Pressure to list with the wrong agent/company.

One of our agents was working with a couple to purchase a condo in downtown Milwaukee. Upon getting an accepted offer on a condo, they were going to list with the same agent to sell their home in Caledonia at 6107 State Rd 31. That is when family intervened. You see, the sister in law of one of the sellers was a Realtor. They had considered working with her but she had a full time job outside of real estate and was only selling 1 or 2 properties a year. Clearly there was no benefit to the sellers AND they were going to pay much more in commission. Nevertheless, the family pressure was too much to overcome so the sellers listed with the inexperienced agent plus they had to pay more in commission (even with her discount). When an offer came in on their home, our agent had to be consulted as issues came up.

This case is not unusual and illustrates how family or friends can "force" a seller to pay more and get less. People waste thousands if not tens of thousands of dollars on added commission because they cannot break away from a family or friendship situation. Admittedly we have plenty of sellers that sold with Homeowners Concept in the past 25 years despite having family or a friend in the business. You do have to admire the person who can stand up and take control that is best for their financial and well being.

The advantage of Homeowners Concept in a recent sale.

The advantage of having a low commission and a skilled Realtor are invaluable in this market. Here is a home at 13550 Wrayburn Rd in Elm Grove, WI that listed with us about 2 months ago that had been on the market for about 2.5 years with a number of different agents. Recently the home received some interest at the $359,900 price and an offer from a buyer represented by another Realtor. Primarily and due to the cost of the Realtor's commission of 2.4%, the offer was never accepted. After a few more days another buyer wrote an offer directly with the agent of this home, Kati Fonte. The agent skillfully negotiated an offer that was higher than the Realtors's offer AND sellers were paying just our low commission of 1.5%. Needless to say the offer was accepted.

It's a no brainer that commissions play a big role on whether an offer gets accepted by a seller. In the go-go years or 2003-2005 sellers had plenty of equity to waste on high commissions. Not anymore. It is crucial to choose a company that not only charges a low commission but brings a skilled Realtor to the table to make things happen.

More sellers now in tune with the market.

Homeowner Confidence Shrinks - Most Americans Now Believe Their Home’s Value Has Declined.

Almost four years into the decline in real estate prices the tables have turned and the majority (60%) now believe their home lost value during the past 12 months, according to Zillow's Q1 Homeowners Confidence Survey. Up until last year the majority believed their home had not declined in value. Over 80% of homes across the country lost value in the past 12 months, according to real estate market reports.

As for selling activity, it’s clear that a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31% of homeowners said they would be at least “somewhat likely” to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround.

“The perception of American homeowners is finally catching up to reality, which is that 80+% of all homes in the country lost value during this past year,” said Dr. Stan Humphries, Zillow’s vice president of data and analytics. “While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward with three out of four homeowners believing that their own homes’ prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well.”

Humphries continued, “Also interesting is the information we have for the first time this quarter on the levels of ’shadow inventory’ - homes that people would like to sell but that aren’t currently on the market, and thus aren’t captured in the official number of homes on the market. With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices.”

Fortunately for sellers choosing to sell using Homeowners Concept's low commission structure, they can count on walking away with more money at closing than the competition.

Tax credit can now be used for downpayment

This is great news and it is something I have personally been campaigning for since late 2008. You see, the biggest challenge for most home buyers is coming up with the cash needed to make a downpayment. The monthly payment is not usually the challenge, as that payment is similar to a rent payment for a comparable property. With this in mind, the Federal Housing Administration made a big decision and an announcement yesterday that will give first time home buyers some real help.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration (FHA) is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment. In a sense, the “no money down” days are back, except this time the home buyer will have equity in the property. Details about the tax credit can be viewed on the March 10, 2009 post or go to http://www.wisconsinhomebuyer.org/taxcredit.html

Tax Credit Can Be Used For Down Payment

The fact that FHA will allow this will make home ownership possible for a large number of first time buyers who just weren’t able to raise the funds necessary to buy. Believe it or not, this will help the entire market, not just the lower end of the market. Anything that helps remove the glut of homes on the market will be good for all home owners, including the move up market and higher end homes. The key to seeing home appreciation again in SE-WI is to reduce inventory to 6 months of supply or below from the current 11 months.

How To Use The Tax Credit As A Down Payment To Buy A House

Donovan, speaking at a Real Estate Summit, said “We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment.” In order to facilitate this, FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the time of purchase. For more information call our lender Netcentral Mortgage at 414-258-7833.

