Why do FSBOs often fail to sell? It’s really not a hard question to answer.

Why do FSBOs often fail to sell?

Why FSBOs often fail to sell?As a real estate professional, I’ve seen my share of FSBOs. Most of the time, they end up with a Realtor’s sign in the yard after months of languishing on the market with a “For Sale By Owner” sign. I just passed a former FSBO yesterday. As usual, it has a Realtor sign in the front yard.

Why do FSBOs often fail to sell?

Why do they fail at a higher rate than a professionally listed property?

  • Homeowners seldom really know the current market. That leads to an overpriced home that savvy buyers would never buy. I showed one last year that was 62% overpriced. I guess the seller assumes there is always a buyer with more money than brains out there. What you want, and what a home will sell for may be light years apart.
  • Showing a FSBO can be challenging. When an agent sets up a dozen showings in one day, scheduling becomes an art. Access is the key to making that day successful. If a FSBO can’t allow the house to be shown except on a limited schedule the odds are radically against it. That’s true of listed properties too. Access is critically important.

There’s more to selling homes than placing a sign in the yard.

 

  • Homeowners may not know how to negotiate an offer. There is usually some give and take in a real estate offer. If a FSBO is locked on a price and won’t budge, or won’t let a home inspection or repair request become a part of the deal, or is refusing a termite inspection, or is demanding of a closing date closer than a lender can accommodate, then a buyer can’t buy it. In a case like this, the house is basically an island with no way to visit it.
  • Homeowners may not disclose things, or they may disclose too much.
  • Homeowners may not understand legal contracts. I ended up re-writing a contract for a FSBO a few years ago because there were so many legal liabilities in it that could eventually come back to bite the seller. The seller had no idea, and the buyer, who wasn’t represented either, had no idea of the legal ramifications of a binding contract full of potholes. Contracts are a Realtor’s bread and butter. Most FSBOs never see one away from a Realtor initiated deal.
  • Listed homes sell for more than FSBOs, on average. On average, listed homes sell 10-13% more than FSBOs. A 2015 article by the National Association of Realtors showed that the average FSBO sold for $185000, and the average Realtor listing for a similar house, sold for $240000. That’s a 23% loss by going it alone. Is it worth it?

Why do FSBOs often fail to sell? – Make the best choice

This list could go on and on, but the reality is that a FSBO is almost always better off selling through a competent Realtor. As is the case in most real estate transactions, fees can be negotiated. If money is an issue, let the agent know that up front and he/she can work with you. Having a qualified agent on your side can reduce stress, and it will help you get across the finish line with a better deal.

Why do most FSBOs fail? For the same reason car mechanics don’t do brain surgery. It’s not their area of ability, and for the sake of the community, they’re better off leaving brain surgery to medical professional who do it everyday. The same is true of real estate. Those who do it everyday are your best resource for an excellent outcome.

When you’re ready to list your FSBO with a competent real estate firm, give Cornerstone Business Group, Inc., a call. We are your local real estate sales pros in this area.

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Winchester-Frederick Co., VA Real Estate Market in Review – 2017

Winchester-Frederick Co., VA Real Estate Market in Review – 2017

The Winchester-Frederick Co., VA real estate market ended 2017 with solid numbers and evidence that the trajectory is continuing up. Every sales number is positive, and the view for 2018 is upbeat and bright. The only negative number in the year in review is the inventory. Inventory as of December 31, 2017 stands at 254 now available homes in the Winchester-Frederick Co., real estate market. That is about 300 below the needed available homes necessary to keep the market healthy.

Winchester-Frederick Co., VA Real Estate Market in Review: Positive Numbers

The average sales price in 2017 was $269,724. That is a 3% increase from 2016. Winchester-Frederick Co., VA Real Estate Market in Review - 2017Historically, the 2017 numbers are 14% above 2013, 11% above 2014, and 8% above 2015. Each of the past five years have shown an increase in sales price. The year to year sales percentages have increased 3-5%. The 2016-2017 percentage is slightly smaller than the previous few years growth, but it has also struggled with inventory shortages.

More positive numbers: Days on the market

There are many details that show a real estate market’s health. Price and volume of sales are always a good place to start, but days on the market will show if prices are drawing buyers into the market or if they are limiting buyers.

Prior to the market decline in 2008, many buyers would have been priced out of the market because of the phantom rise in home prices. The thing that kept that from happening on a broad scale was the easy access to lender cash. With no doc loans and lenders scrambling for dollars, questionable buyers were allowed to stay in the market and buy homes they often could not afford or keep. Those buyers were the first wave of foreclosures at the beginning of the recession. At that time, days on the market was not as revealing as it is in a more stable market.

