Being Realistic about Statistics

If ever there was a sure fire phrase to put most people to sleep, it is the title of this article. We just do not like numbers. Maybe that's why we accept other people's interpertation of the numbers without looking at them for ourselves. The statistics concerning the current state of the real estate market is a good example.

The real estate market is, like politics, all about local conditions. The "market" in California, New York, etc is different from the market in Tennessee where I hang my hat. But the comments about statistics are generally the same.

A simple example, admittedly extreme, might illustrate my point. In my younger days, I was making $10,000 as an engineer. My total debt including car was $3,000. So my debt to earnings was 30%. The next year my debt was $6,000, a 100% increase! If that were the end of the numbers, I am sure my financial reputation would have suffered a bit.

But that's not the whole story. I got married, incurred ring and honeymoon expense, got a raise to $12,500 and my bride was a teacher making $6,000 a year. We were now making 18,500. Pretty smart if you ask me! Our debt to earnings ratio went up to 32% or a total of a 6.7% gain.

What does that have to do with real estate, you ask. In our part of the world, the headlines shout, "Real Estate in a slump! Home inventory increases dramatically. Prices increase slightly by 3.5%". I am sure you have seen similiar headlines.

Here's the story behind the numbers. The average home price is around $350,000, so an increase of 3.5% means the homeowner saw the average price increase by $12,250 in one year, not bad I suspect. The days on the market number, which the homeowner truly cares about, went from 56 days to 76 days, a 36% increase. So the media reports the two figures as "a 36% increase in the time a home stays on the market and only a 3.5% increase in prices", must be a slump.

But for those living in the Real World, this is the reality. The number of days on the market for homes increased by 20 days, about 3 weeks. In return for that 3 weeks, the homeowner got $12,500 more for their home than they would have last year. Seems an acceptable trade off to me.

I've Got to Get a Deal!

My wife loves a deal. I am convinced she would shop for a deal on anything regardless of the amount of money we made. The other day I got a quote for some repairs on the house. Her first response was, "Don't you think that is too high?" Mind you she has no idea whether it is too high, too low or just right. She wants a deal!

I say this because it reminded me of a situation with a young couple several years ago. We found the perfect home for the growing family in a great neighborhood for children with friendly neighbors. After searching for months, we happened on this neighborhood as we were looking at a subdivison close by.

The wife loved it at first sight. It had everything a young mother and wife could hope for in a new home. It even had a small office for her to use in her profession as a graphic artist doing freelance work. The husband loved it's already perfect landscaping. It had a small Koi pond and a well maintained bed of roses which he loved to grow. The garage openned in the back and had lots of space. A basketball goal was already installed for he and his buddies.

The price of the house was a bit high but in their price range. They were putting 30% down and had already been approved for enough to cover the difference. Their household income could cover the payments with no problem.

As we talked about an offer, it quickly became obvious I was going be required to do more than just write the contract and count my commissions. He wanted a Deal! He related a story to me about the way he buys automobiles. He tells the dealer what he will pay and if the dealer can't or won't meet the price he walks away. He was proud of having gotten his cars at "his price" and not the dealers.

He insisted we offer the sellers $15,000 under the listed price and require them to pay the title insurance (In our part of the world, the buyer normally pays for title insurance.), provide a home warranty, be responsible for $6,000 worth of repairs, replace the carpet and throw in the refrigerator and deep freezer. It was with a heavy heart, I delivered the offer to the seller's agent.

As exprected, after the sellers had a good laugh, they made a counter offer. And we countered the counter. I won't go into the details but the sellers gave us most of what we wanted, but would not budge from their offer to drop the price by $7,500 leaving us with a $7,500 difference. Unbeliveably, my buyer would not budge. It was the principle of the thing. He had set the price just like he did when buying a car and he was going to walk away!

And he did walk away from their dream home because he couldn't get a deal! For the difference in house payments of $47.40 (6.5 interest over 30 years), he was not going to get the home both he and his wife wanted and loved. And it wasn't because of the money, he could well afford it, he just wanted a deal. By the way, I found them a another home, not as nice, at more money than the first one but I was sure on the front end that he could get a deal on this one.

I'm not sure of the moral of the story except to encourage buyers to first know their financial limits and their financial capablities and secondly, within their financial limits, select a house that will be their home using all their senses including their emotions and feelings. A home is your secure place where the world is forbidden to enter without permission. Make it a place you can relax and be refreshed. Sometimes that feeling costs an extra $47.40 a month, but it is worth it!

Of Cars and Homes

If you are like me, buying a car is a long process. First I have to want a new car: then I have to look at cars to decide what I like that I can afford. Once I zero in on a particular price, I then look and drive cars looking for the car that feels like me. Yes, I know I am weird, but aren't we all?

In this pretend story, let's say I decide a red sports car convertible is THE one for me. Because I can't afford a new one, I decide a pre-owned Saturn Sky convertible will meet my needs. I go to the Saturn dealer in town and tell him, "Bring me a red Sky convertible." He laughs at my eagerness, seeing dollar signs, and takes me to the pre-owned lot. And there it, or they, are. Yes, two red Saturn Sky convertibles! They both have the same equipment, the same interior, the same engine and the same mileage within 200 miles. They are both local cars and have the same manufacturer's warranty remaining.

Trying to remain calm, I ask the standard question, "How much?" And this is where the similarity ends. One object of my love is $21,500 and the other is $19,500. I ask the dealer about the difference. His response is unexpectedly honest, "We paid more for the $21,500 car than we paid for the $19,500 car."

