January 2010
Real Estate Mythology

Do you believe in Zeus, Hera, and Athena?

Everyone knows that the Greek gods are the stuff of great stories but are also untrue; here are some other popular stories people should stop believing in too!

Myth #1: “Staging is no big deal and my home doesn’t need it.

The reality is that EVERY traditional listing (not bank owned or short sale) on the market should be staged. On average staged homes sell for 1% higher so a $250,000 home will net you $2,500 more. Since I pay for the staging consultation, that’s all profit for my sellers! There’s no recent data for how much faster staged homes sell for but it’s safe to assume that a home in the best condition will sell faster. I know my clients who've staged and then sold their home in less than a month would agree. I think 1% more money IS a big deal, don’t you?

For those who think their home doesn’t need it or are offended by the thought of staging it the explanation is simple. Does a model home look like anyone lives there? That is intentional. They want the buyer to picture themselves living there. When you’re selling your home you don’t want anyone to know who you are and what you’re like. You’re selling your home not your personality and for most people their homes become a reflection of their personality – especially after years of living there.

Do yourself a favor and stage your home. You’ll like the results and the extra cash!

Myth #2: “Winter is a terrible time to sell my house.

Since I call on listings that have gone expired I hear this a lot. December, January, & February are actually GREAT months to sell due to two factors – customers and competitors.

Yes there are fewer customers, I.E. less buyers out there looking. However, the buyers who ARE out looking are very serious. Would you go driving around getting in and out of sub zero weather if you weren’t serious about finding a home to buy? When you get a showing in the winter it’s usually someone who will buy a home in the next month or two. Springtime buyers? They may be just beginning their search or out looking for design ideas.

As for competitors there are fewer of them too and that’s good for you! You have a chance to position yourself well in a smaller group of potential homes, which means more showings for you so long as you have good condition and price.

I should also add that marketing is especially important in the winter to get your home and its value in front of all the people interested in your area.

Wintertime blues? A myth you can ignore AND profit from.

I Had How Many Showings this Week?

What Slow Down?

January 2010 was a good month for the Gerard Team – due to closings but not showings. January 2011 is only half over and already I have triple the showings I had a year ago. As you might imagine, showing levels are a predecessor to pending and then sold listing levels. The proof is in the two accepted offers that have come in so far this month.

So what’s going on? Why the increase in activity? The weather has been cold and snowy. The media continues to talk about how bad the market is. House values have leveled off from the Fall decline but could still slide a bit. Interest rates have even edged up.

I wish I could say that overall showings are up in the Metro but they aren’t. When I looked at the overall showing numbers for the Twin Cities, we’re on pace to have between 10 and 20% FEWER showings than in January of 2010.
The most logical conclusion is that I’ve been able to help my sellers determine the best combination of condition and price to create value and have then been successful at marketing that value to the buyers looking in that area. There are buyers out there but there are 9 homes listed for every buyer.

As for the details on my 10 current listings, they range from $110,000 to $475,000 and the ones getting the most action are above $300,000.

Keep this in mind if you or anyone you know needs a resource to understand what it takes to sell your home.

Home Prices Continue to Decline

But there’s something you can do about it.

A recent article noted that the S&P index recorded its sharpest monthly decline in home values since February 2009. Economists are talking about a double dip in the real estate market and the same article says home values are about what they were in mid 2003.

If you own a home already what can you do about it? Nothing! I don’t mean you have no control over it, which is true. I mean the best plan is actually to do nothing; to hold onto your home and wait it out. Time heals almost all wounds in real estate and we all know that values will eventually increase.

If you do need to sell, your home has to be in super condition. In many cases though, that doesn’t mean you have to take out another mortgage to make it look like the after shot of an HGTV rehab show. In most cases simple, low cost tactics like a fresh coat of neutral paint, new light fixtures, updated cabinet pulls, and staging will give your home a great new look. One that will result in lots of interest from buyers so long as you’re priced right.

Oh yeah, price… what about price? Price your home in the lower third of your CURRENT COMPETITION. Sold listings are good to look at but that is the past. How will you know if you chose well? You’ll have an offer in the first 2 to 3 months. How will you know if you chose poorly? You’ll have less than 6 showings in the first six weeks. If that happens you had better lower your price fast or you’ll risk chasing the market down.

If you’re a buyer, depending on your price range, you have a lot of power. But be warned, very few people can time the bottom of a market. While you wait for lower prices, interest rates are on the rise and that could cost you hundreds of dollars every month – the death of a thousand cuts.

December 2010

Are you listening to Chicken Little?

Whatever happened to the real story?

It’s commonly accepted that the real estate bubble was a major contributor to our current economic situation and that second to reducing unemployment, real estate market recovery is a priority if we’re to feel confident about economic growth in the future.

