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Tag Archives: client protection

Unique Homes?

Wednesday, 14 March 2012 08:00
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french quarter architecture

french quarter architecture (Photo credit: abundantc)

Everybody likes unique homes… maybe not the same unique homes, but homes that are unique to their needs and desires.  But, when it’s time to move, a unique home can be a REAL challenge to sell.  In effect, it takes finding someone else that sees the same value in the property in order complete a sale where everyone leaves the closing table with a smile.

Financing a unique home can ALSO be a challenge.  Now, you don’t just need to find a buyer that has similar needs and desires for their home, but the appraiser needs to be able to justify it through the use of comparable properties.  Comparable properties might be pretty slim… since the very definition of “unique home” would seem to preclude comparable properties.

What makes a “unique home”?

  • Unusual interior features… maybe a 30 seat movie theater, 10 car garage, recording studio or maybe even a smaller house with a commercial grade kitchen.
  • Architecturally distinct… this can be something as “mundane” as a house that doesn’t fit the character of nearby homes.  A modern, minimalist home in a neighborhood of traditional homes would be unique.
  • Falling Water

    Falling Water (Photo credit: spike55151)

    Different type of lot… like a 10 acre lot tucked into a neighborhood with ½ acre lots, or a ¾ acre lot in an area loaded with 20 acre mini-farms.

  • Homes with historical significance… whether we are talking about a house like “Falling Water” (famous Frank Lloyd Wright design) or the Lalaurie Mansion (a famous home in the French Quarter of New Orleans, purchased a few years ago by Nicholas Cage) or even a home owned by a notable person from history.
  • VERY different homes… a house built to look like a shoe, or an earth-shelter home.  Lots of very high end homes fall into this, just because of the cost and limited market for them.

Selling a unique home involves a lot of challenges, both for the sellers AND for their real estate agent.

  • They may take a substantially longer time to sell than other homes.  They need to have the right buyer… and they have a much smaller buyer pool because of their unique attributes.
  • English: Thomas Jefferson's Rotunda at the Uni...

    Image via Wikipedia

    The sellers will often end up selling for much less than they originally hoped… even if they find the “perfect buyer” because of the problems that can arise during the appraisal and financing processes.

  • In some cases, especially homes with historical significance, there might be substantial restrictions on the buyers (can you imagine what would happen if someone bought Monticello, Thomas Jefferson’s home in Virginia, and then bull-dozed it because they liked the lot?)
  • The marketing costs and effort need to be much higher in order to have a good outcome.

There is a saying in real estate… Price fixes everything… but there are limits to that.  In fact, over the last few years we have actually seen properties that couldn’t be GIVEN away.  In Detroit, there were homes that were livable (not nice, but not caving in, either) that failed to sell for $100.  The value of the underlying land was less than the cost of removing the house… and there was no demand for the house.  The parallel in unique homes is that there might not be a noticable local demand for a house with that particular style.  To sell a specialized home to a general buyer often means that the unique features are completely discounted, or may even be a liability.

So, “price fixes everything” may actually not apply in the case of some unique homes.  Marketing might also not be able to overcome some obstacles.  However, to get the best outcome, a combination of aggressive marketing, realistic pricing, and a realistic timetable are the solutions.

I have dealt with several unique properties… garage homes being the most predominant.  The require a different type of service than many real estate agents are willing to provide.  There is a substantial portion of the real estate community that “plays a numbers game” when it comes to listings.  They figure that by listing a lot of properties, they will get a percentage that sell.  By lowering their marketing costs and concentrating on funneling more into the listing end of the equation, they will get more sales on the closing end of the equation.  They are much less interested in changing the equation to get a higher percentage fo the properties sold… and they have little patience for dealing with interesting and unique properties.

If you have an interesting property that you want to sell… or you are looking for an interesting property… around Atlanta, especially in Gwinnett County and around Lake Lanier, give me a call.

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Wayback Wednesday… Long Distance Listing (or Selling) Agents

Wednesday, 01 February 2012 08:00
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A couple of years ago I was dealing with this situation… actually cleaning up after it.

I had a client that had an offer on their house with an out of town agent (the agent was the buyer’s niece).  She was very nice, but she couldn’t be there for any of the 6 inspections we had, nor could she be there for the closing.  In effect, her clients were largely unrepresented in the sale… they were constantly asking me (the agent that is contractually bound to represent the best interests of the seller) how they should proceed or what would be in their best interest.

It came to a head at the closing…  The closing attorney got a bit testy with them for continually asking me to explain the forms to them.  He asked where their agent was.  They replied that their niece wasn’t able to come up from Valdosta.  He then asked if she was there for inspections or anything else.  One of them stated that she usually was able to help them via phone, but that often they had to rely on me.  The husband made a comment that I had declined answering some of their questions.  The attorney busted out laughing.  After a moment, he said that since I was contractually tied to the seller, there were few questions I could answer for them, and that I should NEVER have ventured an opinion about any issue they faced.  The wife chuckled and gave her husband an “I told you so” look.  The closing attorney held up the check that was going to their agent and asked what she had done to earn it…  She hadn’t answered their questions, she hadn’t shown the property, she didn’t even find it and send them information on it.

There are a lot of agents that tag their listings with language like “If I show this property to your client, commission will be X%” (generally about 1/6th of the offered split in the listing).  I don’t usually employ such language because I want to get the listing sold for my client, not punish other agents for not doing their job.  But, I understand the reason.