Winchester-Frederick Co., VA Real Estate Market in Review - 2017The current average days on the market for 2017 was 60. Over the past five years, that number has stayed consistent with a down movement of 25%. In 2014, the average days on the market reached a five-year high at 80, but it has drifted downward each year since.

A home that has been on the market for 100+ days is telling the seller that something is off. It might be location, price, condition, neighbors, or a market that is simply not moving. The Winchester-Frederick Co., VA is in peril of becoming the market that is not moving. Low inventory can ultimately paralyze a real estate market as quickly as a recession.

Winchester-Frederick Co., VA Real Estate Market in Review: Distressed Properties

Distressed properties are also a market health indicator. This is an area where skittish buyers can enter the market with confidence that the market is healthy and they are likely to see equity appreciation over the average five years of ownership. This is also the area of greatest improvement in the Winchester-Frederick Co., VA real estate market over the past five years.

Local distressed property sales, which are made up of foreclosures (REOs) and short Winchester-Frederick Co., VA Real Estate Market in Review - 2017sales, settled into an average of 6% for the year. Throughout the year, a few months saw that number drift to as low as 3%, but the overall average is twice that. Over the past five years, the number of distressed properties has dropped precipitously. The 2013 distressed properties sold in the Winchester-Frederick Co., VA real estate market were 22% of the market. That was followed by 14% in 2014, 13% in 2015, 8% in 2016 and the new low of 6% in 2017.

The continuous drop in distressed properties is one of the most encouraging numbers in the local real estate market. It helps sellers regain lost value in their homes. A street full of foreclosures and short sales affects every house on the street. When neighborhood distressed properties disappear, home values begin to settle back into a true value. The total number of distressed properties in the Winchester-Frederick Co., VA real estate market were 94. When you reflect back to 2013 at 339 with lower overall volume sales, the local market looks a lot better.

Winchester-Frederick Co., VA Real Estate Market in Review: The Only Bad News

There is a great deal of good news in the Winchester-Frederick Co., VA real estate market, but there is one hurdle the market will need to overcome in 2018 if the market is going to reach new highs. Inventory. Inventory is the 800 lb gorilla in the living room.

As mentioned above, inventory is at a decade low. At 254 currently built homes available, the market is struggling to give homes for would-be buyers. Sellers can’t list because there is nowhere to move, and buyers can’t buy because there is nothing to buy. Low inventory could have the local market in a standoff.

If sellers won’t list because of the lack of available properties for them to move to, then buyers have nothing to buy and the circular dilemma continues. That could push buyers into other markets. The Jefferson County, WV market is the fastest growing market in the top of the Shenandoah Valley. Driving buyers and sellers into other markets does nothing to help the Winchester-Frederick Co., VA market.

At some point in the first quarter of 2018, someone has to blink. Even rentals are at a low of 80 available. Sellers who are willing to rent for a year after they sell, have nowhere to move to in the rental market. The inventory issue needs to be addressed early in 2018. If not, the New Year may enter unfamiliar territory in the Winchester-Frederick Co., VA real estate market.

When you’re ready to buy or sell in the Winchester-Frederick Co., VA real estate market, give Mike Cooper a call. Mike is your local real estate sales pro.

What’s a good home-buying timeline?

What’s a good home-buying timeline?

When you’re buying a home, there is a timeline of events that will happen. So, what’s a good home-buying timeline? On rare occasions, you may get the itch to buy a home, and start and close in 30 days. That is not the norm. From the time you have a need to buy a home until you close, you’re most likely looking at 45 days or more. What’s the time-line?

What’s a good home-buying timeline?

  • Financial – Pre-approval
  • Realtor Search
  • Home Search
  • Contract
  • Home Inspection
  • Appraisal
  • Contact Insurance Provider
  • Financing Approval
  • Title Search and Document Preparation
  • Closing Date Set
  • Closing Document Review
  • Contact Utilities
  • Confirm That Funds Are Wired to the Closer
  • Closing

What's a good home-buying timeline?

What’s a good home-buying timeline? – Finance & Realtor Search

Get your pre-qualification or pre-approval letter first. It is always better to have a pre-approval letter, but a pre-qualification letter is better than nothing. This is the first step on your timeline. Getting your financial abilities clearly spelled out will let everyone involved know what to look for when you’re buying a home. Do this about 45-60 days before you hope to close on a home.

Call a Realtor. Actually, call a few Realtors. Interview agents until you find one that works well with your personality and goals. Don’t be shocked if they ask you to sign a buyer broker agreement. A BBA is the equal to a listing agreement when selling a home. In the state of Virginia (7.1.2012), it is required for all buyer-agent relationships. The length of the agreement is negotiable. If you are uncomfortable signing one, ask that the length of the agreement be short (30 day, 60 days, etc.). Find an agent who has your best interest at heart, sign your BBA and get ready to get started.

