MORE BUYERS ARE DITCHING THEIR AGENTS AND SHOP ON THEIR OWN

Home Buyers go hunting alone by rejecting the services of a buyer's agent.

The buyers who purchased a property through a real estate agent just 57% had buyer representation in 2010, according to a report by the National Association of Realtors. That's down from 62% in 2009 and 64% in 2006, before the housing bust.

Also, fewer buyers are first learning about the home they purchase from real estate agents: just 37% are reporting real estate agents as their first source of information on the home they purchased, down from 50% a decade ago, according to NAR.

Bottom line: The trend is that U.S. home buyers are doing it themselves with the help of the internet and smart phones.

After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what's known in real estate as a buyer's agent. Smart home sellers that use companies like Homeowners Concept benefit the most from this trend by not having to pay a buyer's agent.

SELLER LEVELS OF MOTIVATION

Understanding Home Sellers

With nearly 55% of the homes on the market failing to sell in the first 6 months on the market, it is important for a prospective home buyer to understand that there are home sellers out there with different levels of motivation. Choosing the sellers with the highest motivation will allow the buyer to make a safe purchase in today’s real estate market.

I like to classify seller motivation levels in three distinctly different categories:

1. Considering Selling – This homeowner does not really need to sell the home. If they can get their price, they will sell. If not, they will stay in their home. This type of homeowner will not sell their home in today’s market, so home buyers who actually view the property are just wasting time.
2. Want to Sell – This homeowner has a real need to sell, but has not priced the home correctly for one of many possible reasons. Often times, this homeowner feels as if they have plenty of time to sell, so they are “starting high and will lower the price if it does not sell.” Due to the extreme glut of homes on the market, this homeowner will most likely join the ranks of the 55% “Failed To Sell” group.
3. Must Sell – This homeowner absolutely must sell the home, and the asking price of the property for sale demonstrates this. It is the best buy in its category, and all realistic home buyers view the house. This home has an excellent chance of selling, even in a difficult real estate market.

HOW DAYS ON THE MARKET CAN BE MISLEADING.

We often hear “how long does it take to sell a home?” This is a touchy subject. The short answer of course is that with appropriate liquidity in the market it is “a couple of weeks”, but there's more to that.

First of all, selling a home is not rocket science. All you really have to do is tell the people who are ready to buy a home that you have one that they will like. If it is better priced compared to the competition, buyers would want to see it. If it shows well, one or more buyers would most likely write an Offer. With the right agent a sale will ensue. So the key to selling a home is to know where the buyers are, price the home to be attractive, promote the home to those ready buyers and have an expert agent on your side to negotiate and iron out issues so that the sale happens.

We know that 94% of homebuyers are using the internet to identify a home, and we know the processes that they are undergoing in their efforts to buy a home. So the market time (which is the answer to how long does it take to sell a home) is the time that it takes to fully expose a home to this buying audience (not shoppers or lookers but actual BUYERS). Thanks to the internet, this is usually 5-10 days.

Liquidity Matters When Selling A Home

There are times and price ranges where liquidity in the market might extend this market time, sometimes considerably. For example, if you have a $1.5M home to sell, and your market area only sees two sales in this price range every year, it might take a while for that buyer to come along. But when you see multiple buyers in a price range each month, enough liquidity exists for a quick sale.

You can determine liquidity by examining the active listings and the number of recent sales in your market area for your type of property. A good agent can provide that information and any of our agents excel at that. Supply and demand is a critical component of any market, and one should not try to sell a home without a solid understanding of where they fit into the market.

So to summarize, with proper liquidity and a targeted marketing plan, market time (or days on the market) for most homes is 2-3 weeks. For most properties, anything longer than that is due to a lack of information or lack of motivation on the part of the home seller (and anybody involved advising them on the sale of their home).

Measuring Days On Market (DOM)

It is misleading when a real estate agent reports “it takes 75 days for a home in this price range to sell.” Most agents look at “average market time” and think it is a valid measurement of how long does it take to sell a home. It is not.

