One of the real beauties of owning a home that is in good condition and in a good location is that it becomes attractive to people in the market to buy a home.  If the owners actually have equity in the home and have a bit of “wiggle room” to work with a potential buyer on price and inspection items, that’s even better.

One of the real disappointments of the glut of short sales and foreclosures on the market is that both the pricing and the condition of the houses are pretty inflexible. They are what they are.

A House Near Berwyn Heights

In my previous post I mentioned the sale of one of my listings in College Park Woods.

This home is “across town” (which isn’t really that far).  It’s a few blocks from the Town of Berwyn Heights and it’s till very close and accessible to the University of MD, METRO, and the main commuter routes of the Beltway, RT 95 and the Baltimore/Washington Parkway.

I had interviewed with the Sellers quite a long time ago and, yet, for reasons of their own, they decided to use a Realtor based out of Columbia, MD to sell their home.  The Realtor didn’t work out so I came into the picture.  We priced the home well and I implemented my marketing blitz.  Still it took 111 days to attract a buyer.

A buyer recently made an offer and because they have been involved in the home buyer program offered by NACA (Neighborhood Assistance Corporation of America) the financing was all lined up and ready to go.The program offers great home buyer education, access to mortgages with highly competitive rates and the first-time home buyer tax credit of $7,500 for qualified buyers.

There is nothing better than a financially qualified buyer who wants to buy your home.

Next Steps

We are now working through the home inspection phase. After that, it’s the appraisal phase and then onto settlement.

Interested in how you might get good results like this?  Shoot me an e-mail or give me a call at 240-417-9100.

College Park Woods is a quiet community of slightly less than 500 homes near the University of MD.  It has a wonderful community pool, a small park and solidly built single family homes in about four architectural styles.

I’ve been serving the College Park Woods community since 1999 - helping people sell their homes - as they get ready to retire and downsize or move on as the result of a job opportunity or just moving to another area. During the “frenzy” of 2000 - 2005 houses in College Park Woods sold just as fast, if not faster, than comparable homes in the area.  This was mostly due to its excellent location near the University of MD, METRO and a variety of other large employers (USDA, NASA, The Washington Post) and easy access to shopping and commuter routes (the Beltway, RT 50 and RT 95).

The Slowdown

Home sales in College Park Woods remained strong, if a little slower, through 2006.  Home sales really didn’t start to slow down until spring of 2007.  Yet when it did slow down…it really slowed down.  Short sales started to pop up.  People who had bought homes in the early ’00s using Adjustable Rate Mortgages (ARMs) or interest-only loans or a variety of other “exotic” mortgages found that they couldn’t keep up with the payments when the interest rate adjusted upward causing their monthly payment to increase.  They realized, also, that the value of their home had decreased, mortgage standards had gotten significantly tighter and they were unable to re-finance.

This created a challenge for the folks who had plenty of equity in their home.  People who had been paying their mortgage for years, had purchased their home at a low price (relative to today’s prices) and were not “in trouble” found that because of declining home values and the huge influx of the number of homes on the market, they could not sell their home quickly or for as much as they would have hoped.

In fact, in the last year only 6 homes have sold in College Park Woods and it took an average of 123 days for them to sell.

The Miracle of College Park Woods?

The last home that sold in College Park Woods went to settlement on August 15, 2008. It was a nicely updated split level with a nice addition and great kitchen.  Even so, it took 111 days to sell.

Then came 9312 Saint Andrews Place. This home is on a corner lot with an attached garage and beautiful woods behind it.  The owner had made some upgrades and the house was in great shape.  We found a buyer within 76 days. It settled and ownership transferred on December 30, 2008.  A nice belated Christmas gift for the previous owner.

The “Creative” Part

The buyer of this home decided to get creative with the financing.  It was all perfectly legal and the buyer was well qualified to make the purchase.  His intent was simple. He wanted to purchase a house near the University of MD so that his son and some friends could live in it during their years at the University and then sell it (or perhaps continue to hold it as an investment property) in four or five years.

