Buying a new home can be a great experience but it can also be a daunting one as well. For homeowners that have previously only purchased an existing home, they will quickly find the process is much different. From the number of decisions that must be made, change orders and other financial surprises along the way, it can be a little overwhelming for a buyer. Particularly one that went into the process ill prepared or without proper representation by a buyers agent that is experienced in new construction.
What you need to know BEFORE buying a new home…
For more complete information, you can find my complete new home buying report here but I have highlights of the report below:
Let me begin with this is not a political statement and the purpose of this site is not about politics but about real estate. Having said that, this morning I came across the plans for the housing market that Bernie Sanders is proposing if he is elected President which I had not seen before. Upon reviewing his plan (it is on his official site) I realized that while many of the components of it sound good (like “End homelessness and ensure fair housing for all”) many of his promises in this area sound like things that would negatively impact investors and the housing market as a whole.
The following are the Key Points to the Bernie Sanders housing plan from his website (I have included the complete list):
End the housing crisis by investing $2.5 trillion to build nearly 10 million permanently affordable housing units.
Protect tenants by implementing a national rent control standard, a “just-cause” requirement for evictions, and ensuring the right to counsel in housing disputes.
Make rent affordable by making Section 8 vouchers available to all eligible families without a waitlist and strengthening the Fair Housing Act.
Combat gentrification, exclusionary zoning, segregation, and speculation.
End homelessness and ensure fair housing for all
Revitalize public housing by investing $70 billion to repair, decarbonize, and build new public housing.
Under the “When Bernie is president, he will” section are some of the things he plans to do to accomplish the above goals (this list is rather extensive on his site so I have only included a sampling of the items that appear will negatively impact investors and homeowners):
Enact a national cap on annual rent increases at no more than 3 percent or 1.5 times the Consumer Price Index (whichever is higher) to help prevent the exploitation of tenants at the hands of private landlords.
Allow states and cities to pass even stronger rent control standards.
Implement a “just-cause” requirement for evictions, which would allow a landlord to evict a tenant only for specific violations and prevent landlords from evicting tenants for arbitrary or retaliatory reasons.
Place a 25 percent House Flipping tax on speculators who sell a non-owner-occupied property, if sold for more than it was purchased within 5 years of purchase.
Impose a 2 percent Empty Homes tax on the property value of vacant, owned homes to bring more units into the market and curb the use of housing as speculative investment.
Again, this is not a political piece, but given the strong housing market we have enjoyed over the past several years, which has helped many Americans build equity and recover wealth lost during the housing bubble burst of 2008, I think it’s worth noting proposed plans, by any party or power, that could negatively impact the market. Also, these are just talking points from someone running for office, so whether it’s Bernie Sanders or any other candidate, or even the current President, Donald J. Trump, they can all have ideas but getting them implemented takes cooperation of Congress and that is not always so easy so it doesn’t mean any of their plans ever actually come to fruition.
Over the past couple of months, I have written a couple of articles about a new policy approved by the National Association of REALTORS® in November 2019 known as the “Clear Cooperation Policy”. While I’m not sure how closely consumers are watching, or if they even care at all about the policy at this point, REALTORS® have definitely been following the policy and have been pretty vocal about their thoughts on the policy, both for and against.
Before I go on, I should disclose that I currently serve as Chairman of the Board for MARIS (Mid-America Regional Information Systems) which is the Multiple Listing Service (MLS) that serves St Louis area REALTORS® as well as several other markets throughout the state of Missouri. In addition, I’m a broker-owner at MORE, REALTORS®, arguably one of the most technology-forward real estate brokerages and a leaders in the digital marketing world, so I have strong feelings from both sides of the fence, so to speak.
Now, back to the new policy, MLS 8.0 as it is known in the industry. For members of MARIS, which, as I mentioned, includes all REALTORS® throughout the St Louis metro area, the new policy goes into effect on April 28th.
So what is the new MLS policy and how will it affect consumers?
From a buyers perspective, I think the new rules are a benefit in that there will be more transparency with regard to listings that are on the market, or are listed and will be available soon, to both them as well as their buyer’s agents. The reason for this is, under the new rules, listing agents will be required to put all listings in the MLS within one business day of doing any marketing which would include putting a for sale sign (or coming soon sign) in the yard. While “putting it in the MLS” doesn’t mean they have to make the listing information publicly available (that is an option) but they have to at least enter it as “coming soon” which means that the roughly 14,000 agents that are members of the regional MLS (MARIS) will be aware of the listing and have access to information on it including the listing agent information. In fact, the only way a listing agent will be able to avoid letting other agents know about their listing is by giving it a “withheld” status in the MLS, which means no one outside that agents office, would be aware of the listing and there cannot be any marketing done at all not even a for sale sign in the yard.
