Tuesday, December 19, 2006

Keep It Clean!

The car wash in my home town of Birmingham, MI has an expression - "A clean car drives better." While we might doubt the veracity of the claim in its literal sense, we have all felt the sensation of driving away from a car wash, detailing, or oil change; the car just feels so much better.

The same holds true for the marketability of a house. A clean house lives better - sells better too. Certainly a clean house and a dirty one have the same objective market value (if such a thing truly exists). A clean house just shows so much better.

Prospective buyers like to, consciously or subconsciously, picture themselves living in "their" new home. They mentally arrange their furniture, hang their pictures, and make their first dinner in the new kitchen. When they see hairs on the bathroom sink (or elsewhere), dust on entertainment center, or smudges on the kitchen counter, they no longer want to live there. Sure, all of our homes get dirtier than we like from time-to-time. We get busy or distracted, or we'll "do it tomorrow". But who wants to move into an already dirty home?! Not many.

Rationally speaking, when investing $200,000, a half million, or even several million dollars on a new home, the immediate cleanliness of it shouldn't really factor in. For $100 you can hire someone to scrub the place from floor to ceiling. What's $100? Well it's about 0.025% of the average Chicago purchase price.

It's also often the difference between getting a second showing on your home and not.

Friday, November 24, 2006

Don't Wait Until Spring to Sell Your Home

Many homeowners that I've spoken to over the last couple of months have asked if the spring would be a good time to list their home. The prevailing belief seems to be that the real estate market "picks up" in the springtime, and thus, it is the best time to list one's home.

True. And false.

Yes, there is an up tick in activity in the springtime, particularly in the Midwest. Its warmer outside, there's no snow and ice to dodge, and home shoppers are happier to go from home to home, appointment to appointment, and open house to open house. Homeowners know this, and so they wait until the spring to list their home. After all, you don't want your listing to get "stale".

The problem? There's a deep inventory in Chicago now. There are many homeowners waiting until spring to put their home on the market. Unless there's a sudden boom in home purchases, there will be more homes on the market in the spring than there are now. There will be no sudden boom.

Prices are driven by the age-old battle between supply and demand. While the demand for homes may dip in the winter months, the supply will also dip. The ratio between supply and demand will be somewhat preserved. There will always be people buying and selling homes, even on the coldest day of the year. In the springtime, I believe that the combination of homes already on the market, and the new "spring chickens", will impact that balance between supply and demand. Time on market for homes will increase, and prices may hold steady, or even lag a little bit.

Other considerations:
  • When it's nice outside, everyone is looking at open houses and eyeing homes for sale. When it's cold, only serious homebuyers are shopping. Separate the wheat from the chaff!
  • Many corporate transfers occur at the beginning of the calendar year. If you wait for April or May to list, you will miss out.
  • Your home looks nicer during the holiday season, doesn't it? More enticing? More home-like? That's what sells a home - looking like a home.
Don't wait for the influx of spring listings to compete with your place. List now. Sell now, and present potential homebuyers the best value in your price range.

Thursday, October 19, 2006

FSBO vs. Agent Representation - Get an agent!

Thomas M. Stevens, President of the National Association of Realtors (NAR) stated earlier this year that "the level of for-sale-by-owners (FSBO) is on a sustained decline and is now at a record low. In addition, a growing share of FSBO properties are not placed on the open market - they're private transactions."

Why is that? Why are more and more homeowners opting to hire an agent, and pay a professional fee (a.k.a. the dreaded commission) rather than sell the home themselves?

For starters, they end up with more money. According to a January 2006 NAR article:
The median home price for sellers who use an agent is 16% higher than a home sold directly by an owner... there were no significant differences between the types of homes sold.
Home sellers who are aware of this statistic recognize that an agent's commission will be far smaller than 16% of the purchase price of the home - 10% lower! On a $300,000 home, the average seller listing with an agent will net an additional $30,000 over their neighbor selling on his or her own, never mind the out of pocket marketing costs.


