Selling Real Estate in 2010

     Believe it or not, we are not in a "bad" real estate market.  What we are currently experiencing is a unique real estate market.  Every market is different, but they do all go through ups and downs, buyer & seller markets, and fast & slow times.  There are a lot of homes selling in the NRV currently, granted not with the same magnitude of 2006. but none the less  All types of homes are selling, some more than others, but this is more than I can say for some other areas across the country.  Statistically speaking, a $100,000 home is more than likely going to sell much faster, than say, a $400,000 home in Christiansburg.  Another well supported stat -  if you have 2 identical homes, one located in Blacksburg & the one in Pulaski (for example), the Blacksburg home is just going to be more valuable.  Obviously, the university, along with location and other things, give Blacksburg that extra boost.

     Those are common trends we normally see, but there are some new trends emerging out of the woodwork.  Buyers know they are in a buyer's market, and like any rational person, are trying to get from it the maximum benefit possible.  The game has changed, and buyers have home field advantage.  This goes without say, but sellers are clearly left with a slight disadvantage.

     Leroy Houser, a real estate broker & trainer, held a seminar last week on our current buyer's market.  There are a few dynamics in play, and we need to mold our strategies around those forces.  Buyers are looking for either: (1) Opportunities - move in condition, priced to sell, & on the market less than 30 days,  or (2) Deals - priced 15-30% below market value, on the market more than 90 days, may be distressed, in foreclosure, or a "fixer upper".  There is one other category that a home can be in, Everything Else.  If a home is not in the first 2 categories, it is probably going to take a good while longer to sell, or even not at all.*

It is a competitive sport out there, and you need to bring your "A game".  We used to look at comparable home sales in your neighborhood in order to price your home fairly, while still netting the most profit possible.  Now, we are looking at what the others homes did not sell for.  This is a good indicator of the price points you should not expect, and probably avoid.  You definitely need to clean & advertise your home, but when it comes down to it, price is usually the most important factor.  The homes that did not sell were in the Everything else category.  Let's learn from our history & mistakes, so to not make the same errors again.

Personally, I am 100% sure that the economy will get strong & prosperous again.  What I am not too sure of is how long that will take.  We will all have to wait and see, but the numbers say we are improving.  Nothing ever stays the same in life, good or bad; everything changes.  We just have to ride out the storm.  I see clear skies in the distance.   

 *Reference: Margaret Galecki :)

  

Home Selling Price & Home Worth are Interchangeable

Your local real estate market dictates what your home will sell for.

How much you purchased it for, how much you spent on remodels, or even how much you still owe on your mortgage, all have nothing to do with it.  The cards now lie with the buyers in this market, and what they are willing to pay.  The buyers have the advantage, and have set a price threshold.  Sellers are  having to lower their asking price, in order to accommodate that threshold.

Herein lies the problem.  A lot of people owe more on their home than what it will sell for today; these people are underwater.  They just can't take a hit at the closing table of thousands of dollars, in order to sell their home.  I mean, who really can?

In my opinion, herein lies the solution.  The new federal FHA refi program will allow people who are underwater on their mortgage to have the principal balance lowered.  The lender will essentially "write off" a percentage of the balance, and homeowners will get a new FHA insured loan.  Sellers will owe less on their home, and will be able to sell it for less.  Ingenious!

You can refer to the post below this for more info on the FHA refi program.   

Number 1) I emphasize the word local.

  We have all heard it the saying LOCATION, LOCATION, LOCATION!  This is usually in reference to proximity to shopping, work, scenic attractions, etc.  I, however, am referring to the fact that your locality is completely different from the nation as a whole.

"Regardless of national forecasts, it’s what happens locally that matters to you and your real estate. It’s at street level, that the value of one property is established over its neighbors. The local economic impact on income and cost of living are felt directly in your pocket." Source: Realty Times

Number 2)  Yes, I did say your home will sell.  