From a sellers perspective, I don’t think there are really any “benefits” to sellers from the new rule over where things stand today however, there is only limited negative impact on sellers as a result of the new rules. The reason I say there are no additional benefits to the seller that is because instead of opening up more marketing and promotion opportunities to the seller, or the listing agent it puts more restrictions on what the listing agent can do. The new rules, to some extent you could say, dictate to the listing agent how they will market and promote the listing. One might ask, but wouldn’t the seller want their home in the MLS, isn’t that part of the reason they listed it with a REALTOR®? The short answer is yes, for most sellers, if their listing is not entered into the MLS at some point prior to accepting an offer, they are likely leaving money on the table.
However, having said that, the timing of when to put it in the MLS can be critical and, if a listing agent is forced to put the listing in the MLS too early, or prevented from doing any marketing or promotion of it beforehand, it can also result in the seller leaving money on the table. The reason for this is the new rules limit how long a listing may stay in “coming soon” status to 21 days. While 21 days is long enough in many instances for a seller to prepare their home for the market, often times it is not. In addition, it is common for a listing agent to get a property listed in advance of when, for timing reasons, the seller is really ready to sell. A lot of very good listing agents use this period to market the home and create interest in it in advance of it actually being available for showings and sale. This type of marketing, especially in this low-inventory market, works very well and often results in drawing literally a house full of people to the listing once it is finally on the market and available for showings. It is common for the result to be multiple offers, oftentimes over the asking price, which, while maybe it’s not great for buyers, it’s great for sellers! So, many agents feel (including me) that restricting marketing of a listing in advance of when it is actually available for showings and sale is not in the sellers best interest.
Let not your hearts be troubled though sellers! There are firms out there, such as mine, MORE, REALTORS® that embrace change and see things such as this as yet another opportunity to set ourselves apart from the other real estate companies out there. To do so, we use our unique digital marketing skills, along with our experience in the industry, to maximize the marketing for our sellers to make sure we are doing everything possible to make sure our sellers get the best price and terms for their home while still staying within the rules we have to abide by. (Ok, shameless self-promotion, but hey, I need a little something for all this hard work, right?)
Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act that President Donald J. Trump signed into law on December 22, 2017. Opportunity zones were established to help communities that are economically-distressed and work by promoting private investment and development through the use of tax incentives. There are a total of 8.760 designated Qualified Opportunity Zones in the U.S. and there are 140 Opportunity Zones in Missouri.
Opportunity zones appear to have had a positive impact on the housing market in several opportunity zones in the St Louis area. According to data just released by ATTOM Date Solutions, 10 of the 19 Opportunity Zones in the St Louis area have seen at least double digit increase in home prices in the past year and two of them triple digit increases!
You can find complete information about Opportunity Zones, including an interactive map for Missouri Opportunity zones, a complete list of all opportunity zones in the U.S. videos from webinars hosted by the Missouri Department of Economic Development (DED) and more at MissouriOpportunityZones.com
Annually, the National Association of REALTORS® (NAR) does a massive survey of people that purchased and sold a home in the prior year to gather information about them and their transaction. This is done using a 125 question survey that was sent to nearly 160,000 people, in randomly sampled geographic areas, that purchased or sold a home in the prior year. The results are published by NAR in their “Profile of Home Buyers and Sellers“. From this publication, some great information is obtained (in my humble opinion, the best and most accurate information available) about home buyers and sellers as well as the process they went through, the homes they bought or sold as well as about their agent if they used one.
Sellers’ appetite for selling their own homes remains at a near-record low…
As the chart below, which covers the time period from 2001 to 2019, illustrates, the percentage of homes sold using a real estate agent or broker (the blue bars) has increased from 79% in 2001 to 89% in this year’s survey. Meanwhile, the percentage of sellers that sold their own homes “For Sale By Owner” (FSBO) declined from 13% in 2001 to 8% in this year’s survey.
Yesterday, the board of directors for the National Association of REALTORS® (NAR) approved a new policy dubbed the “Clear Cooperation Policy” which goes into effect January 1, 2020, and Multiple Listing Service’s (MLS) have until May 1, 2020, to adopt and implement.
While the vote by the board of directors, 729 in favor of it to 70 opposed, may not reflect it, there is a lot of controversy about this policy among real estate agents and brokers that are members of NAR. The two main changes this new policy bring about are that agents would be mandated to put, for all intents and purposes, 100% of their listings in the MLS system within one business-day of marketing the listing (marketing is defined to include putting a sign in the yard, telling someone about the listing, etc) and “MLS-exempt” listings will no longer be permitted.
Better for the consumer?
Proponents of the new NAR MLS policy say that this will be better for consumers by:
Making all available listings show in the MLS;
Giving more exposure to sellers of their listings by not permitting “MLS exempt”, “off-MLS”, “Coming Soon” or other marketing methods that may not include putting the listing in the MLS, or at least not initially;
Leveling the playing field, making all listings available to all consumers since listings could no longer be marketed through just social media, private networks, etc, but, instead, would be required to be put in the MLS;
Eliminating practices that may violate Fair Housing Laws by limiting what audience a particular listing is exposed to;
Opponents of the new NAR MLS policy argue that it is not better for consumers because:
It eliminates the opportunity for an experienced listing agent to determine, in cooperation with their seller client, the best means and methods to market their home to obtain maximum exposure and the highest price;
Pre-marketing, such as a coming soon promotion on social media before the listing is ready to go in the MLS in an effort to generate buzz and hype over the listing, would be prohibited. This is a method of marketing that, in our current low-inventory market, has been extremely effective in getting maximum exposure, and the highest price, for the seller.
