Mt. Horeb Area Real Estate Blog

Have I mentioned low interest rates?

I'm not sure if y'all have caught it...but interest rates are low and getting lower.  I saw one of the lenders I work with this AM at 5.25%.  If you were above 6% when you financed your home, this is about $100 savings/month (on a $200,000 home).  That's good deal.

I know some of my clients are waiting to see if rates go lower--say into the 4s.  One lender in town thought that they might for new purchases but not for refinances.  The goal of lowering these rates is to stimulate the buyers.  A homeowner refinancing doesn't really help stimulate the housing market.  Therefore, if they do drop, that rate may not be available to everyone.

Spring Brings Hope Eternal

(at least I think that's the quote)

This is the time of year when many buyers and sellers decide to "wait until spring".  However, the real estate store is open all year round.  Some of the transactions that worked out the best for all parties happened right around the holidays--even during heavy snow storms.

In my history, March and April are  the months with the most  transactions closed.  That means the buyers were out in the middle of Winter home shopping.  The best advice I can give someone who is looking to sell "in the spring" is to get your house on the market right after New Years.  Every year, I am surprised at how early the phone starts ringing off the hook.  And  every year its earlier.

Buyers...Sellers get more hopeful in the spring--Hopeful that your low offer will be beat by one of the many buyers that hit the home buying market in the spring.  Sellers have time to wait in the spring. With most sellers putting their homes on the market early in the year, that is also when there is the best inventory of homes.

And then there is the interest rate equation.  They are low right now--5.5% or there abouts most places.  If you were previously looking at 6% this can save you about $60/month on a house payment.  If you were at the 6.5 % we were at last week, then this is over $100 savings on a home payment/month.

No matter what the season, homes are always for sale. There are just as many benefits to NOT waiting as there are for waiting...

Price Denial Syndrome

Realtor Magazine ran an article about what David Knox, a real estate trainer in Minneapolis, called "Price Denial Syndrome".  It is what many  sellers (but not ALL) are cursed with in today's market. 

Sellers afflicted with this condition tend to resist the reality that they must lower the listing price of their home, unwilling to accept that the days of the boom market are gone, said Knox, who spoke at the REALTORS® Conference & Expo in Orlando last week.

Common symptoms of Price Denial Syndome include blaming their Realtor for suggesting a price reduction and trying to justify why buyers would pay the higher price.

But here's the truth: Homes are simply not going to sell if they are overpriced in the current market. In a hot market where demand outstrips supply, overpriced homes might sell, but “in a falling market, overpriced homes sit unsold,” Knox said.

Here are some commonly hear price reduction objections from sellers: (excerpted in whole & in part from Realtor Magzine)

• “We really need the money.” I am completely sympathetic to this situation. And don't take this the wrong way, but it isn't the buyer's problem.  A buyer will not overpay because you need the money.  That may put them in the same boat 6 months down the road.  Unfortunately, if you need to sell, it may have some financial repercussions for you.
• “We can always reduce the price later.” A property that lingers on the market too long is often plagued by constant price reductions to generate buyer interest. The more price drops, the more buyers keep waiting for more. The home will likely sell for lower than what it should and take much longer to sell too.
• “Could we just try it at this price for two weeks?” Buyer activity is highest when it’s just listed so don’t turn off the serious buyers at the beginning.
• “They can always make an offer.” Some buyers won’t even look at a certain price point so you’ll likely be excluding buyers who would be more serious about purchasing it if you don’t price it appropriately, Knox said.

Buyers are  also afflicted with Price Denial Syndrome in that they absolutely refuse to believe ANY house is priced at or below market value.  Some buyers are waiting for the market to bottom out before they act:  “We want to buy at the bottom of the market.”  “But you can’t buy what it was – only what it is,” Knox said. By the time the market starts to turn around, they’ll be buying on the way up and likely miss out on lower interest rates and face multiple offers with sellers less apt to negotiate.

This is true of buyers waiting until spring. What is the quote about Spring bringing hope?  Well, that is where sellers are in the spring.  There are so many more buyers out in the market that sellers get hopeful that another offer is just around the corner.  If the house is a gem, you are also more likely to be competing against multiple buyers.

Signing In

I held an open house yesterday and it occured to me once again how much easier everything in the world would be if everyone followed the golden rule:  do unto others as you would have them do unto you...

You see no potential buyer likes signing in at open houses or giving the host agent any information about themselves.  However, all sellers want to know everything about every person that comes in their house and get frustrated with their agent when they can't answer questions.  And since almost all buyers are one day sellers and sellers often become buyers...YOu see how the golden rule could really help out here...

And if you want to get technical, per the legal listing contract a seller signs, sellers are responsible for all parties that enter their home.  It is a responsible practice for sellers and/or agents to collect names in case there is ever a need to prove or disprove a situation.  It is rare that such situations arise, but just think how helpful that sign in sheet could be if ever needed...

Is Mt. Horeb Recession Proof?

In case you missed the article in last week's Mt. Horeb Mail, you can click here to read!  Realtors speak out about local housing market.

