Buyers Determine The Selling Price

Sellers often start a conversation with the statement, “I have to get a certain amount”. Of course they then tell you what their carved-in-stone minimum price is—and sometimes they tell you why it's that (high) amount. Sometimes their imaginary “have to get” price is what they paid for the place some years back, possibly with every upgrade added in. Sometimes it's the price a neighbor sold for, and they have to “match” the windfall. Sometimes it's totally irrational, and may be a number that they made up over cocktails with the neighbors, or on the phone with the kids, and are now certain they can achieve.

House prices really are like the prices in the stock market, you pay the going rate when you buy in and sell at the going rate when you leave. But with real estate home prices, sellers always think they control the selling price, but it's the buyers who have the cash and they call the price.

The bad news for the stubborn seller is that buyers don't care about their personal “have to get” number. Buyers usually see a bunch of homes that are available within an acceptable area, and after their home search, they are pretty knowledgeable as to what is priced right and what's not. In fact I like to tell buyers that I will make them experts on homes in their price range, and they can make up their own mind as to what is priced properly, and what is not. After a couple of days out looking at homes, they rarely disappoint.

But how do we tell a stubborn seller that his “have to get” price is too high? I suppose gently is the best way, but the signs will be obvious. First of all, the price may be too high if there are only a few lookers

You get the most interest in your home right after you put it on the market because buyers want to catch a great new home before anybody else takes it. If there have been fewer buyers calling about and asking to tour your home than there have been for other homes in your area, (ask your agent) that may be a sign buyers think it’s overpriced and are waiting for the price to fall before viewing it.

Another measure of over pricing is there are lots of lookers, but no offers. If you’ve had many sets of potential buyers come through your home and not a single one has made an offer, something is off. What kind of feed-back are you getting? If the other agents who are bringing in the buyers are not encouraging them to make an offer, there are only a couple of things that could be the cause, condition and price. An overly high price may be discouraging buyers from making an offer.

If the home’s been on the market longer than similar homes, check with your real estate agent about the average number of days it takes to sell a home in your market. We call that DOM (days on market) If your home has been on the market for longer than the usual market period, your price may be affecting buyer interest. When a home sits on the market for too long, buyers begin to wonder if there’s something wrong with it, which can delay a sale even further. It's probably time to consider lowering your asking price.

To increase buyer interest and “get 'er sold” you may resort to a price cut. If you have to sell soon because of a job transfer or you’ve already purchased another home, it may be smart to abandon the “have to get” price and generate buyer interest by dropping your price so your home is a little lower priced than comparable homes in your area. Remember: It’s not how much money you need that determines the sale price of your home, it’s how much money a buyer is willing to spend.

If you want to hold that magic asking price number, and can afford to sweeten the home a bit, consider adding new carpets or stainless kitchen appliances. If you can afford to, then address the questions that buyers have asked—for example if there is a lack of privacy, perhaps adding a hedge or planting bushes will make that complaint go away. Adding a home warranty to give buyers peace of mind can solve their concern about condition. But if you're plum out of cash and don’t have the funds to even put fresh paint on the walls, clean the carpets, and add curb appeal, then a price decrease will cure these issues.

If your home has been on the market longer than comparable homes in better condition, it’s time to accept that buyers expect to pay less for a home that doesn’t show as well as others.

If weeks go by with no offers, continue to check out the competition. What have comparable homes sold for and what's still on the market? What new listings have been added since you listed your home for sale? When comparable home sales or new listings show your price is too steep, the only way to a sale will be a price reduction.

Dane Hahn is a real estate professional practicing in Sarasota and Charlotte counties. You can reach him at 941-681-0312 begin_of_the_skype_highlighting            941-681-0312      end_of_the_skype_highlighting or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com.

Foreign Buyers are Here

One of the first axioms we teach in real estate is that all business is local. Meaning that watching national trends and basing future decisions on national headlines—when our business is local—is like comparing apples with oranges. This week brought lots of minor national reports but nothing to change the outlook. In general, nationally things are better, but not booming. And yet, here on the Suncoast, business is booming. The 12 percent spike in December housing starts (again, nationally) got more attention than it deserved -- a dead-of-winter month is not a good indicator – but it manages to push interest rates up a hair. Locally, it feels like 12 per cent is a low number.