The beauty of this was that he and his son were able to obtain a government backed FHA mortgage and take advantage of a number of opportunities:

1. a low down payment (3% in 2008)
2. preferential interest rate for owner occupied property
3. 30-year fixed rate
4. non-owner occupant eligibility
5. the $7,500 tax credit for first-time home buyers

You see, FHA requires that at least one of the people on the mortgage and title live in the house.  That would be the son.  It doesn’t matter that the owner occupant may not have the financial ability by himself. As long as the co-signer (the father, in this case) can qualify, they’re good to go.

I wrote about this at some length in this post.

So, it’s not impossible to sell houses in today’s market despite what you hear on the news.  If the price is right and the condition of the home is good they will find a buyer.  Mortgage interest rates are extremely attractive making homes more affordable. Sellers still have to make an effort.  A good Realtor helps (that would be me!).  It can be done.

Interested in how you might get good results like this?  Shoot me an e-mail or give me a call at 240-417-9100.

Great negotiating skill is one of the greatest values a good Realtor can bring to the table. By using his knowledge and expertise, a Realtor has a good sense of what can realistically happen in any given transaction.  Negotiation doesn’t stop at price or other financial terms, either.  It continues through the entire process from offer to settlement.

One of the critical junctures in the process is the home inspection. A buyer will bring in a home inspector to go over the home with a fine tooth comb looking for anything that could be wrong.  The inspector will look at the electricity, plumbing, heating and air conditioning and many other aspects of the house that the seller probably hasn’t thought about in years, if at all.

Since the buyer is paying for the inspection and since the home inspector is getting anywhere from $300 to $400 or more for a few hours work you can believe that the home inspector will find a few things in your home that need repair or replacement.  Sometimes there is a huge list of things…and it can all add up to serious money.

Negotiating the Outcome of the Home Inspection

At this point, the buyer needs to think long and hard about whether or not to continue with the process to settlement and buy the house.  If there are some seriously egregious things wrong with the house (a foundation crack or serious roof issue, for example), the buyer may just want to back out completely and look for another house.  If there is just a list of smaller things - a leaky faucet, some outlets that aren’t working properly - they may want to ask the seller to repair or replace some items on the inspection list.

As I mentioned in a previous post, it’s OK to ask for whatever you want.  After all, if the seller agrees to make all the repairs your house will be in just the condition you want it to be in.

On the other hand, it is also important to “know when to hold ‘em” and “know when to fold “em”.  In other words, what is really important to you to have repaired or replaced.  Pushing to hard for cosmetic items like cracks in tile or dirty carpet may just push the seller over the edge.

If you’re the seller, it’s important to understand that, for buyers, this is their single biggest expense in their lives and they’re probably singing a 30-year mortgage, to boot.  It’s also important to realize the end goal: to sell your house.

Let’s Work Together

There are important considerations on both sides of the transaction and it’s really up to the Realtor - the person who has been through this process many times and does it for a living - to sit down with his client and have that heart-to-heart talk about what’s important and what’s not.

Then it’s time for the Realtors - representing their clients - to talk to one another in a civil manner to reach agreement.  Both sides end up giving a little.

I’ve never met a seller yet who loved doing all the repairs requested by the home buyer especially after some hefty concessions on the front end at the time of the offer. I’ve never met a home buyer that didn’t want the seller to fix everything and then some so they wouldn’t need to do anything once they moved into the house.

The bottom line is to know what’s important and to know why you want to buy or sell the house. If you keep those two things in mind and have that heart-to-heart with your Realtor, the rest will fall into place.

Here’s a confession: I’ve never watched a whole episode of Desperate Housewives.  I just like the title. However, based on what I am seeing in the marketplace, it would seem like a lot of home buyers believe that there should be a show call “Desperate Home Sellers”. Buyers are offering financial terms way, way below market and then requesting extensive repairs based on the evaluation of zealous home inspectors. Sellers, in turn, are feeling pinned to the wall and more than a little stressed about the sale of their home.

The Purpose Of A Home Inspection

A home inspection is a good thing. It provides both the Seller and the Buyer with a fairly accurate picture of any items in the house that need either repair or replacement.  I use the phrase “fairly accurate” here because, as all reputable home inspectors will tell you, they are generalists.  Not specialists.  In other words, they can point out areas that they think may need to be addressed by specialists such as electrical problems or plumbing issues.