What’s a good home-buying timeline? – Home Search & Contract

Once you’ve been pre-approved and you’ve located a good Realtor, it’s time to settle on your home criteria and hit the streets. Eliminate as many possibilities in the Realtor’s office before setting appointments. Volume of showings is not the quickest path to the perfect home. Matching criteria with available properties is where you should start your search.

Once you’ve found your perfect home, negotiate an acceptable deal and write a contract. This is where you Realtor will be a priceless addition to your home search. Your Realtor can show you what has sold in your chosen neighborhood.

If you’re planning on offering 50% less than the list price, your Realtor can help you see if there is any possibility of your contract being accepted. The information in the multiple listing service will tell you if homes are selling at list, 1% below list or 50% below list. If they are selling at list or 1% below list, you’re 50% below will not have a chance and you’ve just wasted your time and your Realtor’s time.

This is especially critical in a competitive market. If inventory is low, you can’t afford to make useless offers if you really want the property. Make your best offer and let the seller negotiate if there are needed changes.

What’s a good home-buying timeline? – Home Inspection & Appraisal

Once you have a ratified (accepted) offer, you need to schedule a home inspection (10-14 days, $300-$450 paid out-of-pocket up front). Home inspections look at a home to see if the systems (plumbing, electrical and heating & cooling), roof, appliances and construction are in good working order. If they aren’t, you can walk away, negotiate repairs or accept the property as is. Home inspectors and home inspections are perfect, but they do give a glimpse into the home’s health.

Around the same time, your lender will call for an appraisal (14-21 days on average, and around $450-$650, often paid up front, and out-of-pocket). It’s good to have the home inspection and any negotiations done before the appraisal just in the event the deal falls apart at that point. There’s no sense in paying for an appraisal on a home you will not be buying.

What’s a good home-buying timeline? – Insurance & Financing Approval

Now that the home inspection repairs are agreed to, and possibly complete, you will want to contact your insurance provider to make them aware that you are buying a home and you will need insurance (14-21 days). You may want to shop around to make sure you’re getting the best deal. Prices can vary radically.

Around 21-28 days, you should have a loan approval from your lender. It may take longer, but that is something that should be inserted into the contract. Most lenders can give a loan approval in this amount of time or less, unless there are circumstances that need to be reconciled before that phase can be complete.

What’s a good home-buying timeline? – Title Search & Closing Date Set

Your closing attorney, or closing agent, will be searching your title during this time (14-28 days). The attorney, or agent will be looking for any anomalies in your title’s history. Most will searches will go back at least 60 years to see if the property has had a clear chain of title as it has passed from seller to buyer.

Once the closer has confirmed that the title is clean and can be transferred, a closing date is set. This date should coincide with a date set in the contract. Most contract language says, “On or before” a certain date. That means you may close early if everything is complete and everyone can close early. On occasion, you may close late because something wasn’t completed in time. In that case, you’ll need to have an agreed upon addendum signed by all parties extending the closing date. Those are not as common, and they are normally just a few days or weeks long.

What’s a good home-buying timeline? – Review Closing Docs & Contact Utility Companies to Have Services Set Up.

The closing docs, or CD (for a loan funded sale) needs to be in your hands 3 days before closing. All parties (including lenders) will need to agree to the CD and sign off on the numbers. If there are mistakes on the CD, it will need to be corrected and the 3 day period restarts.

This is a good time to have your utilities set up with your new water, electric, gas, oil, Internet and cable providers. Make sure they are set to start the day of closing. This should be done a week or two before closing. That gives you plenty of time to run around making deposits and filling out applications. This is not something you want to put off to the day of closing. A lot of sellers will have their utilities set to expire on the day of closing. Make sure to put it on your calendar.

What’s a good home-buying timeline? – Confirm That the Funds From Your Lender Are Wired to Your Closing Agent on or Before the Day of Closing & Close.

Make sure the wiring instructions for sending money is handled by you and your closing attorney or agent. Do not send money based on an email received at the last-minute without talking directly to your funding lender. Do not click on a link in a last-minute email offering wiring instructions. A recent real estate scam has been for a thief to send an email with wiring instructions that go to a scam account. It can be devastating. Make sure you and your closing company are monitoring this phase closely, and always talk directly to the people you’ve been working with. This not a time for new names to be added to the contact list.

The last timeline issue is to close. You will meet your closer and sign a one inch pile of papers that are redundant and confusing, but hopefully you’ve picked a closer who will explain everything clearly and with a bit of humor. It can be really boring at this point, and the humor goes a long way. This is an area where having a great Realtor can be a huge plus. Your Realtor can give good recommendations of highly skilled home inspectors, lenders, closing companies and other services.