For now inflation in the real estate markets seems under control, up only 1.7 percent in the whole of 2012. But again, spending income (free cash) has taken a hit with the new withholding taxes. So will that influence the willingness of Mr and Mrs Jones from Anytown, USA to move here—or at least to prepurchase a retirement home for use in the near future? Time will tell. The core hazard facing us all: how to get right the timing and magnitude of fiscal austerity before the Fed has to stop buying our debt. When that happens, the musical chairs game ends and we all know, if you don't have a chair, you're out. We may be making more accidental, near-term progress than we know, time will tell.

Having said all that, I have more business today than I have had in a couple of years. Clients are a mix of American, Canadian and Russian. Honestly, I have never marketed myself to Europeans, I'm not fluent in any language but English, I have a little high school Spanish that has served me well on vacation trips, but I could never say with a straight face that “Yo hablo Espanol”. So what's up with all these buyers being (as we say in New England) “from away”?

Well for one thing, fear. Either the economy of the world sucks more than ours does, and so their investment money is finding us a safe haven and their money is better invested here, or our economy sucks more than theirs and so the values are greater here. Either way, people are knocking at my listing's doors with cash. And they are anxious.

Over the last 25 years or so I have never felt good about writing a contract on a property which the prospective buyer has only seen once and not “slept on”. It's been my history that buyers who fall in love with a property after one viewing, fall out of love just as fast after the home inspection. Once the stars in their eyes clear, and they find reality rearing it's ugly face, they can't wait to cancel a contract. Not so today's European buyers. The decision to get a piece of Florida real estate is so strong that they will ALMOST buy from a photo. If the property they saw in the Multiple Listing is as nice as it's photos, just walking into the property one time is all it takes to confirm their decision. This would make for a really dull HGTV show. The people buy the first house. No drama and no worries. You could fit the whole show into 5 minutes. Too bad they're not all like that.

Dane Hahn is a real estate professional practicing in Charlotte and Sarasota Counties. You can reach him at dane.hahn@gmail.comor by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Maybe It's Time To Sell Your House!

Homes are starting to sell again, and the asking prices are inching up. So for the folks who meant to sell last year, but couldn’t get their price—meaning they couldn’t afford to sell—or for those of you who want to move up into a larger manse, now may be the first time in the last 5 years when listing your house makes good sense. But don’t think that slapping a “For Sale By Owner” sign up on the nearest palm tree will get you the money or deal you are hoping for. There’s a good deal of marketing and preparation that needs to go into a home to get the best price in the least amount of time.

If you want to start the home-selling process, ask yourself, "What would happen if my home doesn't sell?" I’m here to say the home selling process is not easy, but before you panic, recognize that there are many things that you can do so you don't wind up in that position.

First of all, understanding the real estate market and the value of your home will help you avoid this dilemma. The first key point is to get educated about the market. Read your newspapers, check online real estate sites, look at your tax assessment and consult with the best experts in real estate for your area before you determine the sales price.  Don’t take any web site's dollar figure as gospel, but look for ranges within which homes in your neighborhood have been selling.

While all that may seem basic, you'd be surprised how many sellers rely on emotion to dream up a selling price for their home. I once had a house listed for what I considered was about 25% more than it’s value.  The price had been set by the seller’s mother—a price which “came to her in a dream”. It must have been a bad dream. When I finally lowered the price to where it needed to be, the place sold quickly.

Some sellers have done little research on their own neighborhood. Instead, their strong ties to their homes cause them to imagine that their home should sell for the price they want. Or they base the selling price on how much they owe which is, of course, of no significance to buyers. Sometimes the neighborhood busy-body will suggest prices base on what they thought a house sold for. Discount real estate data learned at a cocktail party.

Visualize a shelf at a shoe store filled with shoes. You’re going to pick the nicest ones that fit right?  Most buyers don't want to purchase a house with a long list of things they need to fix before they can live in the home. Yet, some sellers think that it's a waste to spend money on a home that they're moving out of soon. That's quite a predicament. Both sides have valid points.  BUT the buyers are in a stronger position because they have the money. The seller is in charge of the condition of the house, so if the home is a mess, many buyers will simply move on to the next best house.

Sometimes, if a buyer wants a particular home or neighborhood badly enough, he/she might agree to purchase a home that needs work, but it's almost sure that the buyer will want to discount the price for the problems that need fixing. In the end, you might have to fix the issues before the closing anyway. So, offering a house that is in relatively good order is the best way to begin.

I have sold homes on Christmas Eve and Thanksgiving Day. Buyers who need to buy a home will keep hunting through all the seasons. There may be some slow times but when people need a house, they'll keep looking even in the unlikely times. Think about companies that are on a calendar budget, they are ready to hire (and transfer people) in January, so holiday shopping can include homes.