Agents would not be permitted to quietly “test” the market to see how the listing, and/or it’s price, will be received by the market. This is often done by marketing the home before entry in the MLS to establish the right price. Once in the MLS, the days on market start working against the seller, as do price reductions, so coming into the MLS at the right price is essential for the seller.
It prevents a seller from using a REALTOR® when they wish to have their property marketed in a private manner and not publicly. This happens often when the seller is a high-profile individual that for security and/or privacy reasons, does not want photos and details about their home (including that they are selling it) publicly known. It can also occur in the case of a divorce, a distressed-type sale, etc;
Time will tell whether this proves to be good, or bad, for the industry and the consumer.
The MLS Technology and Emerging Issues Advisory Board, of the National Association of REALTORS® (NAR), proposed a rule change that is sparking some controversy among its’ members. The proposed “Clear Cooperation Policy” requires that all listings be put in the MLS within 24 hours of “marketing a property to the public“. The policy defines “public marketing” as including, but not limited to, “flyers displayed in windows, yard signs, digital marketing on public-facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public”.
But, isn’t that how it is now?
Many consumers may having been thinking that this is how it was all along, that new listings were required to go into the MLS but, that is not currently the case. Presently (and going back to the beginning of the MLS here in St Louis, I believe), agents have been able to determine the best marketing methods for their client, as well as allow their client input as to whether they wanted their listing in the MLS immediately, after a period of time or even not at all.
This year is a reassessment year for real property in Missouri, so assessors throughout the state are going to update the property values that tax assessments are based upon. According to state law, the value should reflect the value of the property as of January 1, 2019. Reassessment is done every two years, so the prior reassessment was in 2017. Given that the real estate market has been performing well now for the past several years, and property values are increasing, it’s not surprising that most property owners will see an increase in their assessment from the 2017 value to the 2019 value. However, homeowners in St Louis County have been particularly vocal about their dissatisfaction with the amount of the increase. An article on STL Today earlier this week shared the story of a Kirkwood couple that said: “We feel like we are being ripped off by the county” after the St Louis County assessor increased the value of their home 153% from the prior value two years before. According to the STL Today article, the preliminary figures from Jake Zimmerman, the St Louis County Assessor, show the median increase in assessment was 15% from the last assessment in 2017.
How does the St Louis County Assessors 15% Increase in property values compare with the market data?
According to the latest estimates by the National Association of REALTORS® (NAR), there are approximately 2 million licensed real estate agents in the United States. Last year, according to the NAR, there were a total of 5.341 million existing homes sold which equates to one agent for every 2.67 homes sold during the year in the U.S. Wow, talk about competition! Granted, not all licensed agents sell residential real estate as many focus us on commercial real estate, including industrial, retail, office, multi-family, and land, and others focus on farms, large tracts of land, recreational property, etc. Nonetheless, there is still a lot of competition in the real estate industry.
As of last month, there are 1,327,880 real estate agents that are members of the National Associaton of REALTORS® (NAR) and, according to a survey done by NAR of its membership, 70% of their members (929,516) list residential real estate brokerage and their primary field of practice.
How to choose a good real estate agent….
One question that is frequently asked by people interested in buying or selling a home is how should they choose a real estate agent? You can find extensive information on how to choose a good agent at AvoidBadAgents.com, but below is a list of questions to consider asking an agent you are considering working with:
Are you a full-time real estate agent?
Are you a REALTOR®?
How long have you been an agent?
What professional designations and industry awards have you received?
How do they communicate?
Do they know technology and does their firm use it for your benefit?
I saw an article recently about the results of a survey done of home sellers that found that nearly half of them didn’t realize they pay the buyers’ agent commission when they sell their home.
Sellers pay the buyers’ agent in almost all home sales in St Louis…
While I don’t know for sure, I would guess that the people surveyed were homeowners that planned to sell their homes, rather than sellers that already had their homes listed for sale. I say this because the standard listing agreement used by St Louis REALTORS® spells out the total commission being charged the seller, as well as the portion of the commission that will be paid to the buyers’ agent which I would think, would cause the seller to realize they are paying commission to the buyers’ agent.
