Tag Archives: honesty

Motivation…

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A while back I was at a real estate seminar for agents.  I ended up being quite disappointed before walking out… because the ethics of the business model were lacking, in my opinion.

Sign coconut

Sign coconut (Photo credit: @Doug88888)

The basics of the seminar revolved around acquiring more and more listings, which isn’t a bad thing… however, the problem was that the “leader” of this particular seminar was advocating agents ignoring the needs and desires of the sellers they are supposedly “representing” by using the listings to their own advantage, even if that means misrepresenting their purposes.

I have dealt with sellers for whom selling the property was desirable, but not necessary or imperative.  Others NEED to sell and expect their agent to do everything in their power to make that happen.  While a seller that is on the market looking for a specific price may be fine with their agent using their property as a promotional location (high traffic for the rel estate sign, etc.), a seller that has to sell is much less likely to feel the same way.

And the problem is when an agent uses the property of a “must sell” seller as a personal promotion, all of the while telling that seller what they want to hear… that they are doing everything in their power to get it sold.  That is exactly what this seminar advocated.

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5 steps to get YOUR offer to be the one that WINS

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Be the winner…

A couple of years ago all of the strategies revolved around finding ways to get the lowest price out of a seller.  Then, it morphed to finding the line where the bank would sell.  Over the last few months, the next evolution has come

Winning the bid.

Often we see good houses come on the market and go under contract in less than a day.  These homes are often pulling in multiple offers, some considerably above the asking price.  Yet, many buyers are still convinced that we are in a market that favors them.  We aren’t… except for a few less desirable neighborhoods or some very high price points.

master_bedroom_2

master_bedroom_2 (Photo credit: lane.bailey)

In order to actually buy a house, instead of just making offers, there are a few steps you can follow to “win the bid”.

  • Get a serious pre-approval.  If your mortgage person isn’t pulling your credit and spending some time getting it, it probably isn’t worth getting.  Sellers see an offer with a pre-approval as being MUCH more serious than one without.
  • Have a down payment.  The larger the down payment, the more stable to buyer.  Of course, this is going to vary depending on the buyer segment (1st time buyers usually don’t have 20% to put down… I understand that).
  • Cash is King and FHA is the Stable Boy.  FHA loans are the toughest on sellers.  Not only does the property need to appraise on value, but it has to meet specific criteria for condition.  Most houses meet everything, but an old roof or a missing handrail can turn into anything from a headache to a nightmare for the seller (and the buyer).  A cash sale, on the other hand, is pretty assured.  Conventional loans fall somewhere in the middle… and VA are more rare, but slightly tougher than FHA on the seller.
  • Be ready to close ASAP.  The longer the seller has to wait between an agreement and a closing date, the more that can go wrong and the more expenses that can get racked up.  Aside from the seller’s house payments and utilities, there is lawn upkeep and maintenance on the house.  Not only that, but if you are waiting 2 or 3 or 4 months to close, the seller may think you could develop a case of “cold feet” and change your mind.
  • Price heals all.  We used to tell this to sellers… poor condition can be corrected with price.  Much to their dismay, that “correction” was usually an over-correction.  Now, the shoe is on the other foot.  Buyers that have issues with some of the above conditions can “heal” their offers with price.  But that “healing” is likely to involve a larger bump in the offer than one might think…  Of course, in the end, it comes down to the seller and what is most important to them.

In next week’s post, we’ll look at 3 sample offers and compare them…

 

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It’s the Photos…

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One of the most important things you can do to make your home stand out, whether it is on the MLS, Zillow, Trulia, Craigslist or some other site, is to have exceptional pictures.  Not just for bazillion dollar homes, either…

Vivienne galleria, in the 2nd arrondissement o...

Vivienne galleria, in the 2nd arrondissement of Paris. This panorama is made from 6 portrait pictures taken at 10mm (16mm in 35mm equiv.), f/8.0 and ISO 100. 3 exposures were blended to extend dynamic range and keep details in heterogeneously lit areas. All work was done with Hugin, Enblend, Enfuse and Gimp. (Photo credit: Wikipedia)

There are some challenges, like vacant houses or those that really could use some freshening, but still, pictures are the first step in selling your house.  Video is nice… and virtual tours can add to the pictures… but in the end, having 5-10 great pictures, along with 15-20 good or better pictures (our local MLSs only accept 25 pictures) can be what gets eyeballs INSIDE your house.

Where the problems start are that few real estate agents take the time to learn how to shoot good pictures, or worse yet, they think that grabbing a few pictures with their phone will be just fine.  I know, phones have come a long way… but that doesn’t mean that they take pro-quality pictures.

Even better would be to hire a photographer to shoot the home.  Again, most agents just don’t feel that “this listing warrants that type of expenditure”.  Oddly, I have had agents tell me that when we were talking about $1M+ homes…  If they aren’t willing to hire a pro for a “seven digit home”, when are they?

Image created using the redscale technique wit...

Image created using the redscale technique with Kodak MAX 400 film. (Photo credit: Wikipedia)

Luckily, I have a background in photography… and I still have hired in pros to shoot some of my listings.  It is simply too important.

But there is another problem that I run into… although not as frequently… that is manipulated images.  A little tweaking is fine, and some HDR shots might even be appropriate (HDR is High Dynamic Range, allowing both highlights and shadows to retain detail).  But, I see large areas of homes being digitally enhanced.  In fact, there is a service that digitally adds furniture to listing photos.

