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Tips for Buying in a Hot Market

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | January 27th, 2021

During much of 2020, multiple bidding wars frustrated vast numbers of wannabe homebuyers. Yet such real estate wars are expected to be even more intense in popular neighborhoods during the upcoming springtime selling season.

“This has been the frothiest market I’ve ever seen,” says Glenn Kelman, the CEO of Redfin (redfin.com), a national realty brokerage. To illustrate, he tells how in many areas, eager buyers are bringing lawn chairs and lining up outside open houses.

The obvious root of the problem is that buyer demand for properties is outstripping supply.

“Home price growth and time on market show the effects of plenty of buyers and not enough sellers. Prices are rising, and homes are selling faster,” says Danielle Hale, the chief economist for Realtor.com, the home listing company.

Aaron Norris, a longtime real estate analyst and investor, expects buyers to face a fiercely competitive market throughout the country in coming months.

“Spring will likely be hot, and the Biden administration seems determined to throw fuel on the flames. Discussions on forgiving college debt and a first-time buyer tax credit of $15,000 could help get an entire generation into homebuying in a market already tight on inventory,” says Norris, a vice president at PropertyRadar (propertyradar.com), a data analysis firm for real estate investors and brokers.

Norris urges those hoping to buy a property early this year to get a jump-start on rival purchasers and not wait until spring is in full bloom.

“You have to realize that buyers will be coming out in droves this spring. So, get all your ducks in a row right now and start looking,” he says.

What can buyers do immediately to increase their odds of scoring the purchase in a high-demand area? One step is to establish a relationship with a mortgage lender who can make sure they’re pre-approved for a purchase.

“You might as well get your 2020 taxes done now. Anyway, you’ll need your W-2s and likely also your tax returns when applying for a mortgage,” Norris says.

Here are a few other pointers for hopeful buyers:

-- Search for sellers in a rush to move.

Dorcas Helfant, a former president of the National Association of Realtors (nar.realtor), says the owners of upscale homes are no different from any other category of owners: Some are much more driven to sell than are others.

Some owners have no particular timeline that’s drawing them forward. Such “discretionary sellers” would like to liquidate their properties, but will readily defer their plans should they be unable to obtain the price they want.

In contrast, motivated sellers have well-defined reasons for moving. Life events such as divorce or job changes are commonly behind the need for a quick sell.

Sellers in a rush are more likely to negotiate in earnest.

Often, a home’s owners will indicate openly what’s prompting them to sell -- or they’ll permit their listing agent to do so. Alternatively, your agent can often learn more about the sellers’ circumstances or timing through polite inquiries.

-- Consider listings that have sat unsold for a lengthy time.

Sometimes truly motivated sellers hold out longer than they should, discounting their overly high list price only after they’ve become desperate.

“Sellers usually get a wake-up call after they’ve had no showings in a month or so and their denial on price has worn off,” Helfant says.

In neighborhoods where the supply of available homes is less than demand, a few sellers will still cling to an over-market price until their property becomes stigmatized.

“Even fabulous homes in excellent condition can linger unsold for weeks. Buyers who wait until deep price cuts occur can be richly rewarded for their patience,” Helfant says.

-- Attempt to improve your odds with a personal letter.

Those trying to buy in the current frenzied market often face stiff competition for properties that are well located and fairly priced. No one wants to lose a place to other bidders. But to outdo rivals, it’s not always necessary to offer the highest price.

Norris says sellers sometimes respond favorably to a personal letter attached to an offer.

“Tell the buyers how much you love their property and would enjoy living there. Also tell them about plans to raise a family in the house if that’s your intention. With so much loneliness during this pandemic, a handwritten letter practically brings tears to people’s eyes,” Norris says.

He recalls that when selling a 5,000-square-foot house, his father was swayed by such a letter from a young couple with a 10-year-old son. The parents weren’t the highest bidders, but they still prevailed because of the personal touch.

“My father fell in love with this family and their dreams. He was willing to sell for somewhat less because he wished to help them fulfill their plans,” Norris says.

-- Stay focused on your end goal.

Getting a good value is always a positive in a home-buying situation. But especially for those who expect to hold a place for more than five years, it can sometimes be worth a slightly over-market bid to outdo others for a place they truly love.

