Why Isn’t this house Selling

Back in October, I wrote about Stupid Seller Tricks. What I forgot to add to that post was that it isn’t always clear who is doing the driving: the seller or their agent.

Ready to Move In

The house is listed as MLS 08420018 (note: you may need to create a Redfin account to see all the history). Notice that it says (as of this posting) this property has been on the market for 45+ days.

You never really know the story behind a house, unless you have inside information, but you can make some educated guesses.  For one thing, the pictures have no furniture, so presumably the owners have moved.

This house sold for $237K in 1999. Now, 14 years later it’s listed for almost twice that amount. The listing says, and the photos confirm, that the house has been updated.

Newly refurbished & updated thruout w/ refinished hdwd flrs, repainted interior. New 2nd flr bathroom & 1st flr powder room. Lg kitchen w/ island & new granite counters. New ceramic tile flrs in mudroom & bsmt.

To be sure, based on what I know about the neighborhood and this type of house, the asking price isn’t unreasonable. In fact, this is a wonderful house if you like stainglass and woodwork combined with modern amenities like an updated kitchen and Central A/C.  So why hasn’t it sold in this hot, hot market?

Couple of things to consider. One, the house is about 200 yards away from Family Fruit Market, a neighborhood Grocery store that is known for its fresh fruit and vegetables at affordable prices. Kinda like a Stanley’s West. While this shouldn’t be a reason for concern, the fact of the matter is, there is a lot of traffic in and out of the small parking lot. And let’s be honest: where there’s traffic there is inevitably some Dbag who feels that his way of driving trumps common courtesy and/or standard rules of the road.

We actually passed on a house across the street from this one for that very reason. While we were looking at the home, we noticed several cars park on the permit only street, or fight to get into some of the few legal spots in front of Family Fruit Market.

The other thing is that while this house is on a nice tree-lined street, it is also a street that a lot of people seem to use to cut across from Cicero to Milwaukee Avenue. In the less than 5 minutes I spent there taking these pictures, almost a dozen cars came drive through, and not at residential speeds either.

Another thing that is hard to analyze but I would say the number of buyers looking in Portage Park is less than the number of homes available for sale.

Icarus Theorem of Realty: In many cases the person who can afford your Asking Price, doesn’t want to live in your neighborhood and most of the people who want to live in your neighborhood cannot afford or flat out won’t pay your Insane Asking Price.

Portage Park is a great middle class neighborhood in the northwest side of the city. It has reasonable proximity to downtown, O’Hare Airport and is accessible from the highway and the Blue Line.  But unless you grew up here, you probably don’t know it exists.  And most people who cannot afford to buy in the really hot trendy neighborhoods (aka The Green Zone — I’ll do a post on that soon) figure if they are going to go West, why not just move to the Suburbs and be done with it.

My prediction: this house will have to drop under $400K to sell.  Remember, all predictions correct or double your money back!

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Have Home Prices come back enough to sell your home?

Everyone seems to be buzzing that the Real Estate Market is returning. No one seems to have a clue what it is returning to. Anyone who has been paying attention knows that home sales have finally started moving in the up direction after so many years in the slumps. Pundits who write about Realty finally have something exciting to publish besides the tired old What Renovations Return the most bang for your buck articles they’ve been hawking.

ChicagoNow resident real estate expert Gary Lucido actually called it a few years ago: “The most recent Macro Markets home price forecast survey of 111 economists predicts that over the next 5 years home prices will average an increase of about 2% per year. In other words…the market is not going to come roaring back.”

Basically, If you were deep underwater a year or two ago, today you may be only treading water. Which brings us back to the question on the tips of many homeowners: Is it finally a good time to sell my home?

According to a lot of realtors I’ve met, it’s always a good time to sell your home. They often leave out the part about needing to owe less on it than its worth, or when you factor in realtor commissions and other transaction costs that still means bringing a check to the closing table.

How much your home is worth to you and how much it is considered to be worth in the real estate world are often two different things. Believe me, I’ve been watching sellers with very unrealistic expectations list their properties over the last few years only to have that home languish on the market. The reality of realty is putting your home on the market is like a putting together a Broadway show. You only have one opening night when everyone is watching.

If a home hasn’t been selling, especially in a so-called sellers’ market, the first thing people assume is there is something wrong with it. Once the home has been rejected, they won’t come back, even if the price is lowered. They have already mentally discarded it.

Or maybe you really need to update your bathrooms

Once your listing goes “stale” your agent will tell you that it isn’t priced right and you have to reduce the price. Yep the same agent who reviewed the comps and came up with the price in the first place. Not “sorry I boo-booed” but “Sorry you have to lower your price.” as in I cannot believe you actually thought you could get that price for this place that I priced at that amount.

When I tried to sell my place in 2010, my agent and I sat down and we looked at the comps. He thought we could price it from $200K to $210K. I knew that was high so I said lets go with the low end of that range. We got a few showings but even with the cash for clunkers tax incentive, we didn’t get an offers. I never expected to make money or recoup my costs. I merely wanted to sell the condo for enough to cover my mortgage. Bonus if I actually got some money for a future down payment to buy dinner that night.