While the seller, when presented with the listing agreement, could opt to not offer to pay commission to the buyer’s agent, the MLS rules require that all listings in the MLS (which is most of the St Louis home sales) include an “offer of compensation” for the buyers’ agent, which will come from the seller. Therefore, the sellers have to either offer to pay the buyer’s agent or forego having their listing in the MLS, hence why sellers pay the buyers agent in nearly all instances. It’s probably worth noting at this juncture that this practice has come under attack in a recent class-action lawsuit filed by Christopher Moehrl against The National Association of REALTORS®, Realogy Holdings Corp, HomeServices of America, Inc, Re/Max Holdings, Inc and Keller Williams Realty, Inc. The suit, which can be accessed using the link below, seeks to ban this type of commission arrangement.
The impact of the strong economy the U.S. is currently experiencing can be seen in the National Association of REALTORS (NAR) 2018 Member Profile. In the NAR report when agents were asked about the most important factor limiting potential home-buyer clients from completing a transaction, the answers given in the most recent survey show a strong improvement in economy-related issues from the 2015 survey. For example, below are some highlights from the survey for the most important factor limiting potential buyers in completing a transaction:
Difficulty in obtaining financing dropped from 26% in 2015 to just 12% in 2018
Low consumer confidence dropped from 5% in 2015 to just 1% in 2018
Ability to sell existing home dropped from 6% in 2015 to 3% in 2018.
It would be an understatement to say that Zillow® has many real estate agents nervous about their future. It’s not just Zillow® though, it’s Amazon, big banks, and dozens and dozens of new real estate start-ups and changing business models.
A true dysfunctional family…
The most common name that comes up in real estate agent circles when discussing the impact of the internet on the real estate profession topic is Zillow®, and usually in the context of “the enemy“, so to speak. It seems to me the biggest fear among agents about Zillow® is that they want to eliminate real estate agents and instead give consumers a marketplace to buy and sell homes without the need for an agent. What is most interesting to me about this, is that Zillow® made something like nearly $1 Billion last year from selling leads to, guess who? Yep, real estate agents. So, the group that is afraid Zillow® is gunning for them, is lining their coffers with cash to do so, see the dysfunction? To be clear, I’m not blaming agents here for doing business with Zillow®, nor am I saying what Zillow® is doing is wrong, I’m just commenting on what I see and find it rather fascinating.
But wait there’s more…
Going back to Zillow® and all those leads they sell to agents, what makes it even more interesting is the fact that Zillow® is able to generate all those leads as a result of getting more than 1 million real estate agents in the U.S. to send their listings to them and give them permission to market them. Hmm…
Money Magazine just released its “The Best Places To Live In America” list and St Charles came in at number 32 on the list and was one of only two cities in Missouri to make the list. The other was Lee’s Summit, in the Kansas City area, which came in at number 41 on the list.
In choosing the best cities to live in, Money Magazine looked at cities with populations of at least 50,000 people, then eliminated any place that had either a crime rate more than double the national crime risk rate, a median income of less than 85% of the state’s median household income, or a lack of ethnic diversity. After that step, they were left with 583 cities that “qualified”. From there, Money says they “then collected more than 135,000 different data points to narrow the list. We considered data on each place’s economic health, cost of living, diversity, public education, income, crime, ease of living, and amenities.” Their reporters then even went so far as to interview residents and checked out the neighborhoods of the best scoring cities to narrow down the list to the top 50 in the country.
Today, the Fourth of July is the day we celebrate the signing of the Declaration of Independence which took place 242 years ago on July 4, 1776. With the signing of this Declaration, the 13 colonies, or united States, declared their independence from Great Britain and thus, the United States was born!
While I don’t recall the specific number of times I have read this document, I can say with reasonable certainty that I doubt the number would take more than one hand to count. It’s pretty amazing that such an important document while referred to often, and celebrated annually, is read so little. Or, perhaps, I’m in the minority and others read it more often than I.
In any event, in celebration of “the 4th of July” or, more accurately, “Independence Day”, I just read the complete context of the Declaration of Independence and have shared it below for all that are interested to read. When you take the time to read it, think about what was happening at the time, the number of people that risked their lives, and gave their lives to create this, then later defend it, and then digest it all, it’s a pretty amazing document.
St Louis home buyers today face stiff competition from other buyers and often find themselves in a “multiple bid” situations where a seller has several offers to consider. This has led many buyers agents to suggest the use of “escalation clauses” by their clients in order to increase their chances of success. However, not everyone in real estate industry agrees that this is a good practice and some think it is doesn’t serve the buyer well. I tend to fall into the latter camp as I am not a fan of escalation clauses for buyers, however, in the right situation and when done properly, I do believe they could benefit a buyer.
What’s wrong with escalation clause use by buyers?
In the interest of brevity, which, is not my strong suit, I’m going to simply make a list of the issues:
If the buyer is willing to do an escalation clause, they are obviously willing to pay more than they are offering. Given that in the scenario that would give rise to an escalation clause being considered probably means the buyer gets one shot at it, it may make more sense for the buyer to make their best offer from the start.