Court decision targets extra closing fees.

We've been reporting about these administrative fees (locally, we have seen a charge as high as $595 - see post of 3/30/09) charged by the high commission brokers OVER AND ABOVE the 5, 6 or 7% commission and many times come as a last minute surprise to sellers. Now comes a court ruling in a recent class action suit that should force these brokers to make full disclosure upfront. Sellers on the other hand need to use their head when choosing a broker. Our low commission rates have no surprises at the closing and our record is backed by 25 years in business. We realize it is very difficult for some sellers to break bad habits such as paying a high commission. Perhaps knowing the additional fees at the end might give these people the strength to break away and join the smart Homeowners Concept sellers.

By Kenneth R. Harney
May 10, 2009

Reporting from Washington -- A federal district court has handed down a ruling in a class action that could have a direct effect on the fees you pay to the real estate company at closing, whether as a buyer or seller. The decision targets one of the most common practices adopted by brokerage firms in recent years: charging consumers "admin," "processing," "ABC" and other mystery fees ranging from $150 to as much as $500 per transaction. The fees are tacked on top of regular commissions and sometimes come as last-minute surprises on settlement sheets.... For the rest of the article go to: http://www.latimes.com/classified/realestate/news/lafiharney10-2009may10,0,397967.story?ref=patrick.net

Which seller are you?

Getting your home sold in SE-WI right now, is not as tough as you might think despite the market. The key is understanding a few things about yourself and how you approach the market that determines if and how quickly you sell.

What Home Buyers Want

Right now, there are roughly half the number of buyers in the market as we would normally see. As a general rule, they are conservative and concerned due to the state of the economy and tough lending requirements. They are looking for value. Ultimately, they are going to buy the home that is the best value on the day they make their purchase decision… Wouldn’t you if you were buying today?

Understanding The Housing Competition

Knowing that buyers are looking for value, another key factor if you want to sell a home is knowing who your true competition really is. For you to determine “good value,” you have to know what to compare with. This takes working with a real estate agent that understands the market better than the others. Choosing your initial market position is perhaps the most important factor when deciding to put your home on the market.

Your Motivation To Sell A Home.

So you know what buyers want and you understand your competition and how to value your home, the next and final step is to understand your current situation. Are you motivated enough to sell your home? Here’s a simple test:

Pick which of the below choices best describes you. Think seriously before you decide, as this will help you greatly.

1. The Casual Seller - The casual seller says things like “We are not in a hurry,” or “We don’t want to give it away.” You can expect this person to say “We will sell if we can get $X ….”
2. The Serious Seller - The serious seller says things like “I understand the market and I’m willing to sell my home for what I’m seeing out there.” This seller is ready to sell at “perceived market value” and they expect to price their home with the competition to get it sold.
3. The Very Serious Seller - The very serious seller must sell now. They are willing to create a perception of value and entice buyers to select their home before all others.

Who will sell their home in the next few months?

So, what kind of a seller are you?

If you answered the above question as honestly as you could, you need to know that the casual seller is not going to sell their home in today’s market. There are just way too many homes for sale and the casual sellers are doing themselves and the very serious sellers a dis-service by adding to the inventory.

The market will eventually recover and there will again be great times to sell, but today’s buyer pool is looking for value. Even the serious seller is most likely not going to sell their home. With over 11 months of supply in SE-WI plus new short sales and foreclosures entering the market, only the very serious sellers have the best chance of being successful over the next 12 months. Luckily with our very low commission of 1.5% a seller listing with Homeowners Concept has quite a few thousands of dollars in savings to play with. A serious seller can take the savings and deduct it from the list price making their home much more attractive to buyers.

Some make wrong choices, repeatedly.

Just last week one of our agents showed a property at 4547 W. Tesch in Greenfield, WI to one of the buyers she has been working with, that has been on the market not with one but two different MLS only flat fee/limited service companies. As I have posted before, most sellers who try the flat fee route and pay a hefty upfront fee are out the money and prolong the sale of their property. This is the first time we have encountered a case where a seller has paid an upfront fee to two different MLS only/limited service companies (probably around $500 each time). This defies logic and clearly exemplifies how the process of selling a home lacks critical thinking on the part of some sellers.