Home inspectors will generally point out normal maintenance items as well.  Hot water heaters that may still be fully functional but a little older and should be monitored.  Ditto heating and air conditioning systems and the roof. A good inspector will point out the difference between a maintenance item - what a home owner may normally be expected to repair or replace over the time they live in the house - and items that really should be repaired or replaced sooner rather than later.  In fact, there are some items that really should be repaired by the Seller prior to settlement.

Reasonable Expectations

In the current market there are lots and lots of short sales and outright foreclosures. In addition to the generally lower prices of these types of homes they are also sold in “as is” condition.  What this is telling the potential home buyer is that either the home seller cannot afford to make repairs - as in the case of a short sale - or that the bank has already discounted the price of the house to the point where they will absolutely not make any repairs regardless of condition.  In both cases, a home inspection is still a good idea but the home buyer cannot expect any repairs to be performed.  After the inspection, the home buyer must make a decision.  Buy or Don’t Buy.

Working with home sellers that have a little bit of equity in their home and don’t need bank approval for the sale of their house provides everyone with a little breathing room.  Unfortunately, many home sellers will provide most, in not all, of their available financial concessions up front.  So, when the repair items come along, they have been tapped out.  They feel like they’re being squeezed.

This adds a lot of resentment and general bad feelings to the transaction and it is at this point - the home inspection - that many home sellers dig in their heels and the transaction begins to fall apart.

Why Do You Want To Buy The House?

There are certain contractual obligations the home seller is required to meet as far as home repairs are concerned.  Electrical and plumbing issues need to be addressed and the normal systems of the house like the heating and air conditioning need to work.  Cosmetic repairs like fading paint or cracked tile or old kitchen counters are just part of the house.  If the home buyer wants those fixed it really is all part of the joy of home ownership.

It’s at this point the home buyer needs to ask themselves, “Why do I want to buy this house?”

If the reason is that the house has great potential, is in a great neighborhood, a convenient commuting distance to work or whatever other reason the house appealed to the home buyer in the first place than the transaction should proceed without a long laundry list on minor repair requests.

A Conversation With Your Realtor

Sure, it’s OK to ask.  Who knows?  Maybe the home seller will fix whatever you want. However, it is at the point of the home inspection where the home buyer really needs to know what they can handle as part of the experience of home ownership and what really needs to be done. If the home buyer asks for every minute flaw to be fixed there is a good chance they will find out they are not in their own private episode of “Desperate Home Sellers”.  They may find that the home seller is willing to let them walk away.

It’s always good to review the home inspection report with your Realtor with an eye to whether or not you really want to buy the house that has just been inspected.  If you do want to buy it then you need to know there are some things you may need to do yourself after you’ve moved in.  If you find that there are too many flaws with the house or that there are some serious big ticket items that need repair or replacement, it may be time to walk away.  This is where an honest conversation with your Realtor has tremendous value.

I’m representing a wonderful client with a nice home in College Park Woods. One of the nice things about the home is that there is no wolf at the door. The Seller isn’t in a bind and there is no bank or “third party approval” that needs to get involved with the sale of the home.  If a good offer comes in, the Seller can say “Yes” and move forward to settlement pretty quickly.

It’s probably a sign of the times that no matter what condition the home is in (this one is in excellent condition) or the location of the home (excellent location, too) or the price (very reasonable), Buyers insist on offering way, way below the list price.  It would be insulting if it weren’t a little sad, too.

When Is A House A Home?

If someone is looking for a home to live in it makes sense to try and get the best terms they can get.  A fair price, possibly some help with closing costs are both good. Yet, at some point, they have to ask themselves, “Do I see making this house my home?”.

You see, this house is actually the Sellers’ home, for now.  They have lived in it, made improvements to it, gotten to know the neighbors and paid the mortgage every month. So when Buyers come and “low ball” the price and then ask for lots of additional cash for closing costs on top of the low price, it kinda hurts.

Just Saying No!

Even though this particular house has been on the market only two months, it recently received two offers. Excuse me — one Letter of Intent and one offer. Both were so low that the Seller and I, for that matter, were stunned.  The Seller also said, “NO!”  You see, not everyone is ready to sell their house at any price just to sell it.  Not everyone is in a short sale or foreclosure situation.