“If the property you’ve found is exceptional and really meets your long-held desires, it could be wise to offer a small premium,” Helfant says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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Tips for Picking an Agent When Selling

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | January 20th, 2021

For those wishing to sell a home this coming spring, expectations are exceptionally high.

On the one hand, the new administration in Washington promises to promote housing with a proposed $15,000 tax credit for first-time buyers, among other steps. Meanwhile, home values are still ascendant, inventories are tight and demographic demand is strong.

Yet on the other hand, uncertainty abounds as the nation navigates uncharted waters both politically and economically. The latest worry: Mortgage rates, though still very low, are beginning to creep upward.

“The traditional spring selling season was a bust during the initial months of the outbreak in 2020, though the market recovered nicely later in the year. Sellers should still have a lot of leverage this spring, but they can’t afford complacency,” says Eric Tyson, a consumer advocate and co-author of “House Selling for Dummies.”

Most housing analysts are optimistic for 2021 sellers.

“While we can expect to see lingering effects of COVID-19 resurgences and subsequent shutdowns in the early months of 2021, vaccine distributions and stimulus actions should revitalize economic activity and keep home purchase demand and home price growth strong,” says Frank Martell, the CEO of CoreLogic (corelogic.com), which tracks housing markets across America.

Still, Karen Rittenhouse, a real estate investor who’s bought and sold hundreds of properties, cautions sellers against overconfidence. In particular, she urges them to select a listing agent thoughtfully.

“Who you pick as an agent is a really big deal because you’ve got a lot of money riding on your sale. You need to ask for referrals, check references and interview every agent you’re considering,” says Rittenhouse, author of “The Essential Handbook for Selling a Home.”

Many successful agents hire assistants for much of their routine work, and Rittenhouse doesn’t necessarily disapprove of this practice. But she says it’s important that your primary agent handle such core functions as negotiating on your behalf when offers come in.

“There’s nothing wrong with assistants handling a lot of the day-to-day work, like arranging showings or holding open houses. But good agents perform the key functions themselves,” she says.

Tyson says it isn’t always easy to determine in advance whether an agent will give your listing the attention it deserves.

“The last thing you want is an agent who disappears the day after landing your listing. So before you sign a listing agreement, you’ve got to investigate,” he says.

Here are a few pointers for sellers:

-- Examine a potential listing agent’s selling record.

Maybe the agent you’re thinking of hiring is known for being a prodigious seller. Even so, this could be the wrong one for you.

“Just because the agent is a ‘big producer’ in sales volume doesn’t mean they have expertise selling in your specific area or your type of house,” Tyson says.

He recommends that sellers obtain an “activity list” from any agent they’re considering. This should itemize all sales closed in the previous 12 months and show the property locations, as well as list and sale prices.

“You can’t beat this raw data when you’re sizing up an agent,” says Tyson.

Agents don’t just specialize in particular areas -- they also specialize in certain price categories.

“You wouldn’t want an agent who’s earning most of their commissions from suburban houses worth over $1 million to list a condo worth much less than that. In that case, your condo might fail to get the attention it deserves,” Tyson says.

-- Consider the implications of hiring “partner agents.”

Some agents, including married couples, like to work as a professional team. They bill themselves as two interchangeable parts of a qualified whole.

“In theory, such a partnership has big advantages for clients because you get a doubling up of talent, with two people devoting themselves to your sale,” Tyson says.

But in practice, the two-agent arrangement is only advantageous to sellers if both partners are fully committed to their work.

“Sometimes the two halves don’t equal a whole, and the clients are shortchanged,” Tyson says.

-- Make sure the agent you select is responsive.

Starting the day your property goes up for sale, you need to get a regular stream of feedback from your listing agent.

For example, if your agent stages an open house for real estate professionals in the area -- known as a “broker’s open” -- you’ll want to receive their comments about the price and condition of your home. Also, you’ll want timely feedback from potential buyers who come through your place for showings.

Why is timely feedback essential to a successful sale? Because it allows you to correct course quickly. For instance, immediate feedback that your home is overpriced would let you adjust your price before your home is stigmatized.

Your listing agent should be the one giving you feedback on a regular basis. To ensure this happens, you need an agent who is meticulous about collecting comments and passing them on.

You can increase your chances of finding a conscientious communicator by asking the references your agent gives you whether they got regular feedback. Plus, you can insist that your listing agreement specifies how often, and whether by phone, email or text, your agent will contact you.

