What the NAR Doesn't Get About FSBO's

This week’s topic is the NAR data correction.

The NAR counts any agent involvement in a sale as an agent-assisted sale – even when a by-owner seller simply uses an agent to get a listing onto the local multiple listing service, and identifies as a by-owner seller.

In fact, the NAR's own 2011 Profile of Home Buyers & Sellers proves that alternative agencies are making significant inroads:

• 25% of sellers list with agents that "list the home on the MLS and perform few is any additional services" -- precisely the model offered by ForSaleByOwner.com

• 30% of sellers list with limited-service agents

• 24% of sellers list with full-service, traditional agents

With the proliferation of real estate services, it’s easy to see how even an expert like the National Association of Realtors could get confused. So here’s a quick rundown of the spectrum of real estate services offered by agents, from full-commission to by-owner.

Full commission – Usually, agents charge 5% to 6% to list a home. The listing agent (who represents the seller) collects half of that, splitting that half between the agent herself and her broker. That means that the agent who sold the house only nets 1.5% of the 6% commission. The same happens for the agent who represents the buyer in the sale. The home seller’s 6% fee pays both agents and their brokers. That’s why buyers don’t have to pay to have an agent represent them.

Discount fee – Smaller commission, smaller service. Discount agents sometimes offer a set basket of services for a reduced commission, or sometimes offer a pick-and-choose array of services. Either way, be sure you know what you are getting for the money.

Flat fee – Instead of a commission, a flat fee agent charges a single fee – usually from $1,000 to $4,000 – and expects you to do some of the work to offset the lower cost.

‘By owner,’ listed on Realtor.com and local multiple listing service. ForSaleByOwner.com works with cooperating agents around the country to publish its customers’ listings on local multiple listing services and at Realtor.com. Owners create their own listings with digital photos; market their houses; and by offering a 1.5% or 2% buyer’s commission, can win the interest of buyer’s agents. These homeowners count themselves as selling 'by owner,' even if the NAR doesn't.

5 Killer Sources for Figuring What Your House is Worth

This week we’re taking a look at the National Association of Realtors’ sweeping statistical correction. If you can’t trust the NAR’s statistics on home sales, who can you trust?

Plenty of folks.

• First, mortgage market giants Fannie Mae and Freddie Mac spin off bushels of statistics from their mortgage databases. They even offer a handy home-price calculator by metropolitan market (more than 300 of ‘em!) so you can see how your home value has changed. (This provides a useful tool for pricing your home and defending that price with appraisers and to buyers when negotiating.)  
• Second, mortgage-processing giant FNC also lists home-price data.  
• The Case-Shiller index tracks the monthly change in home values for 20 major metro areas.  
• Local property records – available through your county recorder of deeds or property records office – contain nuggest of data about what neighboring houses sold for, that provide context for the value of your own home. In fact, some real estate economists recommended that property records become the NAR’s ongoing source for its data.  
• It’s smart to take even local agent-generated results with a grain of salt. Last summer, an Illinois multiple listing service was caught with sloppy numbers.

Your best bet: rely on numbers from government and industry analyst sources. Key links are in the ForSaleByOwner.com Pricing Guide.

The Truth Behind the NAR's Data Correction

For years, the National Association of Realtors statistical reports had been drifting out of touch with reality. Finally, under increasing pressure from critics, on Dec. 21, the NAR released a sweeping statistical correction: from 2007 to 2010, an average of 14% fewer houses actually sold, compared to prior NAR reporting.

This week’s ForSaleByOwner.com blogs will parse some of the details in the NAR’s report, explored more fully in our Education section.
The NAR downplayed it statistical missteps by emphasizing the corrected statistics were national, and of course, real estate markets are local. But that overlooks one major point: local markets compare their strength to the national norm, and that directly affects the decisions made by homeowners as to whether or not they should sell. Critics around the country have called on the NAR to tidy up its statistical reports going forward.

The NAR managed to blame a supposed undercount of by-owner sales as one factor for its data headaches. But the real issue is that the NAR’s definition of a ‘by owner’ sale does not reflect what a ‘by owner’ sale really is. If you put your house on your local multiple listing service or on Realtor.com through ForSaleByOwner.com, and handled every other aspect of your sale on your own, the NAR still counts your sale as ‘by agent,’ because an agent was paid a small flat fee to pass through your listing to the MLS.

By the NAR’s definition, the only marketing options that are truly ‘by owner’ are yard signs and local classifieds. But as smart home sellers know, there is a wide spectrum of services that they can tap into while still steering their sale themselves – ‘by owner.’

Image courtesy of Morguefile contributor alvimann.