Buyer is “showing their hand” to the seller. The escalation clause reveals to the seller the true value the buyer sees in the house and there is nothing that prevents the seller from using this to their benefit. For example, if buyer’s offer if $205,000 but the escalation clause indicates that buyer will beat any offer by $1,000 up to a maximum of $210,000, guess what my advice to the seller will get in terms of a counter offer? You guessed it, $210,000.
Seller may question buyers approach and choose to deal with a buyer that appeared more forthcoming. This one comes straight from experience on the sellers’ side of things on some deals. Some sellers are a little put off by buyers using escalation clauses feeling like they are willing to pay more but trying to take advantage and buy it cheaper if possible. If there is another “clean” deal that is close in price, the seller may choose to try to make a deal with them first. There is also some uncertainty for the seller as to whether the escalation clause buyer will actually agree to the increased price if it kicks in.
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If I had a dollar for everytime someone asks me when is the best time to sell their home I would probably not have to be writing this article today and instead would be relaxing somewhere warm :). My initial answer, while somewhat snarky, is always the same “when you have a buyer“. Actually though, just because there is a buyer doesn’t mean you are realizing the best price and terms as may be possible.
It’s not really possible to be totally objective when analyzing this as no more which data I choose to use or consider is going to make it subjective, but I think I have come up with a reasonable criteria to base my answer on. For the purposes of this article, below are the criteria I selected to include in my analysis and why:
Sold Price Per Foot– For an overall market view, price per foot is a good way to look at a trend.
Days on Market – The time it takes a home to sell is certainly indicative of how good or bad a current market may be.
% of Original List Price Sold For – This is a very good indicator of the market for when sellers are able receive close to their original asking price it is typically indicative of a good market (and a good listing agent that knows the benefit of properly pricing a home at the start)
% of Current List Price Sold For – Like the previous one, and is somewhat an indicator of the strength of the current market but is probably more driven by a seller finally facing reality and getting the price to the point where their home sold.
I then created the chart below, using software created by MORE, REALTORS for the St Louis 5-County core market for the past 24 months and then plotted the data above. As the chart illustrates, during the past 12 months, one clear “winner” stands out when all the planets aligned (or data) to deliver the best result to the seller and it happend with closings that occured in June 2017. Therefore, the best month to sell your home is June, right? Wrong! Considering the average sale takes about 5 – 6 weeks to close, and these closings occured in June, the majority of these homes most likely went under contract for sale in April and May, with the majority in May. So, not surprising, since I believe most agents would give this answer without even doing research, but the spring market, April and May is the best time to sell your home. If you look back to June 2016 on the chart, while the % of original price didn’t fare as well as in 2017, June 2016 was defiinitely a winner month for sellers as well!
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So does this mean you shouldn’t sell your home in the winter?
One downside to conversations like this is it can create a certain panic among homeoweners that are considering, or need to sell, but have missed the spring season. Does this mean they should wait unitl next spring? While there’s a lot to take into consideration, the short answer is no, you don’t have to wait until spring. There are advantages to selling in “non-peak” seasons, including less competition, not to mention, if you are buying another home, you will have a better chance of getting a good deal.
Therefore, the perfect scenario is to put your home on the market for sale April 1st, sell it, close it and live in temporary housing. Then, December 1st, start the search for your new home. :)
In today’s low-inventory real estate market here in St Louis, it’s common for would-be buyers to miss out on a house they want even when they make a strong offer only to find out they got beat out by another buyer offering a higher price or better terms. This is particularly true for people trying to buy a foreclosure with increasing demand and decreasing supply, it is not uncommon to have 5, 10 or even more offers for the newly listed foreclosed property.
Does the listing agent have to inform you of multiple offers?
No one likes to get beat out, particularly on the house of their dreams, so the whole offer and negotiation process can get a little emotional at times. This is particularly true when a buyer, who didn’t even know they were in competition, finds they were beat out by another buyer. This almost always results in the losing buyer asking their agent why they didn’t know there were other offers. This can even get contentious between the agents as well, with the buyers agent often feeling “wronged” if the listing agent didn’t make them aware that they had multiple offers.
There is not one black and white answer as to whether a buyer should be informed they are in a multiple offer situation or not. We have to dig in a little deeper. For starters, if the listing agent is not a REALTOR® then they are just obligated to follow Missouri license law as well as the rules and regulations established by the Missouri Real Estate Commission, both of which are silent on the specific issue of multiple offers. However, the license law and rules are very clear about the fiduciary obligation an agent has to a client, therefore, a listing agent is bound to act in the best interest of their seller. Therefore, if the seller does not want the listing agent to reveal the existence of multiple offers to buyers, then it is not in the sellers best interest for the listing agent to reveal it. If the listing agent is aREALTOR® (as are the majority of real estate agents in the St Louis area) then, in addition to state license law and rules, they are also bound to abide by the National Association ofREALTORS® (NAR) code of ethics. The code of ethics, specifically standard of practice 1-15 states “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers approval, disclose the existence of offers on the property.” The key here is “with sellers’ approval”, so, without the sellers approval, the listing agent should not reveal that multiple offers exist to your buyers agent.