The bottom line is that employing an agent (whether on the buyer side OR the seller side) that isn’t in the area doesn’t result in solid representation.

Check out the original post here…

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Wayback Wednesday… Over-Pricing and Under-Offering

Wednesday, 18 January 2012 08:00
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If there were two issues I’d have to put at the very top of my question pile, there would be the ones…  In the original post, I started with the Sellers… so we’ll start with the Buyers this time.

Buyers want a great deal.  We all understand that, and as a real estate agent, I’m supportive.  Even the Sellers get it.  But there are two problems.  The first one I wrote about in a couple of years ago, here.  Buyers, in their zeal to get a great deal, offer too low to start with.  The find a property where the price has been cut to the bone, and then they offer WAY lower.

The problem there is that the seller, whether institutional, or a “regular” seller, doesn’t see the low-ball offer as being serious… then they attach the same feeling to the buyer that made the offer… they aren’t serious.  And the seller, if they send back a counter offer, reply with a counter offer that shows that… like maybe knocking $100 off the price.  Negotiations stall.  That doesn’t help them get the house… and it wastes everyone’s time, including their own.

A few years ago, when I originally wrote the post, there was blood in the water, so to speak, and it was still an issue.  Now, especially at the entry-level end of the market, that is NOT the case.  It is actually a Seller’s Market for homes that are priced well.  I am seeing an increasing number of listings selling for VERY close to list price within days.

Sellers want to get the most from their house.  It doesn’t matter if they are a corporate seller or someone moving to take advantage of a job opportunity… or even a seller doing a short sale.  Of course, just as the sellers aren’t terribly concerned with the needs of the buyers, buyers don’t really care about the needs of the seller to get top-dollar for their property.  And buyers aren’t looking at many over-priced properties. 

They know which properties are over-priced, too.  More and more, I’m seeing buyers that are VERY sophisticated in terms of knowing the value of a particular property, usually before choosing to look at it the first time.  If it isn’t priced within a few percent of where it should be, they probably won’t even look at it.  Not 10%… not even 5%.  More like 2-3%, closer on higher priced homes.

The end result, is that the home sits on the market for a while with few, or even no viewings, much less offers.  After a while, the sellers reduce the price, but by then the home is stigmatized.  The price drops more.  In the end, the home sells for less that it might have sold had the original price been more competitive. 

 

What about short sales?

They are the new wrinkle.  And I didn’t really address them the first time around.  But some similar rules apply…

Sellers, price realistically for the market.  Don’t worry about what the bank will accept, worry about a price that will get an honest contract.  Realistically…  Not too high OR too low.  Anything else is a waste of everyone’s time.

Buyer, offer realistically.  A rule of thumb I use on short sale offers is that if the offer isn’t going to be within a couple of points of the list price, don’t bother.  If the list price is insanely high or low, don’t bother.  If you can’t afford to sit on the offer, waiting as much as six months for the bank to get their act together, don’t bother.

I know that is harsh, but it is reality.  I actually have a partner that is VERY successful at getting short sales sold.  It isn’t easy or fun for anyone…  But, it might beat the heck out of some of the alternatives for the seller, and offers great opportunity for the buyer.

Wayback Wednesday… Zestimate Accuracy in Atlanta

Wednesday, 14 December 2011 08:00
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You just have to love Zillow’s Zestimates.  Log in and look… poof… there is the Zestmate for your home.  Couldn’t be easier.  It’s almost too easy.  OK, it IS too easy.  And while I love the Zestimate just as much as everyone else, I also know that the chances of it being right are pretty slim.

"Lincoln Heights"I don’t want to slam Zestimates, though.  They actually ARE quite useful.  Their usefulness isn’t in their application to individual houses… it has more to do with looking at Zestimates for larger areas… ZIP codes, cities, regions.  The statistical variations that are the problem with looking at individual houses start cancelling each other out.  what we are left with is a pretty good measure of home values for an area.

Last year I posted up a breakdown of the Zestimate accuracy of individual listings in the Atlanta Metro Statistical Area.  The bottom line is that the Zestimate has about a 1 in 5 chance of giving you a value within 5% of the real market value of your house.  And the y are just as likely to be high as they are low.

If you are just curious, it is a fun tool.  If you REALLY need to know, you should talk with an Appraiser or a Real Estate Agent (depending on WHY you really need to know).  And remember, the real estate agent that tells you the highest value is probably wrong… and might even know they are wrong.  In the business, we call it “buying a listing”.  The strategy there is to promise a high listing price, and then come back after you are in a listing agreement and try to get the price down to where it should have been in the first place.  The biggest problem with that strategy is that it completely wastes the prime market time… when the house is first listed.  The end result is that the price usually ends up lower than if you had opted for a slightly lower price to begin with.

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Wayback Wednesday… REOs and Credit Pulls

Wednesday, 16 November 2011 08:00
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great_room_3

Image by lane.bailey via Flickr

Two years ago I wrote about this…  On many Foreclosure and Short Sale properties, sellers are requiring buyers to qualify with a specified lender… sometimes even the lending branch of the seller.

It doesn’t seem to be that big of a deal, right?  I mean all you have to do is call up the specified lender, give them some info over the phone and let them make sure you are qualified to complete the sale of the property.  But the problem is that many buyer end up offering on multiple properties over several months… and that means that the credit pulls can actually HARM the credit of the buyer.

There still aren’t any rules regarding this practice.  And I still think it needs to be stopped…  I can understand it from the perspective of the seller, but it may actually be damaging to the buyer’s credit.

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