First Dream House wasn’t meant to be

I’ve been watching the Real Estate market since the fall of 2008 when I first thought about purchasing a home because I noticed prices were dropping. At first I considered buying a two flat using my HELOC as a down payment and then eventually moving into the building and converting it into a SFH when and if the then elusive wife and kids arrived.

Unfortunately while I might have just noticed prices dropping in 2008, the bank that gave me a line of credit noticed a lot sooner. Chase was kind enough to suspend my HELOC before I could use it. Had I been smart, I should have withdrawn the entire line and put it in a different bank. I wouldn’t have made any money but I’d have a low interest $70K loan for many years.

I still watched the market and started looking at homes, skipping the two flat idea and going straight to the SFH. There was one particular house that has just about everything I could want and thus I refer to it as my dream house.

It is only a few blocks from the Jefferson Park Blue Line and Metra stations, so I’d have my transportation requirements taken care of. It has a big backyard with a great deck and a two car garage. A finished basement and a modern kitchen. New windows, roof and water heater means that all we’d have to do is move in and paint the place.

In March of 2009, I called a realtor from Zip Realty who made an appointment so I could see it even though we both knew their asking price of $539,000 was way out of my price range. It looked even better in person, especially after finding out it also has an attic that could be expanded into a kick-ass master suite later in life. On the downside, the basement was a little limited, it would be more of a children’s play area than a ManCave, but I’d have to take a longer look if I ever had a realistic chance of getting this place. Which I didn’t. In fact, no one really did.

The owner, who was expecting another child in July, had told me that if she didn’t get an offer in a month or so, she was going to take it off the market because she didn’t want to deal with a closing and a birth around the same time. I asked my standard “why are you selling such a great house” question and they responded that the husband had just got a job out of state. She also added that he could do the traveling thing if they couldn’t sell the home.

Even as a then single guy without children I knew that when the second child arrived that would get old real fast.

My dream house was quietly taken off the market in Sept 2009. Thanks to the Internet you can learn so much about a house. I learned that the owners had a mortgage and a HELOC which combined put them at about $475K owed on the house, so they didn’t have a lot of wiggle room.

In the summer of 2010, on a whim, I emailed the owner. Feigning ignorance, I politely asked ‘Just curious if this home was still for sale and what is your current asking price.”

It was over a week when I got this response:

“Hi. Thanks for asking. It’s not officially on the market, but we would still consider selling for the right price… Nothing below our original asking price. [Emphasis mine.]

Thanks!”

The problem with this house is its asking price. Anyone who can afford the asking price doesn’t want to live there and anyone who wants to live there cannot afford the asking price. They wanted almost $540K for it. And while it might have been worth that price at the height of the market, those days are gone for good.

Update:  apparently the owners updated the website they put together for selling this house.  It is not “listed” at $499,000.   

And I cannot blame them for wanting to come away with something for all their hard work. But there was just something about the sentence. Nothing below our original asking price that irked me. As if anything less was a personal insult. It is no doubt this inflexibility on their part that caused them to take their place off the market. It makes me wonder what they would say if someone offered them, say $525K, would they accept, counter offer or just say no thank you.

I think it’s fair to say that they are dreaming if they think they can get their price even in this now improved market.

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The Return of the Pocket Listing

Once upon a time in the Land of Realty, real estate brokers regularly gathered to share information about properties they were trying to sell. They agreed to compensate other brokers who helped sell those properties, and the first MLS was born, based on a fundamental principle: Help me sell my inventory and I’ll help you sell yours. Some realtors however, kept a few listings to themselves, in their pockets, so to speak.

A Pocket Listing, also known as an Exempt Listing, is a listing that wasn’t on the MLS. Instead it was essentially through word of mouth. Let’s watch former CN blogger and TV celebrity Jenny Milkowski explains the advantages of a pocket listing:

http://youtu.be/An_BpHzCMXw?t=12s

These off-market listings have always been around though they were usually only for the rich and Famous. They were meant to be rare exceptions intended to keep your neighbors out of your business or provide a semblance of privacy during a during a divorce or after a death.

This type of sale has become more prevalent lately and is growing in popularity though some agents and brokers don’t think that’s good for buyers or sellers. And if agents and brokers are against something, you can be sure that something has some merit worth investigating further.

There’s one really good reason to do a Pocket Listing that no one is really advocating and it goes back to how Relators, for good or bad, have gamed the industry to their advantage. Let me explain.

Since the bust, Sellers have been waiting for a good time to sell. You’d think that the improved housing market would encourage sellers to take advantage of the first good time to sell in many years.

Unfortunately, some would-be sellers, like my wife, bought at the peak of the market. Many bought with little or no cash down, or they pulled equity out of their home (my wife actually did put 20% down which seems foolish in retrospect). In many cases, sellers today will have still have to sell at a lower price than they could have realized had they sold before the bubble burst. Prices may never be that high again, at least not in the next decade or so — much to our chagrin. In other words people like my wife who bought during the height of the boom are still screwed.