There are many reasons, actually. Says Stevens, "Agents know best how to prepare a home and maximize value, agent's provide a broader exposure to the market and are more likely to generate multiple bids..." Furthermore, "owners without professional assistance also have problems in understanding and completing paperwork, prepping the home for sale, getting the right price and selling within the time planned."

Marketing majors can tell you the "four P's of marketing" - Product, Price, Place (location), and Promotion. One of those "P's" you cannot control as a home seller - location, not without a very large truck anyway.

Your product is your home, obviously, and while it will have the same number of beds, baths, and common areas once your agent is done with it, a talented Realtor® has seen hundreds of homes and can help you stage your home to sell at the peak of its potential.

Your price, or the value of your home, is defined by exactly what homebuyers are willing to pay at a given point in time. Homes that are promoted as For-Sale-By-Owner are perceived by homebuyers as potential bargains. There's no colorful sign, there's no professional agent, there's no fancy marketing, and so on. It must be a deal, right? Furthermore, they don't get as many eyeballs -we'll talk about that more in promotion. Finally, if a home price is set too high, it will sit on the market. Homes that sit on the market are perceived as stigmatized properties, and typically garner a lower selling price than they would have gotten if priced correctly from the start. Professional Realtors® are trained to study the market, compare homes, and set a realistic home price that will allow the seller to maximize their value.

Finally, promotion. If your home is worth what a buyer is willing to pay, isn't it a benefit to have many potential buyers see your home? The more buyers, the more perspectives. The more perspectives, the higher potential price a buyer is willing to pay. Two interested parties? Three interested parties? Hmmm... a bidding war sounds pretty good right now, eh?

How do we promote your home? According to the NAR study, 54 percent of buyers used Realtor.com in their search. If you hire a Baird & Warner agent, your home will automatically appear on Realtor.com. 50 percent use the Multiple Listing Service in their area. In Chicago we have two, MLSNI and MAP MLS. Baird & Warner uses both, by default.

38 percent of home buyers utilize a real estate company website. Who has the most popular, most active website in all of Chicagoland? You guessed it, Baird & Warner. 31 percent utilize real estate agent websites, your home will be listed there as well. 15 percent use local newspaper websites like ChicagoTribune.com - Baird & Warner puts every one of their listings there too.

Promotion doesn't stop at advertising your home online and in the paper, you have to show your home to potential buyers as well. Agents work evenings. They work weekends. They show your home to other agents who have buyers through activities like Office Caravans and Broker's Tours. These are opportunities that FSBOs miss out on altogether.

The option is yours, Mr. and Mrs. Homeseller - block off your nights and weekends for the next three months, develop your own marketing plan, monitor your competition through continual market research, seek out and complete complicated forms and contracts, and take a $30,000 hit to your net proceeds, OR hire a Realtor and sit back and enjoy the ride.

Wednesday, September 27, 2006

Buying a Home in Chicago - There May Never Be a Better Time

The Illinois Association of Realtors is reporting that the sale of homes in Chicago has slowed and the inventory of homes on the market has increased. The Illinois median home price has actually dipped by 1.9%, and although Chicago prices have not fallen, the upward trend seems to have stalled for now. Combine that fact with dipping interest rates, and it is truly the right environment in which to buy.

From the IAR website:
Last year at this time we were experiencing record home sales and a tight supply. Now REALTORS are reporting more homes on the market, which means improved opportunities for buyers, especially with the recent dip in interest rates,” said Robert Zoretich, president of the Illinois Association of REALTORS. “The Illinois housing market should experience a soft landing as we slow down from last year’s record-breaking sales pace. The best thing that any seller can do in a softening market is to work with a professional to correctly price and market the property.
So you own a home already, and you're worried about upgrading now? You don't want to settle for less than you think your home is worth. If its a buyer's market it can't be a seller's market too, right? Right, and not right.

Interest Rates over the Last 22 Years

Image from mortgage-x.com

If you're considering buying a new home you may need more space, you may be able to afford more space, and you may subscribe to the investor's adage "buy low and sell high". You may have bought your current home "low", but selling it "low" now will enable you to make the greater investment, and investment in a bigger, more valuable home now, when you can still buy "low". Would you rather 100 shares of IBM or 200 when the market goes up?