What I don’t get are those trying to attract attention with irresponsible reporting. These Chicken Little wannabes have real estate values continuing to drop for the next four years until we rest somewhere around 1998 levels. Because this feeds our fears, these people get a lot of attention.

The extremes sell – especially the negative ones. Most times though, just like the perceptive powers of Chicken Little they’re not the reality.

In my own “armchair economist” opinion, we’ll see a modest decline in home values over the winter and into the spring – about 7 to 10%. By the fourth quarter of 2011 and into the first half of 2012 we’ll begin to see stabilization. Later into 2012 the high demand areas will begin to appreciate again with the rest of the Metro following suit in 2013.

It sounds counter-intuitive but with values dropping,
rising interest rates and more competition in the spring you’ll get more money this winter than you will in just a few months. It may be late 2012 before your home’s value returns to what it will be in January 2011.

If you know you must sell in the next year, the reality is you have nothing to lose by trying to sell now and lots to lose if you wait.

They’re Pushing ARM Loans Again

Do you think this is good for the economy or returning to old habits?

You can always tell the difference between someone who is out for themselves and their counterpart who is there to serve the customer. The easiest way to tell? Who’s really benefitting?

I got a call From Scott Carlson who is a friend from my days at the Pioneer Press and now works at Finance and Commerce reporting on Real Estate, among other things. He told me that he got wind of a mortgage company in conjunction with a Real Estate company in the Twin Cities (a really big one) that was pushing the 5/1 ARM or Adjustable Rate Mortgage. These were widely used during the bubble to give buyers the ability to buy more house. It seemed like a good idea at the time with prices rising and rates a bit on the high side – at least compared to where they are now.

Flash forward 5 years and homeowners had a rate adjustment combined with a 25 year amortization that resulted in a drastic increase in payment. Before 10% of the workforce lost their jobs, ARM loan reset was the number one cause of default. And just because job loss has replaced it as the number one cause doesn’t mean it’s gone away.

So now we have a mortgage company and related real estate company pushing this loan product again. It gets marketed as a way to save money since the payment is interest only and the interest rate charged for the first 5 years is so low – always lower than a 30 year fixed rate. But people don’t use it to save money, most are payment buyers so when they have a lower interest rate they get “reminded” it will result in a lower payment and the ability to buy more home.

The thing is, rates are still around 4.5% for a 30-year fixed rate making it one of the most affordable rates ever. So why go for a temporary rate at 3.5% especially when you KNOW it will be higher than that in five years? For most people it’s to buy more home. What will happen if they can’t refinance in 5 years or if the rate they can get is unaffordable? Will their current mortgage person or agent be there to help? I’ll let you be the judge of that.

I’ve Finally “Made It” as a Realtor!!!

Irritation or validation of lots of hard work?

A few days ago it happened! Although it’s frustrating for some agents I was proud to get not one or even two, but four scammers emailing me trying to get me to give them my money – or should I say the Gerard Team, LLC’s money.

The scam goes something like this: Someone from an African country wants to move here and buy a home. They need to buy it with 20% down but they must deposit the money into my bank account so they need my account number. Then I’m supposed to put the money down on the house.

Of course if I ever gave them the account number and other info it would be cleared out to the last penny. Not to mention that a client’s money must not be co-mingled with any other funds, business or otherwise.

Despite this phishing attempt I was honored that I’m out there enough to attract scammers. The reason I’m out there is because I’m actively marketing my clients’ properties. Try going to Google and searching:  “4 bedroom home for sale in Brooklyn Park” or “5 bedroom home for sale Eagan” or “3 bedroom home for sale Stillwater”. My blog is the first organic search result for all three! Not bad for a guy who didn’t know much about search engine optimization until about a year ago!

Creatively marketing my listings has become the difference between selling and not selling in this market. The 5 closings I have in December attest to that. When you hear a friend talk about selling their home, the best favor you can do them is to refer them to someone who will get more eyes on their listing and therefore sell it faster for more money.

November 2010

How’s the market?

This is a question I get a lot these days. For people who know me and ask it, I know they’re being kind since they know how much I love to analyze what is going on and also how much I enjoy sharing knowledge with others.

If I had to sum it up in one word it would be challenging.

As of the end of October, the three month average for pending sales is down almost 40% compared to last year. There are also over 7% more listings currently than last year over the same period.

Understandably, the percent of list price received at sale has gone down and number of available houses for ever buyer has gone up. These are all sobering statistics.

However, that’s not the whole story. Housing affordability over the past 12 months is up more than 6% and that’s on top of amazing affordability. For buyers (and even buyers who have to sell a home first) there is great opportunity in the current market. Also, from a big picture perspective, if the economy can add some jobs in the next three to six months, it will have a multifaceted effect on housing.