I had enough room to make one price adjustment. We dropped it $5K hoping that would insight someone to make an offer of $190. Didn’t happen. When I wouldn’t lover my asking price anymore, the agent dropped me except he wouldn’t let me take the place off the market. I had foolishly signed a contract that had a clause about de-listing before the contract expired, six months.

That’s on me. I knew it was there and should have asked to have it removed. In a normal market there’s a very valid reason for having this clause. You don’t want to do a lot of work, showing a home, only to have the seller find a buyer independently and then cut you out of your hard earned commission. However this wasn’t a normal market, it was the middle of the Bust and leaving my listing Active was only punishing me for not being rich enough to sell at any price.

But what is on my former realtor is that he pulled the comps and set the price and made no acknowledgement or took any responsibility when reality didn’t measure up to his advice.

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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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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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Super Bowl brings start of Real Estate Season

In a couple of weeks a long awaited event returns. No I”m not talking about the Super Bowl. I’m talking about the beginning of the Official Spring Real Estate market.

Most realtors will tell you that any time is a good time to let them sell your house. However, if you were to put your house on the market today, by the time the people looking to buy a home (aka the elusive mythical Buyer that had been feared extinct for the last few years) start their house searches, your place will have been on the market for a while, getting that kinda stale scent to it.

Then your realtor will say something like “well your house has been sitting on the market for a month now, I think you need to lower your asking price.” She will of course conveniently forget that she was the one who urged you to get it on the market as quickly as possible.

While realtors will try to convince you that any time is a good time to put your house on the market, the true season begins the day after the Super Bowl. Why do people start looking for houses the day after the Super Bowl? No one is really sure exactly why. Perhaps because without football on Sundays, wives have a better chance of dragging their husbands to open houses (or vice versa). Maybe it’s too cold to work on outdoor projects and honey-do items but not too cold to check out the latest listing in person.

I really think that what happened was someone needed a deadline to get their house ready and an agent said “get it listed by Super Bowl Weekend” and it stuck.

We have a decision to make. We could put our condo on the market while we look for a house, with the hope that we sell our condo first, and thus would have a little more buying power. This would require putting half our stuff in storage so that the place can be properly staged.

We could also take it a step further and move into our Sister-in-Law’s house and start renting our condo. The reason for this is because lenders want two years of rental income on your taxes before they credit you that for mortgage loan purposes. I don’t think it will take 2 more years to find a house, but considering how long we’ve been looking, it would maximize our options.

By the way, my Superbowl prediction: Harbough brothers duke it out ala Baltimore vs San Francisco with our first overtime Superbowl ever. It is won with a defensive touchdown by none other than Ray Lewis.


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Voted Most Likely to Become a Realtor

I know a lot of realtors. I know some socially through church or other organized events. I know some through friends of friends. There’s also the realtor that sold me my condo. There are a few who have latched onto me from an open house or one-time viewing of a listing. They keep me on their newsletter mailings in hopes that I will use them. Every once in a while, even I am surprised by a new realtor connection.

When we started seriously looking last spring, we didn’t want to commit to a realtor. I figured I might come across a house where the seller wanted to sell but couldn’t because he owed so much on his home that he couldn’t unload it for market value and maybe if we didn’t have those pesky realtor commissions a deal could be worked out. Or maybe I’d find the house I liked then use one of those discount brokerages that give you part of their commission. After all, I was planning on doing the lion share of the work. I wanted to keep my options open, especially since I was going to be doing the work of searching the MLS for the house we wanted.

Ultimately, we didn’t go that route. It’s hard to see a house without an agent. Not every listing has an open house and agents typically won’t schedule a private show a house unless you are with another agent.

If we said we had an agent, some would get quiet and stop “highlighting the home’s features.” If we said we hadn’t settled on an agent yet, they would pounce on us like a closeted theologian on a cabana boy.

Redfin has this option where you can tour homes with no obligation. Now, there’s no such thing as no obligation but this is probably the next best thing. After a certain number of home viewings, you are expected to commit to an agent. So we signed up and picked a few houses to see one Sunday.

We selected five homes to tour (maximum allowed per tour is six) since there were a lot on my favorites at the time. Of those, the agent could only get us in to see two. No one returned phone calls for two listings and another didn’t match the comps and she wouldn’t show it to us. The biggest surprise was the agent’s name. Layching Quek. I went to high school with a Layching Quek and I wondered if it was her. [While both common Asian names, I recall from high school Layching pointing out that the combination wasn’t that common].

Turns out it was her! She didn’t recognize me, or appear to recognize me so I didn’t out myself. Just played it straightforward. We saw two homes and they did not impress. One was in a new subdivision behind a bus terminal and the thought of people getting lost trying to find it was enough to put us off. Plus it was a short sale, which is anything but. The second was one of those homes in a great neighborhood that would have been worth asking price during the boom. However, the owner had overleveraged his mortgage and put no money into the house, which was quite frankly a dump.

The interesting thing is that after the tours, Redfins sends you an email with the agent’s comments. She said something very positive…about the wrong house! Her comments were clearly about the first house we saw, but she attributed them to a house we didn’t even get to see. I emailed her about it and she said she would correct it, but one year later the comment is still there. I guess we must have been in different curriculums in high school.