Question: We have been waiting for the Real Estate market to be on the upswing to sell our house and downsize. We do not have any contacts in the community for either a buyer’s agent or seller’s agent. Can you explain the differences in agent representation?
Answer: A critical question and one that needs to be understood thoroughly. In any market, whether you are buying tomatoes at the Farmers Market or a home to raise a family, there is a buyer and a seller. And each is trying to achieve the best possible terms for their respective situations. The goal in both scenarios is similar, but the consequences of the latter infinitely greater. You can toss your bad tomato in the compost pile…but you “own” your home.
Most often people who wish to make a real estate transaction hire professionals for advice. Not unlike hiring an accountant for an important tax issue or a lawyer for legal advice. Most commonly, each party has its own representation, just like each party having its own attorney in a legal dispute. Finding that person, (aka, an agent or broker), that will best represent your interest is arguably the second most important decision you will make.
Real Estate professional are licensed in the State of Washington and many, but not all are Realtors®. (This is a good question to ask any agent: Are you a Realtor®?) Our state has very specific laws regarding buyer & seller representation; please see the attached “The Law of Real Estate Agency”. It is pretty well written and understandable, not a lot of legalize. The Realtor “Code of Ethics” layouts out the moral and ethical guidelines Realtors® must follow, (also attached). You do not have to be a Realtor to sell Real Estate in Washington, but you must be one to work at Windermere and most other major brokerages. Most small outfits are not Realtors and do not pay annual dues.
Bottom line; a Listing Agent represents a seller’s best interest and a Buyer’s Agent, (also sometimes known as the Selling Agent), does the same for the buyer. A BIG caution to everyone; it is legal for an agent to represent both parties in a transaction. I do not understand how… but they can, and in my humble opinion should be avoided at all costs. Would you want your attorney also to represent your opponent at trial? How could one agent possibly negotiate the best deal possible for both parties?
Another fact many people do not realize; the seller customarily pays all commissions…both to the Listing Agent and the Buyer’s Agent. Expert advice for buyers paid by someone else!
Question: My home has been on the market for the past several months and I have had very little traffic. Now that the summer is winding down and school is on the horizon is it true that because many buyers/sellers are pre-occupied with preparing and starting school, September is a bad month for home sales?
Answer: No there is no bad month for home sales; some are just better than others! By looking at the attached chart, you can see homes sell throughout the year. The general pattern is home sellers and buyers become more active in late winter and this continues for several months. (My unofficial start to the season is the first weekend after the Super Bowl, that’s when things really kick-off).
So mid-February until when school gets out in early June is the busiest period for real estate sales. There is an approximate 30-60 day time period from once a Purchase & Sales Agreement is signed, until closing, when ownership actually transfers from the seller to the buyer. Hence most closings occur April thru August and tapers off after that. The slowest time for sales is over the Holidays; mid-November until after the New Year. Closings in January/February are the lowest of the year.
So mid-summer is not the most active time of year, but there certainly are buyers out there. If you have had little traffic, then there is a problem. That problem, broadly speaking, is one of two things, or possibly both. Your home must “Show” well and be easily accessible. And it must be priced correctly for the current market. Both conditions are fixable in most cases and the longer the seller waits, the greater their financial damage. It is a fact that overpriced homes that stay on the market for longer than a couple of months will eventually sell for less than their fair market value.
Question: What do rising interest rates mean for buyers/sellers now?
Answer: Interest rates increases will have a huge impact on both buyers and sellers. With rates at historical lows, currently near 4%, the only way to go is up and the consequences will be significant.
For the last several years the Federal Reserve (our Nations Bank) has pushed down interest rates trying jump start the economy coming out of the Great Recession. And they have been successful. With the economy and the housing market clearly on the mend, rates will now rise. How much we do not know, but even one percentage point can make a substantial impact.
For example, a young couple, first time homebuyers, gets Pre-Approved by their lender for a loan of $240,000. At a 4% interest rate, that means debt service of $9,600 per year, or $800 a month. (There actual house payment would be closer to $1,500 per month as the payment would include principal on the loan, property taxes, homeowner insurance and possible Mortgage Insurance…more on this later).
If rates rise just one percent, to 5%, the debt service is $12,000 annually or $1,000 per month. A two hundred dollar increase; money that must go to the bank, not other things like, groceries, car payments and maintenance, entertainment, etc… For most young families that is not a trivial number.
