The Pricer per Square Foot Argument

As I go another listing appointment I know the first question that will be asked: HOW MUCH IS MY HOME WORTH? Of course that is the most important factor our sellers look at when deciding to sell their home and of course which realtor to choose. I lost a listing last month because the seller held me to a price that was said as part of a lengthy discussion on marketing the property. Side-note: This home in question is in my neighborhood where my real estate partner and I have lived for over 12 years. We have had the most resale transactions in the neighborhood for the last 4 years! Back to the story: I gave him a quick number with the comment "If you want to sell it quickly". To this day he took that number, held me to it, and hired another agent two weeks later. However the seller does not seem to remember that our discussion continued. The seller had taken price per square foot of recent sales and arrived at a much higher price. We discussed this and I said he had a very valid argument. At the end of the discussion the seller said he wanted to list it for his amount and I said we could do that and see how the market reacts. Quick history of the home: •Built in 2005 •Approximately 3675 square feet plus unfinished basement •Went into foreclosure in the summer of 2013 •Overall good shape for a foreclosure •Listed, in foreclosure, for $327K, lowered to an auction price of $289K after 6 months of being on the market! •Present seller buys home in foreclosure auction for $284K •Present seller puts approximately $10K to 20K in work on home. •Present seller wants to list it at $399K! •I bring him an offer, before it is listed, at $389K, with $11K in closing cost. Seller turns offer down. Says he wants $10K more Here is my point: We cannot base the price of a home exclusively using a price per square foot model. In this particular case the home did not sell in foreclosure at a much lower price. It had to be sold at auction. Why is it going to miraculously sell now, over $100K higher than auction price, because the seller has cleaned it up? The home is located in a part of the neighborhood that is in lower demand than in other parts. It does not have a golf course or lake view that most buyers want in our neighborhood. When pricing a home you need to know the history of the home, its location in a neighborhood, and other subjective criteria, before pricing it. The price per square foot is a great start but it is not the ultimate determining factor!

Build or Buy in North Georgia

According to everything you read in the media the housing market is booming. Prices are up and inventory is down. New home sales are also starting to see an increasing demand. So this must be a good time to build!!!! In North Georgia the jury is still out. Here are some considerations: •Price pre square foot will be higher on a custom built home over a resale •Lenders, for new construction, are available but not easy to find •Lenders have tough terms when building a new home •Lenders have a fear that a new home will not appraise in a neighborhood of resales •Price overruns are possible I have seen great deals on new home construction. This is in new neighborhoods built by large builders who can keep their cost competitive. For now I advise my clients to take a good hard look at the pros and cons of each situation.

A Line Drawn in the Sand

The media is full of great stories about our national housing market. Atlanta is also included as one of the latest success stories. If you read between the lines in these articles you will see that the surging house market is also causing other issues for homeowners. For the homeowner who is "underwater" in their home, moving forces them into a financial dilemna: lose money on their existing home to pay more for another home or stay where they are? What I am seeing an hour north of Atlanta is a direct result of the perceived surge in home sales: My neighbors are holding out for 2007 prices. I live in the only golf/boating community on Lake Lanier. At one time I saw homes selling for $1 million dollars! Last year the highest priced sale was $430,000! Many of my neighbors bought lake homes at the top of the market. In addition they spent more money on upgrades. As the foreclosures and short sales appeared in the neighborhood, prices declined. Finally we have reached the bottom. In the case of our area it was a 30% decline to the bottom. So now my potential sellers are in a quandry: •I want to sell my home but I dont want to lose money •Everything I read says the housing market is on its way up. Where is my price increase? •I dont understand why buyers will not pay what I have in my home. As a result they have "drawn a line in the sand". They are going to hold out until they can get their "fair" price for their home. The line has been drawn.

Short Sales and Electronic Signatures

I was so excited to see electronic signatures become acceptable in Georgia. In the comfort of my home I can fill out contracts, email them to clients for signatures, and have them returned to me via email. NO MORE PAPER! Now lets talk short sales. I happily sent two separate banks two purchase and sale agreements. What lending institution would not be happy to receive an offer on their distressed property? In both cases the bank rejected the offers because of the purchase and sale agreements. They would not accept electronic signatures! If we wanted to use these contracts we would have to fill out additional paperwork that required regular signatures! I was back to paper! So much for a good idea.