But there is another group of sellers who, while they did somewhat overpay for their properties, they didn’t pay an extreme premium for their property. Perhaps some lucky combination of circumstances has put them in a position to unload their property today. Maybe they paid off their HELOC instead of borrowing against. Maybe they managed some extra principal payments here and there. These would-be sellers might actually have a shot at getting rid of their property and on with their lives without bringing money to the table. People like me, for instance.

Unfortunately, you really cannot get a clear picture until you put your place on the market. Yes you can run comps but that doesn’t always give you the complete story. You really don’t know what your place will sell for until you get a buyer to make an offer.

And that’s where the PL comes in. I think the benefit of a Pocket Listing in this current post-Boom era is that it gives sellers a chance to test the waters and see if they really can sell their property for enough to free them from their mortgage. By having a Pocket Listing you can feel out the market to see if there actually is anyone out there interested in your home. If you get some nibbles, you negotiate a deal and list and sell the same day. If you don’t get any hits, no harm no foul.

Realtors don’t like that because they fear your property won’t get maximum market exposure there’s even less guarantee they will get paid than with a traditional listing in a down market.

it’s really about leverage. Once you list your place on the MLS you’re part of the game. Your agent can keep pressuring you to lower your price to get a sale. Even if you de-list, the record is still out there like a Scarlet Letter on it for many years.  A topic I will blather about on a future post.

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FSBO Seller can really shoot themselves in the foot

Our weekends lately involve house hunting. We generally try to go to open houses because they are more casual and if we don’t make it, no one is really put out. This can sometimes backfire though. For instance, we went to see a house in Oak Park that was a For Sale By Owner (FSBO). The seller was exploring selling her home so she put fliers in her neighbors mailbox asking them to refer friends. One of the many friends who want us to buy in their neighborhood passed the info on to me.

For Sale By Owner is one of those things that I think make a lot of sense on paper — like communism and Taylor Swift — but doesn’t work in reality, mostly because the industry resists it at every turn.

This particular FSBO seller was a talker. It wasn’t even so much that she was trying to sell me on the house per se. It was more that she was trying to head off any of my potential objections before I even made them. At the same time she advised me to ask for a new garage if I made an offer!

One of the issues with the house was the small outdated kitchen. It would not only have to be updated but also the size somehow increased. The only feasible way would be to move a wall. I said knowing if it was a load bearing or non-load bearing wall would determine what you could do and how much it would cost. And she would argue with me even when I agreed with her!

“Oh you could move the wall all the way to here and do this and do that,” she rambled on.
“You can do anything if you have the money,” I said. “being on a tight budget, we might not be able to afford to do what someone with deeper pockets might be able to achieve.”

This made her even more determined to convince me it could be done. She was quite the talker and even though I had set the expectation that we had other appointments, she managed to eat up all our cushion time so that we couldn’t check out her neighbor’s open house. It’s not that she didn’t want us to see that house. Quite the opposite in fact. She really wanted us to see that house so that we realized what a price break we were getting on a almost identical house — if by identical you mean 30% smaller and more awkward floor plan.

We missed the window of opportunity to see her neighbor’s house because of her non stop rambling. She missed out on convincing us that her held potential for the same reason.

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Annoying Things Realtor Estate Agents Could Do Right

As a byproduct of following the real estate market since 2008, I know a lot of realtors. Some I know through friends and other social outlets. Some i met at open houses and they latch on to me. Often, I get an email from one like this one:

Dear Mr. and Mrs. Icarus:

I saw your note in Crib Chatter that you’re thinking of finding something in the near-northwest suburbs. Like one of these?

Let me know if you have any questions, comments or updates to your requirements.

Sincerely,

ChiTownGal

She sent me a link to her ConnectMLS report which had about 40 listings of various types of houses. All realtors these days have this package, some software developer made off well packaging and selling this to brokerage firms once the industry finally conceded that typical buyer/sellers are using the internet more than agents to buy houses.

For the purposes of full disclosure, ChiTownGal is the realtor who found me my current abode. Unlike many realtors who disppear once the commision check clears, ChiTownGal has stayed in touch over the years.

Okay, you asked. So in letter form, I sent the following back.

Comments:

1) I get these Powered by ConnectMLS reports from every realtor I’ve ever met since the dawn of time. [At any given time I’m also “stalked” by any realtor I’ve met at an open house, party or even on the running path, but that’s another discussion.] I’m also signed up on ZipRealty, Redfin and use a few other sites to do my searching. Since the MLS became available to ordinary buyers it is rare that a realtor trumps me on a home that is out there.

2) Some of my criteria just isn’t codeable and no agent is going to weed through listing descriptions to find me the perfect house — that’s my job.

3) No Agent is gonna review my notes on 40 plus properties. I’ve made comments like “wow, love this house let’s go see it” and “I’ll buy it today” and yet no response.

4) take MLS #07912198 this is a fugly looking house. There is no way i would buy it. I wouldn’t even live there for free or if you paid me (only a slight exaggeration). But if I check not interested, it will still come up in the next email when they delist and relist or drop the price $1. There needs to be a Never Show Me This House Again option.

Perhaps this Post-Boom Market is a good time for all the realtors to come together and fix some of the things broken in the system.

regards,

Icarus

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