For sellers this has major implications also. Most buyers get Pre-Approved for a loan based on the monthly payment, (a percentage of their income combine with taking into account their other debt). So, the buyers get approved for a $1,500 a month house payment. At 4% interest, they can buy a $240,000 home. At 5%, they can only buy a $220,000 home. So for sellers, rising interest rates will keep a lid on price appreciation as there will be fewer qualified buyers for their home.
But don’t let this scare you, my first home loan had an 11% rate. Things were quite different in the early 1980’s, I actually had some hair!
With the hot market right now I have heard that in some cases buyers may find themselves participating in a bidding war for the same property. What is your strategy and how do you help buyers make the right move and not overspend?
What are the key elements to writing a strong offer to help increase your buyer’s chances of buying the house with favorable terms?
Answer: Two excellent and timely questions. After several years of buyers dictating terms, sellers are now finding buyers are being more aggressive. And yes, it is now common to be in multi-offer situation. My strategy for buyers is the same as Seahawk quarterback Russell Wilson—success comes from preparation.
When the right home, at the right price, comes on the market, quick decisions must be made. The only way a buyer will be ready to make the right choice is to be prepared; and that takes work and effort.
Market knowledge can be attained using the internet to study inventory and history, (what homes sold at what price over the last several months), and touring homes with a Realtor. Many first time buyers will see dozens of homes to gain the knowledge they need to make a comfortable, competent decision.
Here, again, preparation can make the difference. Have in hand a Pre-Approval Letter from a reliable, recognizable lender. That tells the seller that you are a legitimate buyer. Pair that with a substantial earnest-money check—one that, again, shows you mean business. Here’s a tip that few people use—and I recommend to all of my buyers who might face a bidding war: Include a hand-written note to the seller.
Also, the offer terms should show some flexibility as to the closing date, Escrow Company, inspection, and other timeframes, as well as not being loaded up with unnecessary addendums. The bigger the down payment the better and if you can pay all your own closing costs, great!
Most important to sellers is the ability and desire of the buyers to complete the transaction. (It is usually 30 – 45 days after the offer is accepted to closing and many things can happen in that time span). Your offer can stand out from the others if you are prepared to make it the best offer and easy for the sellers to accept. Russell Wilson is right when he says, “The separation is in the preparation”.
Cautious optimism best describes Windermere Real Estate’s outlook for 2012. Other terms heard are “favorable”, “improving” “more balanced” and “encouraging”. Real estate, like politics, essentially is a local matter; consequently our opinion only relates to the Poulsbo and North Kitsap markets.
Several factors bring us to this auspicious prognosis. Most important is the new realism of buyers and sellers. Facts show that home prices have bottomed out and are no longer falling. Interest rates are at historical lows. Home affordability, (monthly mortgage payment divided by income) has never been better. Job growth and business investment are rising and the navy is increasing its presence. These positive economic indicators combined with our compelling lifestyle choices and proximity to a world class city convince buyers to make this their home and to “take root” in our community. And now is an opportunistic time to do so. Buying activity is clearing increasing and without the benefit of government incentives, (the First Time Home Buyer tax credit).
Likewise, sellers now realize that we are not going back to price levels of four years past. Homes are now fairly priced and the current market conditions are the “new normal”. Home appreciation will likely return to healthy (and sustainable) levels of 3% to 4% annually. If you are expecting your home’s value to return to peak levels of 2007, be prepared for a long wait. The substantial inventory of distressed homes with homeowners “underwater” will prevent any spike in prices in the near and intermediate future. This truth will be seller’s adversary for several years. So sellers who desire or need to make a move, must recognize that this is “the hand they were dealt” and their task is simply to play it as best they can.
And you can sell your home, if it is priced properly and in good condition. These two terms are non-negotiable. Over priced homes do not sell. Buyers are looking for value and appraisers are insisting upon it, (sometimes to the extreme). If your home has deferred maintenance or structural/water issues, you have a problem and it must be corrected. Fresh paint and flooring work wonders. If your home needs a new roof, get one. Call your local charity and donate unneeded personal property. Hire a cleaning person to put your home in “show” condition. Head outdoors and get some exercise by cleaning up the yard! This, combined with competent professional counsel, is required to maximize your return.
So yes, we are guardedly hopeful that 2012 will be a better year for real estate. Improving economic conditions, cheap money, a great place to raise a family/retire and pragmatic sellers all point towards an enhanced market. So, for some, it is the best of times, others not so good; regardless…this is the only time we have. A Happy and Blessed New Year to all!
Windermere Real Estate – Poulsbo