It's Going To Be Harder to Hire a Good Contractor

Last fall's lift in home sales has just delivered an unexpected side effect: remodeling is off to a surprisingly strong start to 2012.

The Harvard Joint Center on Housing tracks remodeling activity, and today released its latest report, documenting the uptick. JCH attributes this to the high number of lower-end houses sold in late 2011. Those houses apparently needed work, and now. Investors, who have been buying distressed houses wholesale, aren't wasting any time fixing up those properties so they can be rented or resold.

Here's what that means for you:

• If you are thinking of buying a run down or foreclosed property (which may harbor nasty surprises that need to fixed pronto), you will probably be competing for the best contractors. That will add time to your schedule and money to your budget.
• If you want to do a bit of remodeling to your current house with the aim of selling it soon, higher costs will directly affect how much equity you will get out of the transaction. Consider ways to offset the remodeling costs, such as cutting back on the cost of the transaction itself.
• Prioritize your projects so you get the most return at resale.
• Organize your work so you have a short, clear to-do list. With more work lined up, contractors will be less likely to come back and tackle additional tasks you add to the original job.

Less is More, A Lot More, for Today's Buyers

Less house means less money...and less hassle, less cleaning and less maintenance.
According to the Chicago Tribune, home buyers are getting very practical. They're zeroing in on their needs and quickly eliminating their 'wants' as they seek to get the most for their money.

Here's a summary of most-wanted and least-wanted amenities. You're in luck if your house already has the most-wanted. If your house has the least-wanted, consider how staging can reposition those spaces as most-wanted.

What buyers want:

• First-floor flex rooms that can be used for dining, exercise, games or a home office
• 'Pocket offices' for household billpaying and paperwork
• Larger, informal, eat-in kitchens
• Lots of storage and walk-in pantries
• Spacious mudrooms and laundry rooms

What buyers aren't willing to pay extra for:

• A breakfast room off the kitchen
• A sitting room adjacent to the master bedroom
• Overly large secondary bedrooms
• Formal dining rooms that can't be repurposed

Home Is Where the Deduction Is

One thing you won’t be hearing from candidates in this election year: eliminate subsidies for homeownership.

Support for various modes of homeownership subsidies, including the mortgage interest deduction and federal policies encouraging homeownership, is held by two-thirds to three-quarters of Americans, across party and economic lines. That’s according to poll results just released by the National Association of Homebuilders.

Echoing findings of similar surveys conducted in 2011 about Americans’ rock-solid commitment to homeownership are these highlights from the homebuilders’ survey:

•    96 percent of home owners are happy with their decision to own and 84 percent who are “underwater,” or owe more on their mortgages than their home is worth, expressed the same sentiment.
•    79 percent of home owners would advise a family member or close friend just starting out to buy a home, and 69 percent of those who are underwater on their mortgage would offer the same advice.
•    74 percent said that despite the ups and downs in the housing market, owning a home is the best long-term investment they can make.
•    Homeownership and a retirement savings program are considered by voters to be their best long-term investments.
•    Nearly seven out of 10 voters who are not currently home owners (68 percent) said it was a goal of theirs to buy a home.

Despite the uncertain employment market and the difficulty of pulling together a down payment (one of the biggest barriers home buyers face today),  Americans are oriented toward homeownership.  They’ve bought the argument; it’s only up to individual sellers to translate those intentions to a sale through smart pricing and positioning.



Image courtesy of  Morguefile.  

Good News: Mortgage Rates Flat-Line

Mortgage rates are likely to plateau at their current level of about 4%, according to analysts quoted in the Hartford Courant. That’s good news for buyers and sellers, though the underlying drivers aren’t so cheery.

Demand for mortgages will remain tepid mainly due to these factors:

• Rocky employment trends – despite the recent uptick in hiring, millions of Americans are unemployed or underemployed 
• Eroded credit – Struggling to regain firm financial footing, many would-be buyers simply don’t have a good enough credit score or enough of a down payment to qualify for a mortgage 
• An unappetizing array of homes on the market – Foreclosures and distress sales still dominate 

What does this mean for this spring’s sellers?

• Be sure your buyers are truly qualified. To get the very best of the current low rates, they will have to have a hefty down payment and polished credit scores. Don’t waste time with marginally qualified buyers.  
• Position your house as a ‘smooth move:’ if you’re not selling short, your traditional home sale should face few barriers to lenders and buyers.

 Check out the ForSaleByOwner.com Education section for the latest tips and tactics on selling this spring.

 

Not Your Dad's Down Payment

Buying a house isn’t what it used to be, which is why your parents’ advice may or may not be actually helpful.

The basic process of home buying hasn’t changed much But the nuances of financing, rules and regulations have. Closing is more complicated than ever, with more moving parts. And you will need to gather more documentation and have more cash at closing than your parents probably did.