It's Ground Hog Day

I was watching Ground Hog Day over the weekend with my son. This was the movie with Bill Murray where he went to Punxsutawney PA, as a newscaster, to report on Ground Hog Day. He ends up repeating the same day over and over in the town until eventually the cycle is broken. (I do not explain movies very well!) Ground Hog Day would be the perfect theme for a lot of clients I am dealing with in North Georgia. The Atlanta area had a good year last year. Reports of a 1 to 2% price increase, lower inventory, and new construction. That is great news for an area that went down approximately 30% after the market peaked in 2005! Unfortunately we have sellers who had bought their home at the peak of the market. They also put additional money into their home as upgrades. Our sellers are under the impression that the market has turned around to the point that they can receive a higher amount for their home. The reality is that when a market goes down 30% and has since gone up 2%, we have a long way to go. In other words it is Ground Hog Day: Bill Murray has woken up in bed to the same Atlanta housing market he saw last year. Bottom line: Yes our market is doing better but it is not back to the 2005 levels. Our sellers need to take this into account when they decide to sell their home.

MY POCKETS ARE FULL...OF "POCKET LISTINGS"

I know that most of you have never heard this phrase from your friend or neighbor (sarcasm): "If you know somebody who is looking for a home in our neighborhood bring them to my home, I am willing to sell". Yes they are willing to sell: •If the buyer is an all cash buyer so we do not have to have an appraisal •The buyer will pay top dollar for my home including everything I have done to the home •The buyer will close when it is convenient for me •I do want to sell but under my terms My partner and I have pockets full of our neighbor's "pocket listings". We appreciate them giving us the opportunity to sell their home but we are scratching our head on why they will not list with us. Why won't they list their home? •They do not want to pay commission? •They do not want people seeing their home on the internet? •They do not want the neighbors to know they are trying to move? •They do not want to show their home too much? We are trying to wrap our hands around this to give these potential sellers the reasons why they need to list their homes with an agent. •Our neighborhood has no new construction. Buyers have seen the existing inventory and have decided not to come into our neighborhood to look further. They have no idea about these "pocket listings". •We get clients when they find our listings on the internet, or drive into our neighborhood and see our signs. If they do not see a home they like they will not contact us. Therefore we do not get the chance to meet with them and show them our additional "pocket listings". If over 90% of potential buyers start their search on the internet then there is a good chance the "pocket listing" will never be seen. To my fellow real estate agents? What do you think? Meanwhile I remember as a kid when I had army men, bubble gum, pennies, rocks, marbles, and baseball cards shoved in my pants pockets. Ultimately my mom would end washing my pants along with their contents. Unfortunately we do not have a washer big enough to wash my pants with all of these pocket listings. Have a great holiday!

BUT ITS A USED HOUSE!

Here is a trend we are seeing in the North Georgia real estate market: BUT THE HOME IS OVER 10 YEARS OLD! WHY WOULD I BUY THIS HOME WHEN THERE IS SO MUCH TO DO! I live in the only golf course/boat community on Lake Lanier. One hour north of Atlanta it is truly a resort lifestyle experience. Unfortunately there is no new construction going on in the neighborhood! Why? Because the North Georgia area is slower than closer into the city. Because the North Georgia area does not have the jobs and we are too far to commute everyday into Atlanta. We are becoming a quasi retirement area where the empty nesters move to get away from the suburbs! This means that there is not enough demand to bring builders into our neighborhood to build specs. So here comes our clients who have waited for the opportunity to move into this neighborhood. Kids gone, golf clubs in the car, they are finally ready to buy after many years of driving the neighborhood looking for their future dream home. Those houses they have seen for years have grown older. Their dreams have been wiped out because they wanted a brand new, fully updated home, at a foreclosure price! Where is this home? The home has aged. If you want the newest and greatest build a new home. They do not want to because that would cost too much! I want a new home but at a deeply discounted resale price! They drive home dejected and confused. This is not fair. I should be able to have it all at a low price. Just not fair. So they go back to their existing home, read some real estate articles, watch HGTV, decide if they want to move or upgrade their current "older" home, and wait for the next "new older home" to appear in our neighborhood for sale. The cycle then continues.