Every home is sell-able, at a certain price.  That is really what it all boils down to in the end.  The price can change a buyers perspective completely.  The price point threshold is all relative.  It's relative to the area, the type of home, the time period, and the amount of buyers & sellers in the market.  More buyers = more demand, therefore higher prices.  More sellers = more supply, therefore lower prices.  Currently, we have more sellers than buyers, that is why they call it a buyer's market.

We have a fundamental problem in that sellers can't lower their asking price; they owe more on their home, than what it's worth.  So, sellers are basing their asking price on what they owe, not on what the market is dictating.  I don't blame them, having to pay to sell your home is a stomach churning idea.  

The new government refi program allows homeowners to "write down" their principal balance, so it's closer to what their home is worth.  The price at which a home will sell, which is interchangeable with what that home is worth.

Look at this graph below of Christiansburg, from June '09 until August '10.  The green line is the avg price of homes for sale, and the red is the avg price of homes that sold.

It is interesting to see this because it shows homes are being sold, and what buyers are willing to pay is averaging about $170,000.  The avg price people are selling their homes at is $220,000.  That is a $50,000 gap that needs to be filled in.

Christiansburg, VA June '09 - Aug '10

Source: NRV mls trendgraphix

I am sorry I have rambled on about boring econ, but I think this new program deserves more praise and attention.  I really feel it is going to help our economy.

So, my prediction is if this program works the way it should, it will be very beneficial to a lot of people, and to our economy.  People will be able to sell their home, they will be able to relocate for jobs, more homes will be in buyers' price ranges, demand will increase, and their will be a "butterfly effect" felt throughout the economy.  

Under Pressure

Picture this:  Your home's market value is currently less than what you owe on your mortgage.  You are Underwater.

Take it one step further: You need to sell your house - now.   

Don't feel ashamed, alone, or even responsible, for the loss in your home's value.  About 5 years ago, this would have been a ludicrous idea; but today, it's reality for a lot of folks.  It was common thought that Real Estate would just always go up and up, but the economy is cyclical, and no one can truly predict the future.  Sure, we have trends, data, and graphs that we analyze, and we can see there are obvious indicators.  For instance, 99% of the time, more houses will be sold in June, than in December.

Anyways, I am getting off topic, so back to what I was saying.  If you are underwater, there is a new program that may be of interest to you.  It's called the FHA Short Refi Opportunity Program, for Underwater Homeowners.  It's not getting too much attention in the media, which I find a little strange.  This could help a lot of people, as well as the housing market.  I feel this a federal program that will truly help the economy, because it addresses the unique aspects of our recession.

Basically, the bank "writes off", or forgives, at least 10% of your principal balance. If you have been making your payments on time, are in good credit standing, and your lender agrees, you could qualify for the new FHA insured mortgage.

The only thing I can't seem to find, is if there are any stipulations as to the length of time before you can sell your home.  You will have to talk to your lender about this, there may be no stipulations at all.  If you think you can benefit from this program, click on this link.
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-173

The government is not paying me to endorse this, these are my real opinions.  

30 Years of Payments? Pshh, Make Mine 15!

The mortgage norm is a 30 year fixed, rate loan.  It's not a bad norm, nor even a rip off; it's just usually the most affordable option for many home buyers.  The banks break down a lot of numbers & figures for you, but there is one that may be overlooked: the bottom line for them.  Did you know that over the 30 years of minimum payments, you will end up paying almost twice as much as you originally purchased the home for?  No kidding!

Here's the math for a $200,000 home loan:

30 year loan @ 4.5% = $1,015 monthly

12 months x 30 years = 360 months

360 months x $1,015/month = $365, 400 

Typically, on a shorter loan, you will get a lower rate.  This is reflected below.

