The Market…

This figurative name of something that once represented a motion of buyers and sellers moving from home to home, Realtors riding the wave of clients, showings, appointments and entertaining constant market conversations. From Trump to Bob next door, seemed like everyone had an opinion on how to make it big, where to invest, why and how much.

Today they only questions Bob asks are: “so….what do you think? when will all this turn around?”

Although many speculators hope that by the end of this year the economy should improve, fact is, they are simply putting things in place that SHOULD, but might or might not make significant impact. Why? Lets break it down in the simplest terms:

Economy:

The circle of financial life based on consumer perception and financial participation based on their growth in jobs, monetary value, the personal desire, mixed with the abilities that either government or financial institutions contributed to ease the process. If people make money, and they feel comfortable spending, they look to improve the quality of their life through exchanging money for goods sold.

Reasons for our depressed economy: Although there are many factors involved, the growth in real estate sales contributed to 3 immediate factors which hurt us:

1. Stretching financial abilities to procure a home that was just within our jut outside of monthly reach.

2. The qualifications of the people purchasing was negligent and financial institutions began collecting default notices which grew over time and required for those financial institutions to suffer. Basically, bad loans or good loans to people with less that adequate credentials.

3. Home prices began to rise to unlimited amounts limited the reach of many young people, people with financial limitations, etc. They options were limited or did not make sense to make a move forward.

Results:

1. Home owners began to contribute to the growing foreclosures, REO, short sales, and abandoned homes. Whether it was the 5yr arm, or the interest only 80/20 loans – the buyers ad hoped to make more money in the future, and they overspent, and lost.

2. Financial Institutions, Banks and the like began to realize their losses and created additional barriers to prevent random and unqualified home buyers from making purchases that have a high probability of default. Each week the restrictions get tougher, and a loan officer informed me last night that Wells Fargo just last week stated they are getting out of the whole sale business, and many are to follow – which means less private brokers.

3. Value of homes is an interesting pattern to observe, as it is driven by us, the people, and most people can’t seem to put their hands around it. Here is what we saw each and every day in and around the Chicago land area:

September 2005 – Sellers are still hot to sell, market is just about to take a hit, and buyers are looking.

October 2005 – The news of interest rate increase comes out, and suddenly most buyers take a step back in order to see what happens next. Sellers wait as well.

December 2005 – not much is happening and everyone is hoping that January 1st will bring magic to the industry – it doesn’t.

January 2006 – Investors come out to shop and begin to seek properties that seem to be “most motivated”. Most new sellers are still pricing their homes accordingly to their closed or on the market neighborly prices.

March 2006 – Market quiets down again and the sellers that did not fit the category of “distress, they continue to sit.

April 2006 – Spring Market opens but no one is hunting…sellers are still following the “My House is Worth More” principle, and properties grow in numbers as well as asking price. Now the Media Starts to publish endless “Buyer’s Market Reports”

August 2006 – Although some sales occurred the great majority of homes had either buyers with “Buyers Market” mentality low balling, and the sellers holding on with Pride.

December 2006 – The investors, or buyers looking to bargain shop are following the “Motivated” rule, and sales begin in the lower price brackets.

March 2007 – the excitement slows down as Spring is approaching.

April 2007 – Buyers still with Buyer’s Market mentality, and Sellers finally realize that there is not enough buyers to make a deal at their rate, so the prices start to come on lower from the start. News of Foreclosures comes out and many people start to look into them.

August 2007 – Market has been slow and properties are moving only if they show great, are well priced, and are willing to negotiate. Sellers are experiencing low returns, but many eluding troubled financial situations. Many that did not have much equity in their home are contributing to the foreclosure movement, and the amount of foreclosures starts to attracts first time home buyers as well as investors.

December 2007 – Realtors as well as byers are getting their feet wet on how to mix a foreclosure with a first time home buyer. Not that simple. Explained in a different post. The rental market continue to get better as many previous home owners are losing their homes, their spouses, their credit and financial abilities.

January 2008 – The rental market seems to be the biggest driving force as landlords pick and choose their tenants, raise prices due to the amount of tenants looking, and rentals are beginning to experience multiple offers and new challenges.

March 2008 – The endless winter kept many people at home. The mortgage companies have created significant barriers for many home buyers looking to buy new homes, home owners contingent on the sale of their homes aren’t selling them, and the only thing moving a long is the temperature.