Examining the cars again, I am satisfied they are the same except for the price. I want this car, which one do you think I will buy? Of course, the $19,500 one; I'm no dummy. I don't care what the dealer paid for the car, I want the one I can get for the least amount of money. Naturally, I haggle over the price and get it for $18,750 with special spinner hub caps thrown in for free, but at least I am haggling over the least expensive of the two cars.

What does this have to do with the sale of your 3 bedroom, 2 1/2 bath, two story with fenced in back yard, beautiful landscaping and fresh paint and carpet? Not much except there is another 3 bedroom, 2 1/2 bath, two story with fenced in back yard, beautiful landscaping and fresh paint and carpet for sale three streets over in your same neighborhood!

So when a potential buyer walks on to the real estate sale lot and is shown two houses with the same characteristics, they will ask, "What is the difference?" If the only difference is the amount you paid for your home versus the competition, be prepared for the potential buyer to say, "I don't really care what you paid for your home, I'm going to buy the one that is least expensive for my family." Of course, they will make an offer on the least expensive home and your home will stay on the market for a few more days or weeks if there are other similar homes on the market similarly priced less than your home.

The lesson is quite simple. You have two choices: price your home to sell in a relatively short period of time or price it to sell in a relatively long period of time. Your real estate professional can do a comparative analysis of the houses sold and currently on the market. This will help you price your home in line with the competition. Of course, your real estate professional will help you prepare your home so it is perceived to be different from that other home, but of course so will the other real estate agent.

Remember, home buyers will buy to satisfy their needs and wants not to satisfy your needs and wants. If you don't have any showings in 10 days or if you have 10 showings and no offers, you have priced it too high. Either take it off the market or reduce the price!

Price is not everything, but it is real high on the list!

Good Luck on selling your home. Contact me if I can help.
http://BuyMiddleTennesseeRealEstate.com/

Myths #3 and #4 about selling your home

There are very few things a seller can control about their home other than price. Two of those are the condition of the home inside and out. These two myths discuss the condition of your home.

3. Myth: Once potential buyers see the inside of your home, curb appeal won't matter.

Truth:

The first decision buyers make, often before they think of price, is the area or neighborhood in which they want to live. You can't do anything about the neighborhood where your home is located, but you have a lot of control once potential buyers decide they like your specific neighborhood.

The truth is buyers probably won't make it to the inside of your home if the outside does not appeal to them. Many buyers drive by a home before deciding whether or not to look inside. Your home's exterior will have less than a minute to make a good first impression. I have heard buyers say,"If they don't care about the outside, they probably don't care about the inside." Ouch!

Spruce up the lawn, trim shrubs and trees, and weed the garden. Clear the walkways and driveways of leaves and other debris. Remove kid's toys, lawn mowers, put trash cans out of sight. Repair gutters and eaves, touch up the exterior paint and repair or resurface cracked driveways and sidewalks. Paint the front door, place potted flowers out front, hang a wreath on the door and put out a pleasing welcome mat for added curb appeal.

It may not be fair, but the outside packaging is the magnet that draws potential buyers inside to see your beautiful home.

4. Myth: Once potential buyers fall in love with the exterior look of your home, you put interior improvements on the back burner.

Truth:

Have you ever seen a movie trailer and thought, "That looks like a good movie, I believe I'll see it.", only to leave the movie later completely disappointed? A beautiful exterior promises a beautiful interior of equal quality. If buyers walk in the front door and are presented with an interior that doesn't live up to the expectations created by the exterior, they will be disappointed and sometimes offended. Buyers have no qualms about walking right out the front door within 60 seconds if the house doesn't compare to the quality of the exterior.

Unfortunately for sellers, it is suicide to forget either the exterior or the interior; both are important.

Good Luck on selling your home. Contact me if I can help.

http://www.BuyMiddleTennesseeRealEstate.com/

Myths about Selling your Home

Selling a house can be a bit like having a baby -- everyone gives you advice that may or may not be true for you. Here are ten myths uncovered:

1. Myth: You should always price your home high and gradually lower it if it doesn't sell.

Truth:

Somehow we think that selling a home is like selling a car; price it high so you have some "negotiation room". The truth is pricing too high can be as bad as pricing too low.

You may think by listing high you can always accept a lower offer, but if you do, you'll miss the buyers looking in the price range where your home should be. When potential buyers search the internet they search by price range; $350,000 to $375,000 for example. If your home should be in that price range, say $372,500 but you price it at $385,000 to give you some negotiation room, you will miss the very buyers you desire.

On the other hand, buyers looking for homes in the $375,000 $400,000 price range will see your home priced at $385,000 and compare it to homes that should be priced at $385,000. They will likely think, "This home is not worth that price when compared to another similiarly priced home." You lose again!

Offers may not even come in, because interested buyers are scared off by the price and won't bother to look or buyers in the price range will find something at the same price that is of more value. By the time the listing price is corrected, you will have lost a large group of potential buyers.

Ask your real estate professional to do a Comparative Market Analysis (CMA) to help you properly price your home in the current market.

2. Myth: Minor repairs can wait until later. There are more important things to be done.

Truth:

Minor repairs make your house more marketable, allowing you to maximize your return (or minimize loss) on the sale. By and large, buyers are looking for an inviting home in move-in condition. Buyers who are willing to tackle the repairs after moving in automatically subtract the cost of needed fix-ups from the price they offer. You save nothing by putting off these items, and you may likely slow the sale of your home.

Face it, most buyers are not handymen or remodelers. They want to get in a home, unpack and pick up their normal routine. Most homeowner's normal routine does not include minor repairs, patching the holes in the wall, painting, replacing the window screens, fixing that leaking facuet, and all the other "minor" things you have learned to live with. You fix them and sell your home for more!

Good luck selling your home! Contact me if I can help! http://www.BuyMiddleTennesseeRealEstate.com/