When somebody gathers up a group of properties and determines an average of this, what they are really reporting is the average marketing time it took to sell a group of houses based upon the last time the property was listed in the MLS. Maybe an example would make this clear:

Mr and Mrs Miller listed their home “For Sale By Owner” for 30 days to try to sell it on their own. They had no luck (as one would know reading this blog) so they hired Broker A to sell their home. The home was listed for 6 months with Broker A and the property failed to sell. The Millers listed with Broker B and probably after some reduction in price, the property sold in 50 days. So, the MLS report would show a market time of 50 days!

Total time on the market for the Millers though was:

30 days “For Sale By Owner”
180 days with Broker A
50 days with Broker B
This is a total of 260 days, yet the MLS would report it as “50 days.” There is a way to find out the cumulative Days on the Market but an agent has to do a more comprehensive analysis of the MLS data (of course, our agents do this more intensive step).

Worst of all, what about the days on the market for all the homes that failed to sell. What if in our scenario the Miller’s home never sold? How would those days be factored into the mix? The facts on market timing are just a bunch of mis-measured time frames thrown into a pot and boiled. If liquidity is abundant, the home will sell when enough of the buying market sees it, and a well run marketing campaign will achieve that in a couple of weeks.

TAX BENEFITS OF OWNING VS RENTING.

When it comes to the tax benefits of renting vs buying, the benefits of buying far outweigh the benefits of renting.

Home mortgage interest deduction: The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction. In the early years of a home loan most of the payments consist of interest, so this deduction is particularly substantial during the first years of homeownership.

In Wisconsin and depending on a buyer's bracket, this deduction can reduce the cost of borrowing by one-third or more.

Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose, such as paying off high-interest credit card debt. In contract, the interest on credit card debt is not deductible.

Property tax deduction: Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. This is another itemized deduction that renters don't get.

Deductible homebuying expenses: Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.

$250,000/$500,000 home-sale exclusion: Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit. Homeowners who lived in their home for two of the prior five years prior to its sale need pay no income tax on a substantial amount of their profit -- $250,000 for single homeowners and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.

14 days of free rental income: Another little known tax benefit of owning a home is that the owner can rent it out for up to 14 days during the year and pay no tax at all on the rental income. In contrast, a renter who sublets his or her rental must pay income tax on all the rental income he or she earns.

Tax benefits of renting:

The only tax benefit that a renter can qualify for by virtue of being a renter is the home office deduction. This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes.

Some employees can qualify for this deduction as well. The deduction is limited to the amount of profit earned from the business each year. If a renter pays a lot of rent, this deduction can be substantial. Homeowners who are in business and have a home office can also qualify for the deduction.

Of course, the value of the tax benefits of buying a home depends on the state the buyer lives in and his or her tax bracket. Buyers who live in higher tax states like Wisconsin get the most benefit.

SHOULD THIS BROKER HAVE PRICED THIS HOME THAT LOW?.

The seller of this home at 1660 Stephan Lane in Sullivan, went first on the market with Shorewest Realtors for $325,000 in April of 2009. After a full year on the market the seller had reduced to $305,000 with no sale.

We took over the listing in April 2010 at $295,000 and after 3 months on the market we had a Offer that was contingent on the sale of the buyers' property for $260,000. The equity that the buyers needed to purchase the home on Stephan Lane was tied up in the buyers' home. Unfortunately the buyers had little room to move on the price of their home and were unable to sell in time and move up to the home on Stephan Lane.

What happened next though is quite a shocker. At the end of 2010 the seller was pressured to list with another agent "someone his kids were recommending". Sure enough in January of 2011 the seller listed the property with Realty Executives at a price - here it comes: - $200,000 AND paying more in commission and closing costs! $75,000 BELOW the last price and $60,000 below the contingent Offer! Granted it is not unusual for a seller to reduce after switching brokers but a 27% reduction especially when one has an offer for much, much higher is to say the least, unheard of. Furthermore, we had gone through a very slow Summer and Fall due to the expiration of the buyer credit. Sales pick up considerably after the holidays. So a good agent would have suggested to the seller to reduce somewhat and watch for the market reaction as showings and sales pick up. None of this happened of course. The seller said to us afterwards that his kids wanted him to unload the property.

As one would expect after a couple of weeks with the new fire sale price the home was under contract and recently closed. Did the broker do the seller justice? Even if the seller had a possible "mental breakdown" is it ethical for a broker to just take advantage of the situation and get the quick sale? I can certainly state that in 27 years in business, we have never taken an expired listing over and had anywhere close to such a dramatic reduction. Knowing what we know about the previous offer and going into the best time of the year makes this reduction obscene and the broker possibly not serving the best interests of the seller.

