too high.  Heck, even fairly price properties get clipped by appraisers sometimes.

  2. Price on a “node”.  A node is where multiple price searches might come together.  Buyers tend to fall into habits of searching with common boundaries… $100k, $150k, $200k, etc.  Instead of pricing like the grocery store ($2.99), price ON the node…  $300,000.  That way, searches are much more likely to hit your property.  This can be tough sometimes…  but, the thing to keep in mind is that while it is common, pricing that ends in a $999, $900 or even a $950 should be avoided.  End on a round number, and the rounder, the better.
  3. Know that you may be expected to contribute Closing Costs.  This is more true for a $150k home than a $500k home, but many buyers will look to the seller to contribute to closing costs.  Bake it into the price, so that it isn’t a shock when the buyer asks for 4-6% to help them with closing.
  4. Don’t build in fat.  Seems to be the opposite of point #3, but it is what it is.  Don’t price too high thinking it is “negotiation room”.  Buyers are unlikely to offer if they think the price is too high.  Instead, offer up your negotiation room up front.  Tell the buyer that you are willing to contribute 5% (or whatever) towards their closing costs with a full price offer.
  5. Level with your Agent.  Talk with your real estate agent frankly.  Some sellers don’t want to tell their agent what they are willing to do because they assume the agent will use that knowledge to beat them down if they get a buyer.  However, with most listing agreements, the seller’s agent actually has a legal duty to look out for the best interests of the seller.  Simply put, it is an ethical breach, if not a legal one, for the seller’s agent to betray the interests of the seller.
  6. Don’t use the agent that tries to “buy your listing.”  No, I don’t mean one that puts down cash and offers to buy your property…  I’m talking about the agent that comes into the listing presentation with a price that is higher than everybody else’s.  They tell you that your house is worth more than it really is… and then usually say that they will “sell your house for the most money in the least amount of time.”  They want the listing… and the probably know it won’t sell for the initial offering price.  But they are pretty sure they can beat you down on the price later.  If not, they just won’t give much effort to selling your house… and mark it up as a loss.  Many of these agents are playing a numbers game.  If they take 100 over-priced listings, they can get some percentage of them to reduce price and sell.  Buy, listings that start off over-priced usually sell for less in the end.

There are a lot of things that sellers have to balance as they go through the process of pricing their homes.  It isn’t easy…  A good agent can help guide the way, but in the end, the sellers are the ones that have to live with the pricing.

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