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Don’t I get a chance to increase my offer? What about “highest and best”?
Before I go further, I should mention that it is my belief, the existence of multiple offers is revealed by the listing agent (presumably with the sellers approval) many more times than it is not as, normally, it is generally in the sellers best interest to let buyers know so the “bidding war” can start.
So, speaking of bidding war, the next thing that comes up from buyers in multiple bid situations is the question as to whether they will get a chance to increase their offer. As in the question of whether to reveal multiple offers in the first place, it comes down to what is in the sellers best interest and what the seller has instructed the listing agent to do. Often, particularly on foreclosures, listing agents will employ a “highest and best” strategy in which they generally go back to all buyers that submitted an offer and give them an opportunity to increase their offer realizing they will probably just have one shot at it. Some buyers like this as they have an opportunity to sharpen their pencil and others deplore it feeling like they are bidding against themselves, in any event though, this tactic often works in producing a very good offer for the seller. However, there are many sellers that, in a multiple offer situation, will not go this route and may choose to negotiate with a particular buyer without informing the other buyers. This is often the result of a buyer standing out, usually with the offered price but also terms that the seller finds attractive, such as perhaps a cash deal, short closing, etc. As a result, the listing agent will often go back to one buyers agent and negotiate without going back to the others which, as long as he is acting in the sellers best interest, is fine.
My advice to buyers
Everything I have discussed here are reasons why, when you choose an agent to represent you as a buyer, you want to use better criteria than “they are the cousin of a friend”, “they are a neighbor”, etc. Your buyers agent plays a much more significant role than just “showing you houses” and their experience, knowledge, negotiation skills, reputation within the industry, relationships with the listing agents in the areas you are looking in, etc, will all be critical in the process. A strong buyers agent can make the difference between you suffering many disappointments and securing your dream home on the first try!
At MORE, REALTORS, we have some of the finest agents in town and invite you to check us out. STLRE.com.
The National Association of REALTORS® (NAR) just released it’s 2017 Remodeling Impact Report, in which they rank Kitchen Renovation and Upgrade at the top of their list for appeal to buyers as well as for most likely value to the home for resale. Next on the list, in both categories, was Bathroom renovation.
According to the report:
The average cost of a kitchen upgrade was $35,000 and, on average, added $20,000 to the value of the home, for a recovery rate of 57% of the cost.
The average cost of a complete kitchen renovation was $65,000 and, on average, added $40,000 to the value of the home, for a recovery rate of 62% of the cost.
Exterior improvements appear to be the better investment,however, with a New Roof ranking #1 on the list for both buyer appeal as well as increasing resale value, followed by New Vinyl Windows.
According to the report:
The average cost of a New Roof was $7,500 and, on average, added $8,150 to the value of the home, for a recovery rate of 109% of the cost.
The average cost of New Vinyl Windows was $18,975 and, on average, added $15,000 to the value of the home, for a recovery rate of 79% of the cost.
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I am always marveled by great marketing and promotion therefore I must give a tip of the hat to Zillow® for their new “Instant Offer” program. First, it’s getting them tons of attention and press, particularly within the REALTOR® community, which is probably where it is the most beneficial to them since real estate agents are, after all, Zillows’® paying customers. Courtesy of Inman News, REALTOR.com and others, this new program has received the equivalent of thousands and thousands of dollars of free advertising, which is the type of thing I love and dream of getting this type of free publicity for my firm.
Instant Offer concept is not new…
So, why do I say it’s nothing new? I have nothing against Zillow® (although many in the REALTOR® community are not fans as they see them as a threat) however, I really don’t see anything “new” or revolutionary about their instant offer program. Basically, according to their website, what their program does is allows you to submit information on your home to them which then goes to a group of national investors who then submit you a cash offer for your home. Then, an inspection is done of your home (I’m guessing the offer is subject to this inspection being favorable) and if so, then you proceed to closing. Homes have been sold in this manner for decades, including right here in St Louis, so it’s nothing new. When I entered the real estate business here in St Louis in 1979, there were many “speculators” in St Louis, including the broker I worked for, that would make sellers a cash, as-is, offer on their home and would offer to close as fast as 24 hours. So, basically, the same thing as the “new” Zillow® instant offer program with a few exceptions including that our offers were typically unconditional (other than that the seller had good title), truly as-is and we were local, people the sellers could meet, talk with and establish a relationship with as they contemplated whether or not this approach to selling their home was a good decision. Over the years, I was involved in the purchase of over 2,000 homes in this manner right here in St Louis. Today, thanks to internet webinars, reality TV shows and just a wealth of information being readily available, there are many, many people, that, in addition to the established “professional investors”, out there trying to buy real estate in this manner.
Do you want an “instant offer” on your home?
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Today, with the help of the internet, you can get information on just about anyone and usually rather easily. From information websites, to blogs, to classified ad sites and social media, there is a plethora of information about people available with much of it (thanks to social media) coming right from the source…the people themselves. With all this information so readily available, it has become common for home buyers, sellers and/or their real estate agents to use the internet to try to get a leg up on the other side in a real estate transaction. However, this has led to some issues and concerns as to whether this should be done or not.