People who might have lost their homes being unemployed could qualify for a mortgage modification. Others who are worried about their jobs will feel more secure and be willing to take advantage of historically low prices and interest rates. Current homeowners will begin to see their home values increase again instead of mirroring the pumpkin drop that will be replicated in so many neighborhoods at the beginning of November!

So how do you turn challenge into opportunity if you MUST sell in this market?

  1. You need to have your home in the best condition of any comparable home on the market in your area.
  2. You also must price your home to be one of the lowest traditional sales among your competitors. I know this sounds counterproductive to getting the most money for your home but study, after study, after study shows that the home priced slightly below market value sells faster (and here’s the kicker) for more money that those priced at market value. It’s fear or greed that causes people to price too high and keeps them on the market, adjusting price in small increments until someone sees their desperation , gives them a low-ball offer, and dominates the negotiations because they know they have a seller who MUST sell.
  3. You need a Realtor who knows marketing inside and out. What are the guerilla tactics they use to get the word out? What is their internet strategy? How often are they updating the plan? How communicative are they with status of the efforts and buyer feedback? What kind of creativity do they offer to get your home noticed so the super condition and great price can work its magic creating undeniable value?
  4. The reality is that these three areas (in some combination) are ALWAYS what sells a home. In a buyer’s market however, many Realtors get lazier for some reason. They don’t want to do the extra work to get a sold sign on the property. You got where you are today by working harder when there was a challenge. You created your own opportunity. Make sure your Realtor does the same thing!

Great to hear from you Nate… so what are you doing these days?

I was surprised by this question from someone who was a former client of mine and whom I’ve known for more than five years. I wondered why they thought I wouldn’t still be doing real estate. Then he added, “Well, it’s tough, right?” I responded, “Not if you’re good.” I mean, of course the market is tough. There are over 27,000 active listings right now but despite the fact that there is one buyer for every 8 homes, the total sales between Sept. 09 and Aug. 10 is 42,093, which is almost identical to the same period of Sept. 08 to Aug. 09, and 13% higher than the same period two years ago.

This isn’t about the market though; it’s about the business I’ve created. A business to help you, your family, your friends, and your coworkers. I currently have 12 listings priced at over $2.5 million and am experienced at traditional listings, working with investors, and have become particularly skilled at helping people who have a hardship causing them to need to sell a home that is worth less than the value of their mortgage. AKA mortgage counseling and short sales.

How’ve I done this? Keller Williams offers some of the best training and coaching in the real estate world, plus they teach their agents how to run their own business. I’ve never been so purposeful in my life! That has resulted in being third in production for two of the last six months! That ‘s third of almost 100 agents, and our office is consistently in the running to be the number one office in the Midwest area! Now I don’t say this to compare myself to other agents, however it’s something you should know so you can feel great about utilizing my services or referring me to your friends.

So when I call you in the next three months, you don’t have to ask me what I’m doing these days!

Buy a Home Now and Save Money or Wait and Save Money???

You may be thinking, "That can't be!" and you know what? You're exactly right.

If you're one of the majority of people who need a mortgage to buy a home, you can't save money by waiting. It's as simple as that. If the market was in a tail spin and we were losing 20% a year then I could see that logic. However, most economists who are predicting a decline in market values are thinking along the lines of a 5% drop.

Of course any drop is significant and something to be feared, right? Well, maybe not.

For those of you paying cash for your home this post doesn't apply. You want to get the best/lowest deal and if you think you should wait to put down your hard earned $375,000 on a home then you could be right.

For the rest of us though, there's this pesky little step called financing. A large part of financing is your interest rate. Let's take a look how that could affect your long term economic health:

Currently, if you buy a $375,000 home and put 20% down at the current rate of 4%, your monthly payment for principal and interest will be about $1,431. Over 30 years you'll pay a total of $515,607 with $215,607 being interest.

NOW, if you wait and home values drop by 5%, that same home is worth about $355,000. You just saved some money!!! Maybe but what if the interest rates are around 6%? "Oh, they'll never be at 6%!" you say. In case you can't remember as recently as 2008 they were above 6%, which is still historically low.

Now you put 20% down and due to that 6% rate your monthly principal and interest payment is about $1,704. Over the next 30 years you'll pay a total of $612,982 with $328,982 being interest.

WOW, so by waiting you saved $20,000 but you spent about $97,000 more in interest over 30 years. By my math you died the death of a thousand cuts to the tune of $77,000.

By the way... if you invest that extra $273 per month that you save buying now and get a measly 8% return compounded over 30 years, you'll have an additional $318,000!

Still think you can save money by waiting? Think differently!

Contact me at [email protected] or 612-849-9079 for more information or to have me plug in YOUR numbers.