October Market Stats

As my idol in St. Paul likes to say, the following statistics are from our Southwestern Wisconsin MLS and are deemed reliable but not guaranteed.

If you'd like to receive these monthly stats for your community or neighborhood, shoot me an email and I'll put you on my list!

Mt. Horeb

• 8 homes sold

• Average sale price of $262,780 (about 96% of list)

• 4 of those 8 were $300,000+

• Additional 6 homes have accepted offers or offers pending

Verona

• 8 homes sold

• Average  sale price of $307,087 (about 97% of list)

• 6 homes about $300,000 or more

• Additional 9 homes with accepted or pending offers (1/2 of which are over $300,000)

Blue Mounds and Barneveld--sorry guys--no action there last month except for accepted offers on a few farm properties.

Interest Rates drop below 6%!!

Just saw 5.875% on 30 year and 5.375% on 15 year mortgages.  Holy cow that's exciting!!!  Tell all your buyer friends!!

Negotiating Information

When trying to get that deal in market there are some important pieces of information that Realtors use to help you determine that starting point:

•   How long has the house been on the market?
•   What was the original list price?
•   How many time has the price dropped?
•   What did the sellers pay for the house?
•   What do the sellers currently owe on the house?

The answers to the first four questions are available to us on our Multiple Listing Service (MLS).  When you have a buyers agent, this is the kind of upfront information they provide you, likely even as you are viewing the house.  Without any representation as a buyer, this is information you would have to ask for.  Sometimes a buyers agent would has to do a little more digging to find out what a seller paid for a house depending on how it was purchased and how long ago.

The last piece of information regarding what a seller owes on the house is a little more involved.  A buyers agent will research this for you. Sometimes we use the area title companies and sometimes we search on a website called Tapestry depending on the timing.  Tapestry is available to everyone, but costs $5.95/search.  The cost is well worth it if you want the information in 5 minutes.  Other times, Realtors utilize a "search and hold" on a property from a title company, if there is time, just to see all the liens, easements and potential other issues involved with a property.

Armed with this information along with the standard comparables from the neighborhood, you and your Realtor can develop your strategy for making your offer.  It's important to remember that even though you may want a home for a price that means the seller will have to bring $10,000 to the closing table doesn't mean they can afford to do so...Could you?

Seriously. Buy now.

NOW is the most amazing time of the year to buy.  If you are a first time homebuyer or if you don't have a home to sell, you have so much power this time of year in this market.  This is when the market slows WAY down for everyone. 

List to Sale price spreads get larger as some Sellers get nervous because they are likely facing another 5-6 months on the market.  Business won't pick up again until next spring...hopefully.  It's hard to know what will happen exactly in 5-6 months.  Spring  usually brings a whole new batch of homes to the market so even though there are more buyers, the competition for sellers is more fierce. 

If you are thinking of waiting until spring, you are likely not going to get the deal you hoped for. Spring is when Sellers are most confident and hopeful, and therefore,  less likely to sell at any cost.

As a Buyer, you don't have to wait for the price to drop in order to get a deal either.   This is the market & time of year when you can make your own deals.  Maybe the seller isn't in a hurry or is unwilling to go as low as you want or need, but you never know until you try.  You just need to be able to walk away from the house when the price gets uncomfortable for you.  And walking away has immense power in some situations.  There are many Realtor stories where the seller actually comes back chasing that buyer for the price the buyer originally wanted.

Offers are few and far between for sellers so if go ahead and make one. You may just get the sale of the year!

Focus on Appraisals

Pricing homes can be a painful experience for both Realtors and Sellers.  Sellers are not seeing the value increases they saw their neighbors or friends get a few years ago, and in some cases, they may actually be asking for less than they paid for the home.  Realtors are faced with being brutally honest with sellers and losing the listing or going with the sellers and overpricing the listing.

While there are many problems with overpricing, one of the things I always need to tell sellers is that even if they would get their dream price, it may not appraise out.  Sellers tend to roll their eyes and tell me "oh they will make it work out".   Not anymore.

More and more, Realtors, sellers and buyers are in situations where homes are not appraising out---or being deemed "worth" what the seller is asking for.  In those cases, the buyer can either walk, the seller can reduce the price accordingly or the buyer can come with cash to the closing table to make up the difference.

The Wisconsin State Journal just ran an a good series on appraisals.  They have many different articles and takes on it, but my favorite is the one that focuses on Wisconsin.  I feel Wisconsin has been, by all reports, a little quicker to "make things right" in the appraisal/lender situation.  Like I said earlier, there is certainly, in this area, no guarantee that the appraiser with just "make it come out" at expected value.

The other article that I like was the Q&A for homeowners.  The one piece of advice I liked was that the buyer should pick the appraiser.  I think buyers assume that the lender HAS to pick the appraiser, but the buyer ultimately pays for it, so they have every right to pick it.

The other to articles have a national focus:  Bad Appraisals Hurt Homeowners and American Real Estate Appraisal System is Crippled.