Also you can offer incentives. You can make your home more appealing by offering a home warranty or some other incentive. The law allows the seller to offer bonuses to the buyers, but it's best to speak with your real estate agent about which incentives are best for you to offer. I am presently offering a cruise (value up to $2,000) to whoever buys a home I own in Maryland. Consider practical incentives to get buyers into your home to view it. For example, if your house is “way out of town”, consider offering a $25 gasoline certificate for each family that shows up at your open house. These incentives can help encourage the buyer to move forward, especially if other challenges arise.

Have you ever heard about staging your home? This is not the same thing as fixing up your home. Fixing up your home includes daily maintenance and repairs. Staging your home involves using a decorator or staging experts to make your home showroom-ready–like a model home. Even if you don’t want to live in a “model home” at least your agent can take photos of the home in all its staged glory, and use them in the advertising.  And speaking of photos, walk through your home before you list it for sale and take photos.  Then with a critical eye look at what your buyers will be seeing. I'll bet you will see dirty fingerprints and messy areas that are simply the result of living in a home, but you will be able to fix these things yourself--and that will help sell the house.

Take the time to research and understand today’s real estate market. See a Realtor. This will allow you to gain knowledge and information about your home and the market place. What you do with that is up to you, but it may just be the difference between a For Sale sign and a Sold sign hanging outside your home.

Dane Hahn is a real estate professional service Sarasota and Charlotte Counties. You can reach him at dane.hahn@gmail.com, or by phone at 941-681-0312.  See him on the web at www.danesellsflorida.com

Investing In Real Estate Investors

With the never-ending changes in our Real Estate Markets real estate professionals are starting to pay attention to the sound of new commission streams of income. Some realtors have either shied away or ran-away from such terms as "Cap Rate," & "Cash-on-Cash Returns." Terms that only the 'smart' and 'numbers-oriented people use to determine if a Real Estate purchase is a "Good Deal", or not. A majority of the realtor brethren attended real estate school because they are excited and passionate about the promise of selling real estate and making a fantastic living. That being said "Times are a Changing." Even if you live in a Hot Market where residential real estate sells in 2-3 days there is an old approach to real estate that is growing faster by the day.....Residential Real Estate Investors.

This deft group of real estate investors is taking real estate and the real estate investment world into a new era! No longer accepting the crazy volatility of the Dow Jones and NASDAQ families. Unwilling to accept the investment practices of their fore-fathers these Investors throw caution to the wind for returns above the traditional 5-6% in their Roth or IRA accounts. These Investors are bold and oftentimes aggressive. Today's Real Estate Investors are all about the fast fix-n-flip, high appreciation, and rock solid monthly cash-flows. Cutting their teeth on investment in their own home-towns is only the beginning as the Serious Investors turn to points outside their own back-yards to other regions that demonstrate greater promise and higher returns. You may say well how does this older adult view their investment opportunities? For starters the age of these stealth hunters ranges from 28 to 68. From "Rich Dad-Poor Dad" book series to Trumps magical presence on "The Apprentice," the young real estate entrepreneurs are making their dreams happen to the tune of 3-5 acquisitions a year! Got your attention now? The typical Investor has good to great credit scores. Excellent cash reserves or hidden resources of partners with cash, and a willingness to make the deal happen at nearly any cost. The best kept secret of all is that these investing beasts travel in packs. Where you see one another is very close behind. In other words they know the people that you need to know to grow your investor database even larger. If the real estate professional does a good job the happy clients are likely to refer many of their fellow-investors. Not just investor clients but their regular every-day real estate business. Face it, if you can demonstrate to your clients how adept you are with their largest personal purchase of real estate, then wouldn't you suppose they will be over their "trusted real estate advisors" opinion on buying a basic home, condo or beach house?

So what if you haven't been focused in the real estate investment sector. And you are thinking this all sounds pretty good, let's give it a try. First question to ask yourself is who have your clients been working with or exploring their options of real estate investing with over the past 3-4 months. Statistically 6 out of 10 clients have considered investing in real estate or have already begun doing so before their realtor even has a chance to blink an eye. Got your attention now? How about the fact that in less than one year I increased my annual commissions by 30% by just positioning myself within my primary data-base of clients. All I did was let them know that I was ready, willing and able to begin assisting them with their "Investment Realty" needs. What I learned during the first year was that if I could create an environment for my clients to learn more about real estate investing that they would thank me in a variety of ways....Most importantly they would call me before writing a contract and would make sure that I was involved in every contract that wanted to make a real estate purchase. Before long 30% went up to 45% and further. Even if you aren't interested in expanding your client database, at least consider protecting the turf you have for so long spent tireless amounts of time and financial resources to maintain their allegiance. On the other hand if you are looking at your real estate career and are wondering how to reposition yourself for market growth certainly to go well into 2025, here are a few known facts about how real estate investors can improve your business.