How a home buyer can benefit from internet snooping…
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Yesterday, the National Association of REALTORS (NAR) released their existing home sales data for October 2016 which revealed home sales in the U.S. during that month were at a, seasonally-adjusted, annual, rate of 5.6 million homes, an increase in rate of 2 percent from the month before. We track St Louis home sales data in a little different manner, comparing the most recent 12 month period with the prior 12 month period, so a rolling 12 month average of sorts. Using this method, as the table below shows, home sales in the St Louis MSA for the 12-month period ending October 31, 2016, increased 6.0% from the prior 12 month period and we have branded the St Louis MSA housing market as a “Hot Seller’s Market“.
There were 36,139 homes sold in the St Louis MSA in the 12 month period ending last month, up from 34,089 homes sold during the prior 12 month period. During the most recent 12-month period, homes in St Louis sold for a median price of $167,837, an increase of 6.64% from the prior 12-month period when homes in the St Louis MSA sold for a median price of $157,388.
If we look at home sales for just the month of October, using the chart beneath the table below, we see that there were 2,925 homes sold in the St Louis MSA during the month, an increase of 8 percent from October 2015 when there were 2,711 homes sold. The median price of homes sold last month was $165,000, a 7 percent increase from October 2015 when the median price of homes sold in the St Louis MSA was $154,000.
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Over the past 5 years or so I have written a few articles on the topic of the mortgage interest deduction (MID) and how, in spite of what many others in the industry say, I didn’t think it was that critical to the housing industry. All the while, the National Association of REALTORS (NAR) (of which I’m proud to be a member, just happen to disagree on this topic) has staunchly supported the MID and warned that if the deduction went away the housing market and home buyers would suffer. NAR published a fact sheet on the topic stating:
Repealing the Mortgage Interest Deduction (MID) is a form of tax increase. Families with children would bear more than half of the total increase.
IRS data show that taxpayers in the 35-45 age group take the largest MID on average compared to any other age group of taxpayers.
First time home buyers would be hurt the most if the MID is curtailed.
Current data from the IRS show that 65% of the taxpayers who have claimed the MID made less than $100,000.
The housing market has not emerged from the crisis that began in 2007.
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It’s a beautiful spring Sunday morning in St Louis and many people will spend part of the afternoon touring open houses…some looking for their next home, some to see what homes in their neighborhood are selling for and some simply to kill time, satisfy curiosity or get some decorating ideas. Whatever your reason for seeking out St Louis open houses, the best source to find information on all the homes that are scheduled to have open houses today (with information from a database that is updated direct from the MLS!) is StLouisOpenHoues.com. On this site, you can search open houses in a variety of ways:
As of the time I wrote this article, there are 1,188 St Louis Open Houses scheduled for today and showing on StLouisOpenHouses.com
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It’s hard to drive through a neighborhood today and not see a “coming soon” rider on a for sale sign in front of a house. With the St Louis real estate market still favoring sellers in many markets due to a low supply of homes for sale, it’s not surprising that coming soon listings create somewhat of a fervor among would-be buyers and their agents. However, it is not uncommon for a buyer to wait patiently for a coming soon listing to hit the market, only to find that that at the same time it comes on the market “live” in the MLS, it immediately goes to a pending sale status leaving the would be buyer out on the cold.
What’s wrong with this picture?
Assuming the seller was under the impression that, by listing their home with a REALTOR® they would get maximum exposure for their listing, through the MLS as well as the thousands of websites that receive MLS info through syndication, IDX feeds and the like, and therefore obtain the highest price the market would bear for their home (which is what you would expect from maximum exposure to the market) then the seller was short-changed. By presenting an offer to a seller before the listing was ever taken “live” and given all the exposure the MLS has to offer, then the seller has no way of knowing that they received the highest price and/or best terms the market would bear. All the seller knows, is that from the few people that happened to call on the coming soon sign, or that the listing agent told about the property, this was the best offer.
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St. Louis County is entertaining the idea of adding the City of St. Louis to its list of incorporated municipalities. All legal opinions firmly show that the County will absorb NONE of the City’s nancial responsibilities. If this were to happen the City of St. Louis will be no different than municipalities such as Clayton, Ellisville, or Chester eld. It would simply be another city located in St. Louis County. I am an advocate for this move. The City needs to cease County functions and turn them over to the County. Currently, practices and city functions run at inefficient levels.
If the city were to join the St. Louis County roster then we would have about 91 municipalities in the County. It should be noted though that 23 of them have less than 1,000 in population. Why does that make sense for a few blocks of St. Louis County to incorporate? If you ask them, they want to control their neighborhood, perhaps a worthy endeavor. However, we then have 90+ City Administrations for a population of 1.3 million (City and County). Some may suggest that this is very inefficient and a misuse of funds. But how inefficient is it really?