There have been cases where sellers have been very low on their perceived market price. If the market analysis shows higher, with the sellers' approval, we have marketed homes and ultimately gotten more than the sellers originally thought. Many clients refer to us as the Good Guys not only because we save sellers on commissions and closing costs but by also doing what is necessary to maximize sellers' net amount. Actions by few brokers as in this case, give the industry a bad name.

7 HOMES SOLD WITH HOMEOWNERS CONCEPT!

We  found out during our first sale that their agents sell a lot of homes, many more than your average broker. That is a great advantage to have when you need representation. We have listed 7 homes and condos with Homeowners Concept in the last 22 years and have saved thousands of dollars on each sale! Plus they don't charge any extra fees other brokers tack on. Each transaction with Homeowners Concept allowed us to "move up the real estate ladder" buying a more expensive home.
Our 2 agents have been highly skilled as you would expect. When we sold a home in Whitefish Bay our agent ironed out a number of issues with the inspection and occupancy. This saved us valuable time during the peak market season. When we had a cash buyer for a condo we owned in Pewaukee our agent got a bank letter to verify the buyer’s funds. Again, we did not turn other buyers away if this buyer was not qualified. Their agents know how to move fast and efficiently so that sellers can close quickly.

Since buying and selling with Homeowners Concept, we have saved tens of thousands of dollars that would have been paid in realtor fees. Why get burned twice in this current real estate market? You will get burned the first time by the poor market and you will get burned twice with the high 6% commission typical of other realtors.

We are now in our dream home but, when it is time to sell again you can bet we will be on the phone calling Homeowners Concept.

Barbara and Dr. Bob C.

Another Glowing Testimonial

I have done four real estate transactions over the last several years. I have had outstanding service with Homeowners Concept. The process of listing, showing, selling and purchasing were made so easy for me to understand. The education that was provided to me at no charge and the knowledge that was bestowed upon me was beyond impressive. I initially chose Homeowners Concept because I just didn't want to give away the profits of my first home sale to the Real Estate Agent in big commissions. I was charged far less than the 6% companies. I have recommended Homeowners Concept to many of my friends and all have been pleased with their experience. I will continue using Homeowners Concept for any and all of my future transactions. Thank you for your expertise and saving me a bundle.
Sincerely,

Stefani Miller

NOT a smart move...

This property at 242 N. 112th st in Wauwatosa had been for sale with us for a few months. The listing agent knew and the comments by buyers viewing this property confirmed the fact that it needed a lot of updates for the money (it was an estate sale). The sellers did bring the price down to $169,900 but refused to go any lower. Part of the problem was that another home on the same block had received an Accepted Offer and it was priced in the $160's. Never mind that the interiors were completely different, in the sellers' mind it had to be the "Realtor". When the time came to the expiration of the listing contract these sellers acted upon the idea that another broker would somehow produce different buyers that would indeed like the interior for $169,900.

So after a few days off the market the home reappeared on the market with the Realtor that had the home down the street. BUT the price was dropped to $155,000; $15,000 LESS than they had it priced with us AND now the sellers were paying thousands more in commission PLUS hundreds more in closing costs! Hah?

So all along the sellers were blaming us for not selling the home when in fact the sellers didn't give us a shot at selling the home at the right price. The smart thing would have been for the seller to stay with us and reduce the price by the $15,000 and go on to save thousands in commissions at the end.

Bottom line is that if a home doesn't sell with our company with the vast marketing and expertise we offer, the price needs to be adjusted. Look, no matter what the selling price ends up being, one can always count on saving thousands in commissions AND closing costs.

Selecting an Agent Based on Highest Recommended Price is a Mistake

You are planning to sell your home and interviewing a few potential real estate agents to help you with the process. Each agent describes their services and offers up a pricing recommendation based on their knowledge of the local market. Often agents with the highest recommended prices ooze with confidence and say “I can get you $50k more than the other guy.” Of course sellers want to maximize the amount that they receive for their home, so time and time again, we see sellers making their selection based on the agent who promises the highest price. Choosing your agent based solely on the fact that they recommended the highest list price is one of the biggest mistakes that a home seller can make as evidenced by the daily high rate of reductions (typically, 130-150 homes get a price reduction each and every day). Let’s look at why.