1. Real Estate Investors are literally everywhere. Successfully tapping into your current database could increase your annual commissions by 20-30%.

2. Real Estate Investors will be loyal to the professional that helps fill the gap of their investment education. Workshops, mentoring groups, finding the "golden deals" in your market makes a huge impact!

3. Investing in Real Estate Investors doesn't have to mean that you lose your "typical" residential realtor position. Being a real estate investment specialist means you are smarter than the average realtor in the market.

4. Mortgage professionals are struggling to provide real estate investors with property deals, so when you can place an investor into a good deal the referrals will begin to flow even more.

5. Real Estate Investors tend to be more conscientious about your personal time away. Investors also like to shop Monday-Friday for their deals before the "Weekend Warrior" investors get out into the competition. This translates into more normal hours and days of operation for you and your business.

6. Real Estate Investors buy-sell cycles are shorter than primary home purchasers resulting in more transactions in shorter time-frames.

We Made it Over the Physical CLiff

Dear Congress of the United States, all is forgiven.  My concern that the real estate market would be an orphan adrift on a raft of foreclosed homes has not come to pass. This week the House and Senate passed H.R. 8, legislation to avert the so-called “fiscal cliff.” A delightful term, which was widely misused as “the physical cliff” by Barbara Walters and others. Following are real estate-related provisions of the bill, which the President has ratified. So we’re good for another year.

The interest on your home mortgage remains deductible, so long as you itemize deductions on your tax return. Check with your CPA, but mortgage interest costs you money and is therefore income for your bank or mortgage lender and those guys will get to pay the taxes on that payment to them. There was some realistic concern that the interest deduction might not make the cut, but when push came to shove in Washington, this topic was apparently not even on the table.

The capital gains rate remains at 15 percent for individuals earning less than $400,000 per year and couples earning less than $450,000.  Any gains above these amounts will be taxed at 20 percent. The $250,000 individual/$500,000 married couple exclusion on the profits from the sale of a principle residence remains in place, but when one exceeds these parameters, one needs a CPA to sort out the Obama Care fees on that transaction.

Mortgage Forgiveness Debt Relief Act has been extended to January 1, 2014. In place since 2007, the act provided a tax break for homeowners who struggled through financial hardship such as a foreclosure, and were granted mortgage debt forgiveness. More than a quarter of all real estate transactions involve distressed properties.  In a letter to Congress, the NAR said. “Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received.” So the short sale continues to live among us, at least through next January.

Mortgage insurance (which is an insurance company’s guarantee that you will not welsh on your mortgage, and in turn for that guarantee a lender will give you a mortgage with less than 20% down) that mortgage insurance has been deductible for only the past few years. Congress has decided that this deduction (for filers making below $110,000) should be extended through 2013 and made retroactive to cover 2012.

Another topic Congress touched on is the 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties.  In their wisdom this is extended through 2013 and made retroactive to cover 2012.

I’m not exactly sure why the 10 percent tax credit (up to $500) for homeowners for energy efficiency improvements to existing homes was extended through 2013 and made retroactive to cover 2012. But I’m sure the guys who sell air conditioners had much to say through their lobbies on this topic.

“Pease limitations” that reduce the value of itemized deductions have been permanently repealed for most taxpayers (but will be reinstituted for high-income filers). “Pease” limitations will only apply to individuals earning more than $250,000 and joint filers earning more than $300,000. The thresholds are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction. Raise your hand if this applies to you or anyone you know.

First enacted in 1990 and named for Ohio Congressman Don Pease, who proposed the idea, the limitations continued throughout the Clinton years. The limitations were gradually phased out starting in 2003 and eliminated in 2010. Reinstitution of these limits has far less impact on the mortgage interest deduction than a hard dollar deduction cap, percentage deduction cap or reduction of the amount of mortgage interest deduction that can be claimed.

Dane Hahn is a real estate professional serving Charlotte and Sarasota Counties.  He can be reached at 941-681-0312 or at dane.hahn@gmail.com.  See him on the web at www.danesellsflorida.com.