“When it comes to selling your home, good communication with your listing agent isn’t a luxury, it’s crucial,” Tyson says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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Buying Your First Home in the Post-Pandemic Era

Smart Moves by by Ellen James Martin
by Ellen James Martin
Smart Moves | January 13th, 2021

The pandemic has motivated those who own starter homes to trade up to still larger properties with oversized kitchens, home gyms, dual home offices and yards big enough for a custom fire pit. But even more eager to move are young renters who fantasize about escaping apartment living to buy their first house.

What’s propelling this present push for first-time homeownership? Much of the momentum is coming from the younger adults now forming households and having kids.

“The demographic tailwind has arrived, as Generation X and millennials drive housing demand,” says Frank Nothaft, chief economist at CoreLogic (corelogic.com), which tracks housing trends.

It’s understandable that as the nation emerges from the pandemic, first-time buyers who’ve been living in cramped quarters for months will want to move hurriedly toward their goal. But veteran real estate specialists urge novice buyers to exercise caution as they think through their priorities.

“Any house in the burbs seems like utopia to people burned out on living the limited apartment life. But it’s very unwise to jump for the first affordable place you encounter because your choice of a house has so many implications,” says Michael Crowley, who’s represented buyers in Spokane, Washington, since 1997.

One factor is that most detached houses are more spacious than apartments.

“Anything bigger can seem thrillingly large to long-time apartment dwellers -- tempting them to decide quickly. A swift purchase is especially likely if they’re in a hot area where houses are flying off the market,” Crowley says.

Just because a house gives you plenty of space for the money doesn’t mean it’s a good choice. He encourages novice purchasers to shop thoughtfully before making a decision. That means being selective about both their target neighborhood and the target house within that neighborhood.

“On occasion, first-time buyers do locate the perfect property at the front end of their search. But even then, it’s important they view alternative options before solidifying your choice,” Crowley says.

Here are a few pointers for first-timers:

-- Look for a place that would work for your future lifestyle.

First-timers sometimes make the mistake of expecting to keep their property for just a few years before moving on.

But Tom Early, a longtime real estate broker who specializes in helping buyers, strongly advises clients to buy with a time horizon of at least five years, due to the high transaction costs associated with selling one house and moving to another.

“These days, you can’t necessarily count on tons of appreciation in home values to bail you out if you wind up selling in just a couple of years,” he says.

Young buyers should also consider their personal plans when selecting a house.

“If you’re thinking of having kids in the near future, for instance, it’s a good idea to pick a house with extra bedrooms and play areas for young children,” says Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

-- Avoid buying an offbeat property.

“You don’t want to buy a contemporary in a neighborhood full of colonials,” says Mark Nash, author of “1001 Tips for Buying and Selling a Home.”

The problem with what Nash calls “the odd man out house” is that one day it could be hard to sell.

“We live in a society where housing is increasingly homogenized. Most people feel safer about their investment if the place they buy looks like all their neighbors’ homes,” he says.

-- Put your priorities in writing.

“Nearly everybody has to make trade-offs when they buy a home,” Early says.

Before you go home shopping, Early encourages you to compose two lists. One should itemize “must have” home features and the other -- a “wish list” -- should include features you could live without if trade-offs must be made.

-- Seek out a place with appeal for multi-generational buyers.

Assuming you can afford it, one excellent investment is a house with an extra bedroom that has its own “en suite” bathroom, meaning a private bath. The reason is that more homebuyers want a space suitable for elder family members, according to recent research on resale trends from Zillow, the national real estate company.

“People are increasingly looking for ways to add space and make homes more comfortable -- and safe -- for multigenerational living,” says Haley Johnson, a Zillow spokeswoman.

-- Don’t buy the biggest house in the neighborhood.

Though extra bedrooms are a valued feature, it’s usually a bad idea to choose one of the biggest houses in a neighborhood. Early explains that the so-called “king on the hill” house is unlikely to gain as much value as an average-sized place in the same area.

Granted the biggest house will likely appreciate --assuming it’s located in a popular area. Still, its owners will get less of a boost in value on a per-square-foot basis than will the owners of a smaller house. That’s because the median home will set the standard for the area.

“Sometimes it’s smarter to be in the middle of the pack rather than an outlier,” Early says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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