There is one final conclusion to your process. You get the keys. Congratulations on your home purchase. When you’re ready to start your own timeline, give Mike Cooper, or any of the agents at Cornerstone Business Group, Inc. a call. We are your local real estate sales pros, and we’ll get you across the finish line (hopefully, with a smile).

 

 

 

Low housing inventory. What changes it?

Low housing inventory. What changes it?

Low housing inventory. What changes it? The simple answer is to add more houses to the inventory, but the real answer might be more complicated. The housing market is cyclical. The market shifts from a seller’s market to a buyer’s market and once in a while a market will be in balance, but that is rare.

Low housing inventory. What changes it? – Seller’s Market

When more buyers are in the market than sellers, the housing market is a seller’s Low housing inventory. What changes it?market. Seller’s have more opportunity to generate higher sales prices. Good to great homes that hit the market are quickly gobbled up and they often receive multiple offers. Many times, those offers can exceed the list price.

Buyers will forgo some contingencies to improve their chances of obtaining the property. It may be as simple as not doing a home inspection or not asking for closing cost help. The cleaner the contract, the more likely a buyer will gain an advantage over other would-be buyers. Of course, cash is often king, but not always. Shortening the time of closing is another way frantic buyers may win a multi-bid real estate purchase.

Low housing inventory. What changes it? – Buyer’s Market

Supply and demand influence both seller’s markets and buyer’s markets. When there are more sellers than buyers, buyers have an advantage. In this case, buyers may be able to get a discount on a property. They may be able to ask for closing cost help, and home inspection repairs. During a previous buyer’s market, I asked for the seller’s motorcycle, which he agreed to give me if I bought his house. That’s just how crazy it can get in a buyer’s market.

Some home inspection repairs may be expensive, but in a buyer’s market, they may be the only way to make things happen. In a sale I did a few years ago, my Seller offered $20,000 for a roof replacement. We were in the throes of the recession and buyers for high-end properties were few and far between. The only way to close the deal, was to offer that repair. It was a buyer’s market and buyers could ask for just about anything and get it.

Low housing inventory. What changes it? – The Circular Dilemma

Low housing inventory creates a circular dilemma. Sellers who want to sell may stay put because there is no place for them to move to. Buyers can’t buy houses that are not on the market, and sellers can’t sell if there is nowhere for them to go. It’s a vicious circle.

The Winchester-Frederick County, VA housing inventory has reached a historic low at 270 presently built homes. As I’ve talked to other colleagues, they have stated that their work load has slowed because there are no houses for their buyers to buy. With a market that thrives in the 500-600 available homes range, 270 is incredibly low. So, what changes low inventory.

Low housing inventory. What changes it? – What Changes Low Inventory

There are multiple things that help pull a market out of low inventory.

  1. Lower interest rates. When interest rates are low, people can afford to buy, but as interest rates rise, some buyers are priced out of the market. In a convoluted way, the Federal Reserve controls interest rates, and as long as there is low inflation and low employment, the rates will stay low. But, the rates can’t stay low forever. Low interest rates help home-buyers, but they hurt bond holders and pension funds. Sooner or later, the rates will have to move up, but the FED has held the line on increases, though there are rumblings of rate hikes.
  2. Consumer confidence is another step out of low inventory. When consumers are confident in the economy, they are more likely to buy or sell a home. Consumer confidence is now at a 17 year high. That bodes well for the real estate market. The seasonally low inventory may be bolstered in the new year by the growing consumer confidence. When consumers are feeling good about the economy, they spend money. The recent GOP tax cuts may fuel that even further in 2018, and that could lead to a housing boom.
  3. Low unemployment. The current unemployment numbers stand at 4.1%. That is the lowest unemployment rate in the United States since February 2001. The workforce is growing, and that fuels consumer confidence, the tax base and that puts more cash in the economy. As more people go back to work, their ability to buy a home increases.
  4. Increase in new construction. Buyers can’t wait forever to buy a home, and neither can sellers, but with new home construction at a new high, homes coming on the market may give sellers confidence to get out there and look for new home so they can place their current home on the market. New home construction took an unexpected jump in November. Sadly, housing starts tend to lag demand. That is now contributing to the housing shortage, but it is not a long-term issue. When construction begins to catch up with demand, the market may shift to the buyer’s favor.

The solution for low inventory is more complicated than simply adding more houses to the market. It’s a nationwide issue that takes time to reconcile, but with a little patience, it will correct itself, and in the coming year, the real estate market may hit a new boom. As long as the economy can sustain its current trajectory, 2018 may be the best year for real estate since 2007.

When you’re ready to list your home, or you’re ready to buy a new home, give the Cornerstone Business Group, Inc., a call. We are your local real estate sales pros, and we’ll put economic and construction experience to work for you to make your experience a dream come true.