There's No Place Like Home

1. Inflate the price to get the listing – This is one of the oldest tricks employed by real estate agents to get your business. Listing contracts are lengthy and exclusive to the listing agent. By luring you in with false hopes of a higher price, they know that once they have the listing, they have a few months to work on you to whittle down the price until the point that it sells. When competing with other agents for your listing, there are plenty of agents out there who will outright lie about the market value of your home to get the deal.

2. Ignoring negative features of the house – Just because a neighbor’s similar house sold for a certain amount does not automatically mean you will receive the same. Maybe your house hasn’t been maintained or updated like your neighbor’s home or the floor plan is not quite as desirable. Sellers often ignore such factors in hopes of getting a higher price, or maybe some negative factors simply don’t bother them after years of living in a house. The agent who ignores such negative factors when pricing a home is doing the seller a huge disservice. Even if these negative factors do not bother you as the seller, they will impact the amount that buyers are willing to pay for your home.

3. Real estate agents cannot guarantee a price – Real estate agents are not able to tell you how much your home will sell for. That is a sales pitch perpetrated by aggressive agents. Agents who start the sentence with “I can get you $XXX…” should be viewed with skepticism. An agent can only provide you an estimate of what they think the house will sell for based on recent sales and current supply and demand in your neighborhood (this is where expertise plays a huge role).

4. The market determines value, not your agent – The actual market value of your home is determined by what a buyer is willing to pay for it. Supply and demand changes periodically and your home needs to be priced to entice buyers to choose your house over your competition. If there are fewer buyers in the market or higher than normal inventories (as is the case now), your price needs to be more enticing to attract a buyer.

5. Free advertising for the agent – You may find this hard to believe, but it may not matter to your agent if your overpriced listing doesn’t sell. Having a sign in your yard, your listing on their website, and hosting open houses can all be ways that the agent will attract new clients.

6. Shorter market times produce the best financial results – Sellers who took the bait of a higher suggested price often grind away on the market for months or years at a time with repeated price drops. When the home finally sells, it ends up at a more realistic price that was originally suggested by the more conservative agents. Had you taken their advice initially, the home would have sold much quicker for the same net result.

7. The comparables don’t lie – Does the data really support the higher list price that an agent is suggesting? Are the recent sales truly similar in age, size, configuration and location to yours? Don’t be duped by a set of comparable properties that are listed at higher prices unless you have evidence that properties are actually selling in your neighborhood at those price points. Looking only at unsold listings can be misleading, as there are certainly a fair share of overpriced properties on the market. List prices do not necessarily equal market value.

8. There is both art and science to determining home prices – There is a wealth of information and market data available online these days, and a rigorous analysis of that data will help you to arrive at a realistic price for your home. However, an agent who offers data analysis without looking at a range of properties in person is being lazy. Every piece of real estate is unique, and a proper pricing analysis does involve in-person analysis of the home, competing homes and the surrounding neighborhood.

9. A reputable agent will turn down an overpriced listing – The list price for a home is ultimately a seller’s decision. However, an ethical agent will turn away a listing that is clearly not going to sell at the proposed price. It can be a waste of effort for the agent, and it does a disservice to the seller with long market times and sub-optimal financial results.

10. The second agent will save the day – The best agent to be in this scenario is the second agent that comes on board after the first agent’s listing expires. The first agent promised a sky-high price, but after 6 months on the market and numerous price drops, sellers often become frustrated and will switch agents. As the second agent, the home is likely queued up at a much more reasonable price, and with a fresh listing and a bit more marketing, the house finally sells. The replacement agent looks like a hero to the seller, but in hindsight, the seller could have achieved the same result months earlier by not falling for the promise of an overinflated price.

As a Company, we end up losing multiple listings every month because we are “outbid” by agents who claim to be able to get a higher price than us. For the past 2 years we can say with confidence that ALL of those potential listings did have to drop in price at or below the price we suggested. It does neither us nor a seller any good to overpromise on a price that clearly won’t work, especially in today's real estate environment