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Before I begin, I should point out that what I’m about to tell you runs contrary to what the National Association of REALTORS® (NAR), the largest trade association in the country and one I belong to and support, will tell you. The NAR position on the mortgage interest deduction (MID) is, quoting from their website, “the mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership.” Many St Louis REALTORS® will echo the message of NAR but I think if more people took the time to look into the MID, and do a little simple math, they would see that the mortgage interest deduction does not appear to offer any real benefit to the ordinary, typical homebuyer in St Louis.
What brought this to mind this morning was a friend of mine on Facebook (who is a loan officer for a St Louis mortgage company) posted a link to an article written by an owner of a Chicago real estate company outlining the benefits of the MID and, while I think he did an excellent job of laying out the potential tax savings of deducting mortgage interest and property taxes on a home, I think he left out a key component, namely, the Standard Deduction.
Why the MID doesn’t help the normal home buyer in St Louis:
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The number of homes sold “For Sale By Owner” (FSBO) dropped to a record low of just eight percent of all homes sold, according to the National Association of REALTORS (NAR) 2015 Profile of Home Buyers and Home Sellers report. A commentary posted on the Economist’s Outlook Blog by Amanda Riggs, Research Survey Analyst for NAR. on the NAR website indicated that homeowners that sell as a FSBO often find it doesn’t turn out as they expected either in the amount of time it will take on their part nor in the price they ultimately receive. Highlights from Rigg’s commentary include:
Forty-eight percent of people who sell without a real estate agent think that if they sell themselves, they’ll end up doing a little extra work in exchange for not paying a commission or closing fee. According to the research, however, what they actually get is a lot of time spent hustling to make the sale and a final selling price that is less than what the market can bear.
FSBO sellers sold for prices lower than listed homes. According to the report, the median selling price for all FSBO homes was $210,000 last year. For homes sold with the assistance of an agent, the median selling price was $249,000 ̶ almost $40,000 more for the typical home sale.
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Pending home sales in the U.S. fell again in September, to the second lowest level this year, according to a newly released report from the National Association of REALTORS (NAR). According to the report, pending home sales in the U.S. dropped 2.3 percent in September from the month before.
St Louis Pending Home Sales Increase In September..
In contrast to the national picture, as the charts below show, St Louis Pending Home Sales rosein September, increasing 8.6 percent from September 2014 and on a year to date basis, through the end of September, pending home sales for 2015 are up almost 10 percent (9.9%) from the same time a year ago.
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I often find myself very surprised to hear how a consumer chose the real estate agent they hired to represent them and hear things such as “I work with him…”, “She is a friend of….”, “He is my cousin…” etc. When I hear these responses several things come to mind:
Wow, our industry has done a poor job of looking and acting like professionals in the eyes of the consumer. So much so that many consumers don’t see a real estate agent as a true professional or, if they do, they don’t seem to use the same selection process as they would when selecting other professionals.
Many consumers think the process of buying and/or selling a home is much simplerthan it really is and has far less liability associated with it than it really does. Like many things, buying or selling a home today is much more regulated than it was even just 10 years ago the penalty for mistakes has grown significantly. Come October 3rd, when the boat load of additional regulations associated with the Dodd-Frank Act go into effect, it will become even worse.
Consumers deserve to be more informed about the home-buying (or selling) process as well as how the real estate industry, and agents within it, work. They also need to understand what to look for in an agent and choose one like they would choose an attorney, doctor or CPA.
The real estate industry is concerned about low-quality agents…shouldn’t you be?
Recently, there have been two reports issued by key players in the real estate industry, the National Association of REALTORS® (NAR) and Inman, in which concern about low quality real estate agentswas expressed. In the NAR report, title the “D.A.N.G.E.R. Report”, in which the trade association examined what they saw as threats to the real estate industry, under the “Dangers to Agents” category, #1 on the list was “Masses of Marginal Agents…”.
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The median price of homes sold in St Louis (the 5-county core market) this year thus far has been $169,000, an increase of 5.7 percent from when the market peaked in 2006 at $159,900. While the peak of the housing bubble is considered to be 2006, as the chart below shows, St Louis home prices actually peaked in 2007 at $162,000 but, in either event, St Louis home prices have regained what was lost when the housing bubble burst and then some.
This is in contrast to what is happening at the national level with regard to home prices as evidenced by comments made by two of the top economists as teh National Association of Real Estate Editors (NAREE) conference last week. At the conference, Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) said he “anticipates home prices will return to their 2006 peak sometime this year” and Frank Nothaft, Chief Economist for Corelogic (and formerly for Freddie Mac) predicted home prices nationally would not return to 2006 levels until the end of 2017.
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Today, the Fourth of July is the day we celebrate the signing of the Declaration of Independence which took place 242 years ago on July 4, 1776. With the signing of this Declaration, the 13 colonies, or united States, declared their independence from Great Britain and thus, the United States was born!
