The Reality for FSBOs – Leaving Money on the Table

Imagine you’re at an auction, eyeing a painting you admire and when the auctioneer opens the bidding at $100 you look around and see you’re the only one in the room. Well congratulations, you just scored a great painting for $100. Now, imagine you’re eyeing that same painting, and this time when the auctioneer opens the bidding you’re surrounded by a roomful of people, some whispering to each other, some gesturing at the painting, and others silently raising their paddle as the bids continue to rise. Unfortunately for you, the buyer, you now experienced competition and won’t be getting that painting for a bargain price.

Now imagine you’re selling your home, and you decide to do it for sale by owner. You spend your own money to advertise it, pester neighbors and friends to try to spread the word, and hope that enough people will even know it’s for sale. You hold an open house, have a handful of people tell you they’re interested, but they don’t have any urgency to make an offer. You try to follow up with them all but they’re elusive. Finally, one person agrees to a written offer. You have a sinking feeling in your stomach. It’s lower than you expected. You banter bake and forth and finally they raise their price a little—take it or leave it. You take it, thinking you’re still ahead by not paying a realtor. Congratulations, you just gave a buyer a bargain price. You left your own money on the table, and you haven’t even made it through inspection yet. And did all of the work… There is a reason that 92% of people who sell their home for sale by owner wouldn’t do it a second time.

Without competition, buyers have no sense of urgency and know that they have the upper hand. By listing with a realtor though, that same home is exposed to countless more people—not just through the Multiple Listing Service (MLS) but also networking with other realtors (TOP agents always talking to each other about who has what for sale, what’s coming on the market that’s not yet listed, what our buyers are looking for, etc.), dozens of other websites not available to a FSBO, and more. After all, if that “right buyer” is busy looking at dozens of homes they saw from the MLS, how are they going to find you?

Who Are the Buyers?

Buyers are back! As many renters transition to homeowners now, let’s take a look at who is fueling today’s real estate market.

When the “bubble” burst a few years ago, even qualified buyers got scared and sat on the sidelines. It took some time and reassurance to enter the real estate market, but now we’re seeing many first-time buyers who would have bought 3-4 years ago. Coupled with yesterday’s and today’s first-time buyers, the entry-level market in particular is seeing tight inventory and rising prices.

Move-down buyers like empty nesters and those paring down their lifestyle are driving a new market of smaller, but more upscale housing like the patio homes found at Louisville’s Steel Ranch. Move-up buyers with growing families are also adding to the real estate rebound.

With high rents now, investors are doing well taking advantage of these low interest rates. Another sector of buyers, coined “boomerang buyers” by some, are those who were previously foreclosed upon or did a short sale years ago and are now eligible to buy again. Though not everyone in this category with qualify for a loan, many are paying more in rent than they would a mortgage and now have stable jobs and a down payment to take advantage of today’s market.

As the dynamics of today’s buyers are changing, it should be interesting to see how they shape the future market. 

Where Have All the Listings Gone?

With a new year starts a new chance for real estate to make headlines, and so far 2013 would be “Where Have All the Listings Gone?” Just as 2012 ended with low inventory levels, we are still seeing this problem over a month into the new year. Less than 1% of existing homes are for sale in Boulder County, a very low number, and troublesome for buyers. Some sellers have been able to capitalize on the decreased competition by getting a higher price for their home than they did one year ago. However, it’s not to the point where buyers will sacrifice things such as living on a very busy street, having views of a commercial parking lot, or buying a fixer-upper – without of course paying less for that.

While a portion of buyers have the luxury of taking a “wait and see” approach to what new inventory will come on, many people need to make a decision now and will have to settle for what is available. Superior and Louisville in particular are especially in demand right now, with more than half of all listings under contract in both towns. Buyers must keep in mind though that even a half of one percent rise in interest rates will result in 6.3% less purchasing power, so the waiting game can backfire as interest rates are expected to rise as the year goes on.

What does this mean for buyers? Understand that you are in competition with others now, and that in most cases the seller has the upper hand. If you find a property you like, you must act quickly to get it and be reasonable in an initial offer; low-ball offers will get nothing but upset sellers who then may not want to work with you. Know what you want, and what you’d be willing to sacrifice to get it (i.e., a smaller lot but a bigger home, a different school district, etc.).

What does this mean for sellers? If you want your home to go quick, have it look its best by keeping it clean, de-cluttered, and well-maintained. Know that real estate events of the past decade have left a lasting impression on everyone, so buyers are still hesitant to “overpay” and risk any financial distress. Yes, you can ask more for your home than 2011 prices, but it must still be realistic.

Thinking of selling your home? Call “Definitely Dave” today at 303-442-5001 to see how much you could net!