April 2008 – The sun is out, people are beginning to look, but the same obstacles from lending, general fear of real estate instability, first time home buyers bargain shopping against REO properties, and sellers who just cannot go any lower….not much has changed. Renters are still looking, and rental properties are getting more expansive.

Today?

To be Continued…

Having a hard time selling your home?

Isn’t this just the most common statement of the past 3 years.

Aside from all you hear in the media.

Aside from what you hear from your friends and family.

What you are left with is Sacrifice, Patience or Technique.

In order to understand why your home has not sold, it is important to view the audience that is looking at your home. Blaming your agent or blaming the market is just….not working with the limitations you have been given.

Fact is that when my clients say – do you think we can move this home fast and am I up to the challenge? The question I ask them, if they are willing to do the same. Why? I, as a Realtor can host hundreds of open houses, spend endless amounts of money on marketing campaigns, be the nicest guy, always available, always up-selling, reaching out to endless amounts of people within or outside of the US.

If my limitation is an overpriced home, I might not succeed.

If my limitation is an unkempt home, limited showing hours, animals smells, or other “unpopular” scenarios – it may come down to price or a real knock out property.

Why is price so important?

Not because Realtors like fire sales to make a quick buck. (although there may be some that do)

Price creates a category that buyers see potential, feasibility, value.

The price you list historically was based on your close by sales in the neighborhood. It still is, but keep in mind that buyers do not just look in your neighborhood. They drive all over – from city to city based on:

• Price range
• Bedroom/Bath count
• Location
• Interior/Exterior features.

With that in mind, lets dissect the buyer profile. Please keep in mind that this profile is very different for every person, as well as the likely hood of the your prospective buyer will vary on your home.

Example: 2 story modern home, spiral staircases lead to the upper level, a 3 tier deck will give you much summer enjoyment. This home boasts 4 bedrooms, 2.1 baths, and is listed at 899,900.

What can I expect from the most probable buyer:

• The buyer is probably not a first time home buyer
• The buyer either has children, or likes a lot of space
• The buyer will be capable of doing lots of stairs
• The buyer is not an investor
• The buyer is looking at competing homes between $700-$1mil
• This price range has a limited amount of buyers, as the audience for this price point is smaller, but the amount of homes listed about $700 may be large.

Based on this information, what can I do, as an agent to provide the most attractive scenario for my seller to be successful:

• Physically preview the homes in the nearby area that are listed above and below the $899k mark to determine the impression buyers are taking into consideration. (the nearby homes just serve as a sample)
• If the homes in the area are all $1mil + and are in similar shape and size as our listing, we are looking “probable”.
• If we are the smallest home in the area, and priced in the same price range, we are unrealistic.
• If we are the nicest home, but priced $50k over the similar properties, we need to evaluate if our “differences” are substantial enough for a prospective buyer to pursue.
• Take into consideration media pressure on buyers to bid low, or take advantage of large home inventory.
• Take into consideration any physical features that may be nicer in our listing, but some nicer in the comparable homes, and how can we stay in the buyer’s viewing eyes.
• Are we easy to show? …or are there 3 dogs protecting the grounds at all times?

Am I scratching the surface of seller dilemma in 2008?

Example 2: 1bed/1bath Condo on 1st floor of 38yr old building. 2 parking spaces included. Coin laundry in lower level. $149,900

Based on this information here are the likely buyers approaching:

• Buyer may be single or young couple
• Buyer may be older that has limitations in mobility
• Buyer may be investor looking to flip or rent and hold
• Buyer may be parent looking for condo for college grad.
• Buyer may be looking for a less expensive home post divorce, break up, etc.
• Buyer may be a first time home buyer

Based on this information, my approach is to look at all possibilities that are most likely to click:

• Neighborhood amenities for homeowner to enjoy
• Proximity to train, town, parks, school
• Special handicap features that the buyer may find helpful
• Investor programs for investors
• First time home buyer programs applicable to the complex
• Preview the surrounding properties that are similar in profile, and see what we can do to stand out.
• How well does our listing show compared to similar homes
• Are we priced higher, lower, or same?
• How do I combat fear of living on first floor (taking burglary or break in into consideration) – encourage alarm?

As you can see, understanding your audience is a key factor is selling a home. Putting your neighbors price tag on your property because your home is “better” means very little.

Listing high because you want money, and that’s that – sorry, unrealistic.

Taking a serious look at a tactical way of exposing your home to maximize value? Priceless.