This property has been on the market for over 550 days and was with two different agents in addition to the limited service brokers but at much higher price than currently on the market. They probably never received the proper advice on pricing, presentation and staging necessary to get the job done at a reasonable time frame. The choice of agents employed by the sellers of this property was without much research as they both do very few closings/year and consequently have nowhere the capabilities of our average agent.

In the current real estate market, sellers need to be judicious on using the best agents in the metro area. A little research would show that we offer not only highly skilled agents but we charge much less than a 5, 6 or 7% agency.

Selling/buying in this market

One of the questions most often asked of us by sellers or buyers is when will the market turn around? While none of us pretend to have a crystal ball or a magic hat, it is easy for us to see that the Real Estate market in SE-WI will not be changing all that much in the next several months at least, due to a high inventory of homes and tight lending standards.

The market peaked in the Spring of 2005. The years prior to 2005 were marked by a run up in home values like we had never seen before. There were years during this time where property values increased by over 10% year to year. These values were not sustainable as incomes failed to keep pace.

In a survey of Realtors by Homegain in March, 2009 showed that 45% of homeowners think their homes should be listed 10 to 20 percent higher than what their Realtors recommend. Nearly 20 percent of homeowners think that their homes are worth 20 percent higher than their agents recommended listing price. Home buyers are experiencing a similar disconnect on price. According to the Realtors surveyed by HomeGain, only 18 percent of their home buying clients think homes are fairly priced.

This survey underscores that while homesellers may be aware of falling home prices around the country, many believe that the slide doesn't apply to their homes. Many sellers have decided to take their homes off the market or not list at all because they want to wait "till the market comes back". There is a belief by many sellers that the market is going to come back very soon. Unfortunately many sellers are putting off their plans to move on with their life hoping that the market will make a dramatic "V shaped" recovery which has never happened before.

A fascinating thing about the decision process is a sellers unwillingness to part with the lost equity on their current home, even though they will be turning around and purchasing another home under the same conditions. Furthermore, everyone accepts losses in other assets such as the stock market, collectibles and cars but most people find it hard to take a loss in the value of real estate. We constantly witness sellers getting hung up on getting X amount out of their home that they continue to "feed" even a vacant property by paying each month taxes, mortgage, maintenance, etc. You can now find 100s of properties that have been on the market for over 2 years, many of them vacant (not foreclosures).

Most economists predict that once we do finally hit bottom we will only see a more historical norm of 2-3% yearly appreciation on our homes. Do the math - with this kind of reality check it is very easy to see why it is going to take a long time to get to the levels were at prior to the Real Estate correction.

Some food for thought. As of this writing interest rates are outstanding under 5%. If you have wanted to sell your home for whatever reason and are not because you don't want to lose the equity you once had then you could be making a huge mistake. Interest rates are at a once in a life time level. When the economy does finally improve interest rates this low will not last.

It could be 5-7 years or longer before we get back to the levels of 2005. What are the chances that interest rates will be where they are now when that finally happens? When your home finally does get back to 2005 levels so will all the other homes in the area.

Flat Fee is out. Reasons why:

Recently Homeowners Concept switched from being a flat fee company to just charging 1.5% of sales price. Our fee was around 1.5% anyhow as it was a tiered fee structure, so there is very little impact on any of our clients. The reason behind the switch though, was the fact that we needed to disassociate ourselves from the other flat fee companies which have popped up in the last few years and are now showing histories of low success rates while charging the sellers a hefty upfront fee of around $500 (see post of 2/20/09). Most of these outfits are doing just MLS data entry, and they could care less whether the home sells. Thousands of sellers have fallen victim to paying the hundreds of dollars upfront, wasting months or years on the market and having to turn to another broker (ourselves included) to eventually sell.

Homeowners Concept on the other hand is a full service real estate company which offers more marketing, more experience for less commission due to innovative and efficient systems and has been around since 1984. We have also earned the Accredited Business BBB award - one of only two large companies to have this! We have a vested interest in making sure the home gets maximum exposure (percentage wise we spend the most amount of money advertising properties of any company). We actually work very hard for the money.

So many of these flat fee outfits have come to the market the last few years (as of this writing we can find at least 11 in SE-WI) because it is such easy money for little work with no pressure to sell the homes. The proliferation of these is reminiscent of the online FSBO websites that were started as internet became mainstream. Hundreds of them have shut down in recent years as consumers wised up that spending hundreds of dollars upfront to be on "somebody's" website that received virtually no hits, was indeed useless. We feel the same fate awaits the MLS only/limited service companies.