Sure. It’s OK to offer lower than list price.  It’s OK to ask for closing help.  It’s OK to ask for inspections and a settlement date you like.  It’s also OK for the Seller to say “No” if you’re being ridiculous. The idea of negotiating terms that are beneficial to the Buyer is to leave room for the Seller to meet the Buyer at some middle ground. If the gap between the list price and the offered price is too wide, there is really no place for the Seller to go.

So they stay put.

It’s a crazy market out there!

The Maryland Contract of Sale and all of the appropriate addenda for various inspections and jurisdictions, etc. can run to 40+ pages.  Even though most of it is boilerplate put together by lawyers, there are still a lot of blanks to fill in with terms and conditions.

Instead of going to the trouble of filling out this humongous “offer” a lot of Realtors have resorted to a Letter of Intent.  These Letters say right on them that they are not offers to purchase and not enforceable.

So why use them?

They’re an easy way to ‘test the waters” to see if the Seller is even remotely interested in entertaining what is almost always a low ball offer. It’s a way to start a negotiation prior to going to all the trouble writing this 40+ page offer and having people cross out stuff, write new stuff, fax back and forth, etc. until the documents become illegible.

The challenge is that they are almost always way, way too low.  The Seller gets insulted. They either laugh or scream.  Most Buyers’ Agents know this.  Most Listing Agents know this, too.  However, It’s our job as Realtors to represent the interest of our clients faithfully according to their [the clients'] wishes.  As I often tell my clients and other Realtors, “It’s not my house.”

So we throw these low balls back and forth to each other wishing and fantasizing that maybe one day we’ll get a phone call saying, “The Seller agrees.  Write the formal offer.”

Tomorrow, I walk into a hotel ballroom in Greenbelt to convert all my Supra lockboxes and key access to Sentrilock lockboxes and key access. Woo! Hooo!!!

Neighboring jurisdictions have converted long ago (and Montgomery County/Washington, DC will convert a little later this year or early next, I understand). So I went and got my Sentrilock key and card reader several months ago. I wasn’t going to forgo showing property in either Anne Arundel County or Howard County just because Prince George’s was running out the clock on their Supra contract.

I’m seeing a lot of pluses to Sentrilock, not the least of which is that they will trade me one-to-one for all the Supra lockboxes I have. Lockboxes aren’t cheap and being able to maintain my personal inventory without breaking the bank is important. I’m just hoping they accept the key cards from all the neighboring jurisdictions. I guess it’s that reciprocity thing.

Luckily, I only have three listings that will be lockbox-less for about 24 hours. I’ll run around late this afternoon to pick up the old Supra lockboxes and then run around again tomorrow after the exchange to install the new Sentrilock lockboxes.

Hey, I guess it’ll give me something to do!

Many of my clients are optimistic that a new presidential administration and a new Congress will usher in a new wave of potential home buyers. “Let’s see what happens after the election.” was common to hear. I believe the thinking is that important factors like price and condition won’t matter as much.  After all, people have to live somewhere.

A Closer Look

Let’s take a little bit of a closer look.

Both the President-Elect and the Vice President-Elect have been in Washington, as Senators, for awhile (plus, they’ll have a place to live!).  A lot of the people whose names are floating around have been here for awhile, too.  More importantly, anyone that does move here from elsewhere will most likely rent a place for the short term (say, the first year) while they get acclimated to their new job and the MD Suburbs of DC.

Most Congressmen or Senators have homes and constituencies elsewhere and maintain their primary residences elsewhere and go back and visit their home districts pretty regularly. Some of them and their staff will buy a house here but for folks that come up for re-election every two years (the House of Representatives) or every six years (the Senate) it sometimes makes more sense to rent a house than to buy one especially if they think home values may continue to decline.

What About The Lobbyists?

There will be an influx of lobbyists, contractors, and various support people who will be moving into the area.  There will also be a lot of them that are already here and will just switch gears to accommodate the Obama Administration.

Again, depending on what industry or trade association they’re representing, these lobbyists and their staff and support people may or may not run out an buy a house.  A lot of them have intense travel schedules and families with children in school systems “back home” - wherever that might be.

