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How Much Is Free Advice Worth?

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | May 17th, 2019

Just as some people look for love in all the wrong places, some homebuyers and sellers look for advice in all the wrong places.

Rather than seek the counsel of their real estate agents, they ask practically everyone else how they should proceed.

Among the questions they pose to anyone within earshot: “Should I offer above the asking price?” “Should I hire an attorney?” “Should I forgo a home inspection?” “Do I really need to offer a warranty?” “Can I make a lowball offer?” “Can’t I just sell my house myself?”

But ask yourself this: How much is free advice worth?

The topic was raised recently on the ActiveRain online real estate community by agent Scott Godzyk of New Hampshire’s Godzyk Real Estate Services.

Admittedly, Godzyk was having a bad day. A client of his had sought advice from numerous sources, but not from Godzyk -- the agent with whom he had listed his property for sale. The place was priced at the highest end of the market, but needed some work, and had been for sale longer than neighboring houses listed at more reasonable prices.

“The seller solicited advice from everyone but the listing agent,” said the broker-agent, who just happens to have 30 years’ experience in the field. In situations like this, he said, “the seller ignores the listing agent’s value and ignores the listing agent’s advice.”

So before you think about taking someone else’s advice over that of your agent, ask yourself: Do you really want to take the word of someone who last sold a house 20 years ago? Or should you, instead, trust someone who bought or sold 11 houses in a single year?

Why 11? That’s the number of deals the typical realty agent handled in 2017, according to the latest member profile published by the National Association of Realtors.

Some other profile stats worth noting: The average agent works 40 hours a week. She (52 percent of all agents are women) gets 17 percent of her business from referrals and 12 percent from repeat clients, so she must be doing something right.

Many agents bring broad experience to the real estate world: About 32 percent had previous careers in fields like management, finance, retail or sales. And they work at real estate day in, day out -- often day and night.

Sure, there are agents out there who don’t have this kind of experience or success. But you won’t be saddled with one if you do the homework necessary to find a good, qualified agent. And once you do find an agent you trust, listen to him or her -- not the peanut gallery.

“Sometimes sellers shoot themselves in the foot,” says Anna “Banana” Kruchten of the Phoenix Property Shoppe. “Even though they’ve been given expert advice, (they) decide to do it their way, or somebody else’s way that has no clue.”

Myrl Jeffcoat of GreatWest Realty in Sacramento once listed a house for a seller whose two sets of in-laws “almost got into a fist-fight over how to proceed with a sale. Yet, neither had thoughts that were sound, or based on professional knowledge.”

Similarly, Francine Viola of Washington’s Coldwell Banker Evergreen Olympic Realty worked with a buyer whose neighbor told her she should offer $10,000 over the asking price, even though the house had been languishing on the market for months with no nearby competition.

Some other examples of really, really bad advice:

-- “You can sell your house as-is. You don’t need to disclose or fix anything.” Wrong. An owner is obligated by law in most places to divulge anything and everything regarding the home’s condition. You don’t have to repair what’s wrong -- but of course, you should. Otherwise, you will almost certainly get lowball offers, if any at all.

-- “Where I come from, the seller doesn’t have to pay the buyer-broker’s fee.” Incorrect. In most places, the buyer-broker, who is working solely on behalf of the buyer, is paid half the commission paid by the seller to the listing agent.

-- “It’s a seller’s market, so you can ask whatever price you want.” Sure, you can ask for the moon. But if the market is starting to turn -- as it is now, in some places -- you won’t get any offers. And if you do get a contract, it will be for well below what you’re asking.

-- “Pick an agent who promises to obtain the highest price possible.” Nah. Overpricing a property is one of the oldest scams used by agents to secure listings. Better to base your choice on his or her past performance, expertise in your specific market and marketing plan for your home. Price is a separate issue.

So, the next time someone offers you an opinion, ask yourself this: Just how much is free advice really worth?

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Today’s New Buyers Want Smaller Houses, Closer In

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | May 10th, 2019

In something of a throwback to the 1920s, a new minimalist trend, in which less is more, may soon be taking hold in new-home design. At the same time, some builders will be heading deeper into urban and close-in suburban spots where location will be the primary amenity.

These two possible trends, predicted at the recent National Association of Home Builders convention in Las Vegas, are not likely to change the face of new-home construction. But if they are on the money, at least some builders will be simplifying their designs to capture buyers suffering from sensory overload, while others will build smaller houses on smaller lots in an effort to bag young buyers who are paying in rent what they could pay to own.

The minimalist trend is “in its very early stages,” according to Renee Labbe, director of foresight strategy at Broadside Studios in Los Angeles. But in that it stems from the need to provide a respite from buyers’ overstimulated modern lives, it can’t arrive quick enough.

“We are all subjected to an exceptional amount of technology, social media, visual messaging, infomercials and the like, and that has caused people to lose focus,” Labbe says. “Our brains have become so busy that we need to reduce friction.”

For home design, that means a reduction to simpler floor plans, and to modestly pitched roofs with minimal overhangs and reduced ornamentation -- or none at all, says Labbe, who calls the shift “design reduction.”

In a sense, it will be a return to a style of architecture popular nearly a century ago, when houses were sheathed in just one material, including the roof, and in just one color.

“It will be somewhat similar to a simple barn house,” Labbe explains. “The trend offers consumers a ‘visual ease’ wherein the details that comprise the total aesthetic are reduced for the express purpose of greater overall unity. Detail will exist, but it won’t detract from the whole.”

At the same time, Labbe sees the boundaries between architecture and nature blurring, so there will be less noticeable difference between the two. Landscaping will become less showy and more relaxing, she says -- less manicured, more primitive and raw.