15 year loan @ 4% = $1,480 monthly

12 months x 15 years = 180 months

180 months x $1,480/month = $266,400

The difference between the original loan amount and final sum is astonishing.  This is especially true because a 4.5% rate on a 30 year loan is considered very good. (You can do the math for a 6% or 7% loan, and there's a tad difference.)  Over 15 years, on a $200,000 loan @ 4%, you will pay about $66,000 in interest.  Over 30 years, on a $200,000 loan @ 4.5%, you will pay about $166,000 in interest.  You can decrease your number of payments by half, and decrease your interest by 60% ($100,000 in this case), just by increasing your monthly payment by $400, or 40%.  This happens because you pay the most towards interest during the early life of your loan.  For the first couple years, only about $250 goes towards your principal, and about $750 to interest.  Around the 30th year, you finally pay about $700 towards principal, with only $300 towards interest.  This is why the interest rate you get is important, but so is the amount of time you take to pay it off.
Now, keep in mind, 15 year mortgages are best suited for people in the best financial situations.  I am talking about little to no debt, a good rainy day account, and a very secure career.  You don't want to forcibly stretch yourself too thin.

The best thing to do, in my opinion, is finance your home through a 30 year mortgage, at the lowest rate you can find.  (And please do shop around, because loans are the bank's product.  Different banks will give you different rates.) So, finance a 30 year mortgage, and if you are able, make the payments of the 15 year mortgage. It is amazing how much bigger of a dent you make in the loan that way!  This is a more flexible decision, because if money gets tight down the road, you don't have to pay the extra amount towards principal every month.  You can pay your regular minimum monthly payments of the 30 year loan.  It will take some self control and commitment, but I know you can do it, and later on, you will be glad you did.

4.32% Mortgage Rates!

Well, they have done it again.  They lowered interest rates to the lowest ever recorded since 1971!  This is 30 year fixed rate conventional loan, no bells and whistles.  A 15 year fixed rate mortgage is at 3.83%!

Is there a New Home or Refinance in your near future??

U.S. house prices climb in second quarter: FHFA - MarketWatch

U.S. house prices climb in second quarter: FHFA - MarketWatch

Calculate Your Home's Worth

This tool on the FHFA's website provides a general estimate of a home's worth in the Blacksburg, Christiansburg, and Radford metro area.  It projects what a given home purchased at a given point in time, would be worth today, if it appreciated at the average rate of the other homes in the area.

The graph below shows from Q1 2005 through Q1 2010.  Yes, the graph has been recently decreasing, but that decrease has been slowing.  Notice the sharp increase in 2006-2007, did anyone really think that was sustainable?

*What I really want you to notice is the long term.  From Q1 '05 to Q1 '10, the trend is increasing.  If you bought your home in the beginning of 2005 for $200,000, it would be worth generally $227, 505 in the beginning of this year.  Sure you hit a high of about $240,000, but at least you haven't lost all your equity.  You have still gained $27,505 dollars in estimated value.  

Real Estate does fluctuate up and down, but in the long run, the trend has always increased.

My predictions:  Going into the fall and winter this year, the amount of home sales are going to decrease, as they always do. There is going to be a higher amount of homes for sale (or inventory as we call it), and that will cause prices to decrease.  However, I don't think they are going to decrease back to what they were last year.  Then, come spring, homes sales will increase and so will prices.  As long as the prices rise more than they fall every year, in the long run, your home's value will increase.  Just like we have always seen. :)

Home Price Calculator

Go to this link if you want to see what you home's estimate worth is, based on when you bought it & for how much.

Tips For 1st Time Home Buyers

I was a "1st timer" about a year ago, and it was such a fun, yet admittedly scary, experience!  I love working with First Time Home Buyers; you all are one of my favorite groups to counsel!  I will never take advantage of any of my clients or the other parties' involved, and I will make sure you are making a well-informed, smart, and financially feasible decision.  Don't worry, everyone gets cold feet before big decisions.  This is normal, so please don't let it prevent you from buying a house that you truly love!

Here's some helpful tips for First Time Home Buyers as you start the next stage in your life.