Of course, there actually IS a place for digital manipulation.  I have used a service that allows prospective buyers to “digitally remodel” a house.  They could go into key rooms and digitally alter details like wall and trim colors, floor surfaces and cabinetry and counters.  The big difference is that THEY started with a true representation of the room, and THEY made the changes.  They weren’t presented with an unrealistic portrayal of the area.

Some common things that get edited that might be ok would be trashcans by the street (seems easier to me to move them…) or a reflection of the photographer in a bathroom mirror.  But some things that cross the line… at least in my mind… are editing out power lines in the backyard, getting rid of stains on the carpet, cracks in the driveway and other defects which are factually accurate.

One direction that we have as REALTORS® is that we HAVE to honestly represent the property.  And as real estate licensees, we aren’t allowed to hide or lie about defects of which we have knowledge.  Advertising a proeprty should put it in its BEST light, but it should be honest, as well.

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So, You Want To Be a Real Estate Investor…

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I had a call recently from a “would-be” real estate investor.  He wanted me to find a few properties for him to flip.  He’s been looking at the Atlanta market for a few years (his words) and decided that now was the time to jump in and flip some properties.

Atlanta

Atlanta (Photo credit: Lima Pix)

Specifically, he was looking for entry level homes that he could pick up needing a little work, maybe in the $50-75k range, needing $10-15k worth of renovation.  His goal was then to sell them for $100-$125k.  East peasy.

Except, it isn’t… 

In fact, right now that would be ANYTHING except easy peasy.  It would be quite difficult.  And here’s why…

  • A few Billion Dollars in “hedge fund money” floating around the Atlanta market
  • A market turn that while not “complete”, is far from unnoticed.
  • A limited inventory, especially on the entry level end.
  • Lack of easily available financing.
Billion Dollar Car

Billion Dollar Car (Photo credit: soul_motor)

This was a guy without a load of cash, unable to offer quicker closes than “the next guy”, and unable to out-spend the competition.  He was not only convinced that there was a glut of homes, but that he was completely in the driver’s seat on these types of deals.

That is NOT the case.  In fact, small investors are regularly SHOCKED at what the hedge funds are paying for houses right now.  They are bidding them up on the open market.  They are bidding them up on the Courthouse steps.  They are willing to pay top dollar whenever and where ever they find them.

They don’t care what they can sell them for right now.  They are looking at 5 year turns… with rental income in the mean time.  The “over-payment” will be erased by the rental income and the increase in values over the next few years.

If you want to compete right now, THAT is what you have to compete with.  A few years ago, you might have been able to pick up a cheap property and flip it… not so much any more.

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Garage Values…

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I’ve been working on some statistics for valuing additional garages.  It is tough.  They are a specialized addition, not unlike equestrian facilities, pool or tennis courts are for other families…

ROD WORKS SHOP

ROD WORKS SHOP (Photo credit: ATOMIC Hot Links)

Appraisers have been all over the map, but for the last couple of years they have consistently under-valued enthusiast garages.  I have seen $50k-$70k garages valued under $10k during the appraisal process.

A large part of that is due to the fact that actual market value numbers are seldom worked up for specialty garages.  The buyers see the additional value, and of course the sellers see the additional value.  But too often, the appraisal gets in the way of completing the sale.

As a real estate agent, I can NOT do appraisals, but I can provide limited guidance to appraisers to help them see the additional value that should be added for an enthusiast garage.

For a recent property, I worked up an area wide study of similar garages.  The results were a little surprising.  Keep in mind, these were specific to the type of garage I was trying to find comps for… in this case, the house had an attached, over-sized 2 car garage and a detached VERY over-sized workshop garage (around 900square feet).  I controlled price range to be similar to the subject home.  Looking for direct comps was fruitless, but I was able to find other homes with detached garages, generally in the 500sf range.  In each case, there was only one home with the bonus garage.  So, I looked for comparable homes without the bonus garage to compare the difference in prices.

  • Subdivision 1 – Average difference was $23,300.
  • Subdivision 2 – Average difference was $10,500.
  • Subdivision 3 – Average difference was  $53,615.
An aerial view of housing developments near Ma...

An aerial view of housing developments near Markham, Ontario. Photo by IDuke, November 2005. (Photo credit: Wikipedia)

In the case of subdivision 2, there were only two houses, one with and one without the big garage.  The house without the big garage had been fully updated with a new kitchen, granite counters, stainless steel appliances, upgraded bathrooms, etc.  The house with the garage had laminate counters, old appliances and had not been updated for at least 15 or 20 years of its 33 year life.  That would lead me to believe that the market values of the homes was actually considerably wider than it first looks.  And, I believe the opposite to be true of Subdivision 3… the Garage Home was considerable nicer than the non-garage comparables.

However, this shows pretty solidly that the additional garage is more likely worth $20k-$30k, rather than the $5k-$10k that many appraisers will initially allow for the structure.  That also puts it in line with Remodeling Magazine’s annual Cost vs Value study garage data.  That puts the mid-range garage cost at around $46k while the value at sale is around $30k.

Appraisals are great when you are looking at a cookie cutter home.  Those are easy… it’s when the mold is a little different that things get sticky.  Of course… you need an agent that is willing to invest the time to fight a low appraisal.  Even as a buyer, if the appraisal doesn’t come back at a price the seller can work with, you won’t be able to get financing…  Give Lane a call.

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