Today’s first-time buyers also have different expectations for building wealth through homeownership than did prior generations. According to the Pew Research Center, today’s newly retired homeowners enjoyed a stroke of good timing: they bought their houses long enough ago that their net equity was not eroded by the housing recession. In other words, they’ve still made money on their houses.

Despite lower housing prices, today’s first time buyers probably will not get a big lift in equity, especially in the first five to ten years of homeownership, if current predictions about a slow housing recovery prove accurate. That means that it will be a decade or more before this year’s buyers can truly count their houses as an asset. 

First-time buyers need all the help they can get. But make sure that advice is current, and not based on outdated assumptions and experiences

2011 Home Improvements Will Make All the Difference in 2012

Americans are dour about the economic prospects for 2012 -- their own, and the country's.  They expect to save less and stay stuck in debt, according to the latest Harris Interactive poll.

One sign of the times: only 11% of homeowners say they will re-invest in their homes through value-building home improvements.

That means that you have a major selling advantage if your house is recently improved, so work it! 

• If you improved in 2010 or 2011, put those dates in your listing headlines and  description -- you'll stand out from others using fudge terms like 'recently updated'
• Be specific with brand names -- Kohler, Viking, KitchenAid, GE, Pergo -- that are shorthand for quality
• Lead with photos of your nearly new improvements, and take several photos from different angles, of the improved rooms. Include close-ups.

For five more tactics that will keep you ahead of the 2012 housing market, plus ways to tame a post-holiday credit hangover, visit the ForSaleByOwner Education section.

Clear the Way To Your Down Payment

Opening a credit card statement and seeing $0.00 as the balance is very satisfying.

So satisfying that many consumers pay off smaller balances completely just to get them out of the way, while rolling over larger balances…ultimately paying more.

Our mission at ForSaleByOwner.com is to help you buy the house you want. Our Credit Cleanup Countdown can help you wrestle your credit score and report into shape for a fast and clean mortgage preapproval. (With that preapproval in hand, you can negotiate confidently for your house.)

Here’s one way to gettyour credit ready for a lending officer’s scrutiny:

Find out what cards have the highest interest rates. Then, find out what your credit limits are for all your cards.

1. First pay off the accounts that have the highest balances in relation to the maximum credit ceiling. You want your credit report to show that you are not using anywhere near the amount of credit you could, on any account.  
2. Second, chip down on the balances with the highest rates. Those are the most expensive accounts.  
3. Finally, pay off the balances on the accounts with the lowest rates. Those are cheaper to carry for a few billing cycles.

These steps will help you make progress towards a stellar credit report and rating when you apply for a mortgage. Rely on ForSaleByOwner.com for everything you need to know about shaping up your credit for a home purchase, from FICO to  first down!

Image courtesy of Morguefile contributor cohdra.

We Know Where You Are Moving To

Moving? Chances are pretty good you are headed to Texas.

According to the annual Allied Van Lines tally of who's moving where, the top fives states people are moving to are:

• California
• Texas
• Florida
• Virginia
• North Carolina

And the top five states people are moving from are:

• California
• Florida
• Texas
• Illinois
• New York

 

But when you subtract the from's from the to's, Texas nets the most 'in-migration' -- in other words, more people choose to move to Texas than choose to leave.  

Statistics like these can help you gauge the demand for housing in your state...and consequent home value and housing demand.

 

 

Image courtesy of Morguefile contributor jdurham.

 

 

5 Hot Items for Condo Board Agendas

Thinking of buying a condo? 

Thanks to our sister publication, the Chicago Tribune, here's a top list of hot topics for condo boards for the coming year.


Be sure to investigate these issues when you are examinig the bylaws, minutes and finances of any condo association you are thinking of joining.

Delinquent assessments. Bad debt and delinquent members affect everyone in the association....and make for tense neighborly relations.

Foreclosures and bankruptcies. Units owned by delinquent owners and by banks might not be contributing fairly to community obligations. How is the association dealing with crimped income?

Long-term deferred maintenance. Maintenance deferred means bigger bills later.

Municipal budget problems. Many municipalities are trimming budgets -- Chicago, for example, now charges condo associations for trash pickup that they already pay for from private services. What fees and rate hikes are on the horizon?

FHA recertification. To quote the Tribune's story:  The Federal Housing Administration in 2010 changed its policies to require that associations, not just individual units, undergo an approval process before the agency will offer mortgage financing within the development. Because certification is valid for only two years, associations that certified in 2010 must recertify in 2012. If they don't, owners will miss out on a large number of shoppers.


To stay ahead of these issues, line up a real estate attorney who is conversant in both condo law and in the city in which you are thinking of buying.