1.  Be choosy, yet realistic.
     You may not actually find the perfect home.

2.  Do you homework before looking at homes.
     Determine what features are most important to you.

3.  Get your finances in order.
      Check your credit score & prepare for a down payment and closing costs.

4.  Get pre-approval from a bank.
     You can talk to a lender now, or I can contact my usual brokers & see what they can do for you.  Nowadays, you definitely need that pre-approval letter.  We submit the letter with all purchase offers on homes.

5.  Know your move-in date.
      When does your lease end?
      Are you allowed to sublet?

6.  Think long-term.
     Are you looking for a starter home, or something to stay in a little longer?  This could influence your decision on mortgage terms, as well as the type of home you pursue.

7.  Don’t become “house poor”.  
      Buying the most expensive house you can afford may leave no money for maintenance, decorations, or renovations.  Don’t let your mortgage payment exceed 30% of your monthly income (28% to be safer).  

All of my clients get a free Home Warranty at closing (which ranges from $455 - $655 dollars).  This is good for one year, and covers almost everything in your house - from the dishwasher to the air conditioning.  If something breaks, they will either fix it or replace it, for just $60 per incident.  I recommend this so highly to my first time home buyers, especially because of limited finances, and limited home maintenance experience.  It can also help with anything the home inspector found, but the sellers didn’t fix before closing.
   
  

Phillip Thomas goes BLUE!

“I went blue for Coldwell Banker Townside, REALTORS® because I was Katelyn Compton’s first client, and she taught me a lot throughout the process and I’m extremely happy with my purchase.” 

You can GO BLUE too! Click here to GO BLUE & get a free t-shirt.

So....For Sale By Owner, eh?

So, you want to sell your home on your own?  That's cool, there's probably just going to be a lot...to learn.  :)

I am not trying to use scare tactics, but here are a few brief things that deserve a little thought.

1. Legality 
• If nothing else, I would at least use a Real Estate Lawyer to look over your purchase contract before signing anything.   
• Make sure you don't forget to disclose things like the roof sometimes leaks & you may have lead based paint if your house was built before 1978.  
• When your buyer does the home inspection, and asks you to fix 54,435 things, how much are you actually liable for?  
• What about wells, septics, radon, & those pesky termites?
2. Home field Advantage
• Hopefully the buyer is using an agent.  They will make your life easier, but also leave you at a severe disadvantage.  The buyer's agent will write up the contract & guide their client through the whole process. They will try their best to get their client the best deal. The agent will set up a home & radon inspection, make sure the sellers fix the requested repairs, make sure the sellers get the termite & well inspection, get all the necessary documentation over to the closing attorney's office,  and be the voice of their client throughout the entire process.  
• Who is going to have your best interests at heart, protect you from subtle tactics, and help negotiate your best deal?
3. The Odds
• 85% of homes are listed through a real estate brokerage firm.  Most buyers (at least 90%) work with a buyer's agent.  A buyer's agent is only going to show houses that are offering a commission - it's the only way they get paid.  The homes that are offering a commission are the ones listed through a brokerage firm.  
• There is no reason for a buyer to not use an agent.  Free advice, free transportation, and free representation are hard things to pass up.
• There are generally a few categories of people that will shop "forsalebyowners".
• Investors - they will want to make a profit on your home, so will probably offer you about 70% of the market value of your home.  *Note: "Market Value" is not correlated in any way to your asking price.
• Unqualified, uninformed buyers & your everyday "looker".
• Buyers who are informed, and who are trying to save money.  They know you are not paying a commission, so they will subtract that from their offer.  
• The buyer will think to themselves, "Well, you are asking $200,000 & not using a Realtor, so saving $12,000.  I can take that $12,000 right off the top of my offer."

If you decide to sell your home by yourself, I wish you the best of luck & still believe it is possible.

If you would like some help with pricing, marketing, & legalities, I will be here.

Call/Text/Email me!