And in another predicted trend, which the foresight strategist labels “priva-see,” she says the focus will be on achieving a balance between providing a sense of freedom -- a feeling of being outside -- while increasing privacy between the house and the world beyond.

Meanwhile, John Hunt of MarketNSight, a feasibility assessment firm, points out that if builders want to recapture the share of the market they have lost to the resale sector -- 35 percent all of buyers used to purchase new units, and now just 8 percent do -- they have to build closer in, not farther out.

Hunt believes millennials are willing to buy and live in small spaces, as long as the homes are in their target areas. “For many of today’s potential new-home buyers,” he says, “experiences and location trump square footage.” And they are not alone: Boomers are vying for the same houses.

Builders and developers aren’t currently building the homes that first-time buyers and retirees want, or where they want them, he said.

“We’re still building the same houses we built 40 years ago,” he said. “We need to build something different.”

Not every buyer wants to “drive until they can buy,” he points out. Many want to live in trendy locations where they can walk to food and entertainment options. Their major concern isn’t schools; it’s convenience to work and nightlife, or where they can grab an Uber or Lyft.

Right now, this “potentially huge” market is being served by apartment builders. But Hunt says builders can offer more space for the same price -- and make a higher profit, to boot: “We have seen small product garnering as much as $450 a square foot.”

He’s talking townhouses, for sure, but also condominiums, and even “micro homes” of 500 square feet or less. Hunt says millennials are willing to pay higher prices for smaller spaces, as long as they are in their preferred locations.

As he sees it, it’s not the lack of demand that is keeping builders in the ‘burbs; it’s the fear of not being able to obtain the right price. But he has case study after case study that shows builders can make their price points, or even more.

In one hot Atlanta neighborhood, for example, one builder is hoping to build stacked flats that will start at $180,000 for 400 square feet. The mortgage on the smallest unit would run $750 a month, which compares favorably to $1,600 a month in rent for a 560 square-foot apartment across the street.

“The apartment market has shown us the way, if we are willing to listen,” says Hunt, a 30-year veteran of the housing wars. “We can compete with them.”

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Installing Floor Tiles Tops List of ‘Most Regretted DIYs’

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | May 3rd, 2019

If you’ve ever smashed your thumb with a hammer while doing a home improvement project, there’s no need to feel foolish. Fully 6 percent of everyone answering a survey on do-it-yourself projects has injured themselves on the job.

To add insult to injury, no pun intended: One in 12 respondents to the survey by ImproveNet -- a website that connects consumers with contractors and other pros -- has also damaged his or her home in the process.

These aren’t necessarily mistake-prone amateurs, either. The 2,000 people who responded to the poll reported having undertaken an average of eight DIY projects. Sixty-three percent of them regret having done at least one of those jobs, and 1 in 3 has hired a professional to redo the work.

Failures don’t necessarily come from winging it, either: Respondents put in an average of six hours of research before starting their projects. Sources included YouTube videos (65 percent), home improvement websites (51 percent), friends or family members (45 percent), store clerks (20 percent), books or magazines (16 percent) and television shows (14 percent).

Why do so many homeowners go to all this trouble?

Whether we’re “just up for a challenge” or “don’t have the budget to hire a pro,” says ImproveNet, “we share the glorious pastime of DIY home improvement projects. But they don’t all turn out well ... Many of them fail, and some become legendary disasters.”

Based in Evanston, Illinois, ImproveNet claims to have helped 867,000 homeowners with their home improvements since 1996. The site features a handy grading chart of which kind of tasks are particularly daunting, all the way down to the tasks that are so easy they seem to do themselves.

The most regretted? Installing floor tiles, followed by replacing ceilings and refinishing hardwood floors. The easiest to get done? Installing lighting, adding trees and shrubs, and installing trim and moldings.

Interior painting is the most popular job among the do-it-yourselfers, with 40 percent reporting they’d tried it. The second-most popular task, also rated the second-easiest, is adding trees or shrubs, which 20 percent of the respondents tried.

The third most popular job is interesting, because it is also the most regretted: installing floor tiles. Twenty percent of these home improvers have given this a go.

The least popular jobs are also the most difficult. Just 2 percent had tried to install a fireplace, while only 3 percent have taken a crack at repairing foundations or adding or expanding a room.

The most problematic areas in a home to improve, according to survey respondents, are what you might expect: floors (40 percent), adding or expanding rooms (35 percent), and walls and ceilings (31 percent).

Why DIY? To save money, naturally. Fifty-six percent wanted to keep more in their wallets and fork over less to contractors. “On average, people hope to save at least 60 percent of what they would have to pay a professional,” according to the company.

But the really hardcore DIYers said they wanted to do it themselves because it was fun (14 percent). And some were looking for a challenge (20 percent).

What went wrong? In addition to injuring themselves or damaging their homes, the survey says 55 percent found the job took longer than expected, half found it too much of a physical challenge, 48 percent found it technically harder than anticipated, and 17 percent thought it just cost too much.

“On average, when DIY projects run over budget, people spend nearly two times what they projected,” according to ImproveNet. “On average, when DIY projects run long, people spend 22 hours more than they expected.”

The top reasons why home improvers were disappointed in their own handiwork were: It didn’t look good (55 percent), it didn’t function well (24 percent) and it didn’t hold up well over time (21 percent).

Enjoyable experience or not, the home improvement field remains a big market. In 2017, 1.1 million prospective borrowers applied for a home improvement loan, with about half of those getting approved, according to data from the LendingPatterns application of ComplianceTech, a Virginia software vendor. About $80 million in home improvement financing was granted by lenders in 2017, with an average loan of $6,900.

If you are doing a project, be safe. The most likely ones you will be injured on are installing fireplaces, installing windows and foundation work.

In the meantime, remember: Measure twice, cut once.

-- Freelance writer Mark Fogarty contributed to this report.

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