Happy New Market

With the Wall Street Journal reporting the “tides have turned” on real estate and CNN/Money betting on home price appreciation in the New Year, 2013 could be the year of the real estate rebound.

Both local and national news indicate a favorable turn of events for the real estate market as the healing process from the great recession continues. As someone who is in the trenches daily, I can attest this is what the Boulder area market is experiencing too. In Boulder, Broomfield, Weld, and Adams counties, the under-$450,000 market is on fire. Buyers are getting off the fence and making offers.

The mid- to high-end market is also experiencing an uptick, but inventory levels aren’t as tight as the lower-end market, so buyers don’t have as much urgency to act quickly. As the under-$450,000 market surge continues, its effects will slowly trickle-up to the higher price points with move-up buyers. That’s not to say the high-end market is dormant; I have a listing at $849,900 in South Boulder, and in the past week I’ve had three agents tell me to let me know if another offer comes in.

As for new construction, it is still competitively priced, so sellers shouldn’t assume that their 6-year-old home has the same appeal as one that is nearing completion. If a house has already been lived in, buyers won’t pay as much, even if it’s in pristine condition. On top of that, certain energy efficiency features that weren’t available then are luring buyers now.

If you’ve been on the fence about listing your home for sale, there’s no better time to sell than when you have a buyer! I have buyers ready to act on “the one” so please call “Definitely Dave” at 303-442-5001 today. 2013 may just be your lucky year!

‘Tis No Off-Season

Ahh, the holidays. A time to sit back, relax, and wait a few months for the real estate market to start up again. Right?

Ironically, that that’s what most people believe. Just like the public used to have a misperception that flipping houses will make you a millionaire (we all know how the truth panned out there), there’s a major misconception that real estate activity hibernates through the winter, and that buyers come out of the woodwork once the spring blossoms appear.

In fact, since Thanksgiving I’ve had 8 deals go under contract in just three weeks, plus an uptick in the number of showings on my listings. And today, my open house was crowded with people who felt it was more important to shop for a home than for presents.

Why all the activity this time of year? For one, with the holidays people seem to have more flexible work schedules, allowing them time to either get their home ready to sell or look to buy. And with the New Year right around the corner, people have a focus on the future mindset, which may include a new home. Of course, it doesn’t hurt that interest rates are at 3.25% for a 30-year fixed.

All the references I’ve heard to real estate having an “off season” originate from non-real estate news sources. Are you interested in taking advantage of this seller’s market? Call “Definitely Dave” today at 303-442-5001.  

Hello and Goodbye to Phillips 66

As a realtor who sells homes in Louisville, Colorado, I’ve come across more than one homeowner telling me they were holding off on selling until the ConocoPhillips (now Phillips 66) research and training campus was underway. “My house will be worth a fortune once ConocoPhillips comes here,” one man even told me. “Why would I consider selling now?” Though I believe the presence of such a large, well-known company would have boded well for the area’s home prices with all the jobs it would have created, unfortunately they’ve pulled the plug.

The 432-acre property in Louisville, Colorado will be coming on the market soon. According to Louisville Mayor Bob Muckle, "The uses that ConocoPhillips originally envisioned for this site don't really fit into Phillips 66's long-term plans at this time.”

Fortunately, the site can be developed by another interested party and with it being perfectly situated between Boulder and Denver, it’s just a matter of when, not if, someone will buy it. But since commercial properties can take years to sell, I wouldn’t hold my breath that Louisville residents can expect significant home appreciation directly related to this property. The appreciation will come from Louisville’s already vibrant downtown, good schools, and overall great quality of life. 

A Refreshing Change in the Headlines

Goodbye doom and gloom. While a housing rebound has been evident recently, it is new news for the media to agree that the real estate market is on the upswing. Consumer confidence is up, foreclosures are at a 5-year low, construction jobs are back, and moving trucks are on the road again.

Just this week a Deutsche Bank executive wrote that the "residential housing market is in the very early stages of a durable recovery" and noted the housing recovery is important because housing is what led the US economy into a recession. And Barclays Capital recently forecasted that home prices could be back to peak levels as soon as 2015.

Locally, activity in the Boulder, Colorado area market is busy.  But it’s a double-edged sword. Some homeowners who would like to sell are holding onto their homes longer, in hopes that the improvement we’re seeing in the market will increase their home price. But right now, inventory is tight and buyers aren’t always finding what they’re looking for. So, many buyers continue to sit on the sidelines.

Sellers need to factor in the cost to hold. Let’s say their home is currently worth $400,000, and they’re estimating a 3% appreciation for holding on one more year. That would put the home value at $412,000. Sellers need to weigh the perceived benefits of putting their life plans on hold for one more year. It’s hard to put a price on uncertainty, and as recent years have taught us, home prices can be unpredictable. For sellers on the fence and buyers on the fence, there’s no time like the present.