What Really Matters

There is always optimism about a new Administration. For different people, there is optimism about the new direction the Obama Administration will lead us. Home Sellers want to believe the change will also stimulate home sales.

I want to encourage all the hope and optimism.  I am also pragmatic.

I’ve been in the real estate profession through a few changes in Administrations.  I’ve been waiting for the BRAC (Base Realignment Commission) influx of military personnel to come to the area. I’m still waiting.

If you have your house on the market, here is what really matters:

1. Price
2. Condition

About once a month I run stats for the the 20740 zip code that includes College Park and Berwyn Heights.  Both these towns share the same zip and homes in these towns are close to the University of MD, METRO for a quick commute to downtown DC, great commuter routes like the Washington Beltway, RT 95 (north/south to Baltimore or points in Virginia), RT 50 which heads either into DC or out toward Annapolis and eventually the Atlantic Ocean, lots of parks, great shopping and decent schools.

So here’s the housing run down:

Current # of Homes Available for Sale =155 (all types)
Pending Listings (under contract) = 19
Sold within the most recent 90 days = 40
Average # of Homes sold/month = 13.33 homes/month
# of months housing supply = 11.63 months of inventory

Let’s Break It Down

There are 155 total homes currently available for sale (this includes condos, townhouses and single family homes). Yet, in the most recent 90 day period, only 40 homes sold.  So, if no other home came on the market, it would take almost a year to sell what is currently available for sale.

This is known as the absorption rate — how long it would take the current number of homes to be “absorbed” by the market. It’s an actual mathematical formula which can be used for any geographic area. It’s pretty simple: the number of homes currently on the market divided by the average number of homes sold with in a certain time period.

In the case of 20740 (College Park and Berwyn Heights) it looks like this:

40 (homes sold within 90 days) ÷ 3 (months) = 13.3 (avg. # of homes sold)

155 (# of homes for sale) ÷ 13.3 (avg. # of homes sold) = 11.63 (months supply)

Thirteen homes (give or take a third of a house) sell, on average, in any given month.  This means that of the 155 homes for sale your home has a tad better than 8% chance of selling (8.4% to be more exact). Put another way it means there is a 92% chance it won’t sell.

What The Heck Does This Mean?

It really just means one thing.  If you want your house to sell…if you want your house to be one of those lucky 13.33 houses that move from Seller to Buyer…if you are really tired of having people walk through your house (or not walk through), you need to address two things:

1. Price
2. Condition

Caveat: Even though these numbers take into consideration all homes, including foreclosures and short sales, I understand that with foreclosures and short sales both price and condition are beyond the control of the Seller.

Part of what I do as a Realtor is hold Open Houses.

Open Houses are one of those age old traditions in real estate that just don’t seem to want to die.  I think they started back in the pre-Internet, pre-Multiple Listing Services, pre-Buyer Agent days when about the only way people got to see the inside of homes was at an Open House.  People would comb through the Sunday classifieds and map out their own tour of homes and take a few hours to drive around various houses.  Sometimes they even found one they really liked and wanted to buy!

Nowadays, of course, there is the Internet, Virtual Tours, the Multiple Listing Service and Buyer’s Agents that are ready, willing and able to provide their own private tour of homes for their clients.  The Buyer’s Agents can access the house with a special card that will open the lockbox that has the key to the house in it. It can be Monday at 2pm, Thurday at 6pm or any other time.

Open Houses are great for the neighbors who might be interested in seeing what their neighbor’s home looks like and get decorating tips and the like.  Or they may just be curious to see if their own home might fetch the same price as the Open House. Or (and this is the big hope) they may know someone that is looking for a house in the neighborhood but isn’t working with a Realtor.  You never know!

So, tomorrow (Sunday, Septmeber 28th), I’ll be at 5918 Bryn Mawr Road in College Park from 12:00 (noon) to 3:00 ready to meet and greet the neighbors and anyone else who comes by in the hopes that one special person will see the house and want to buy it (or know someone who does).

You can get the details by point your mouse toward the top of the Page at the words “Featured Listing” and than click on “Open Houses”  (how easy is that!) or you can just — CLICK HERE.