Not the brightest realtor out there

Ever so often a realtor I worked with or met back when I was house hunting will reach out to me and ask if I found a house or if there is anything they can do to help.  Usually it’s an agent I met at an open house who then added me to their mailing list even though I didn’t ask them to or they offered to be my agent if the one I’m working with didn’t work out.

Today I got an email from one such agent.  He sent the following:

Greetings

Interest rates are expected to rise in 2015. If you haven’t bought a property yet, now is the time ! Please call/text me at 773-4xx-4xxx

Sincerely,
Rusty Reagan

I could ignore these but I try to be nice so I sent him the following note:

we bought a home in Nov 2012..If you happen to have a buyer for my condo, please send him our way.

And I included a hyperlink to the listing of my condo.  The very next email I get from him was:

Is your condo listed?

Not a very observant fellow but I did feel much better not letting him help me find a house.  I gave him the benefit of the doubt and replied:

yes, perhaps you didn’t notice the link  I sent, here it is again.

I already suspected how this would play out but I always love to get anecdotal proof.  He sent a reply that simply said thank you.  Which I hope means I’ll take you off my mailing list.

You’d think he would write back something like congrats on finding your home, good luck with selling your condo and if a buyer approaches me, I’ll be sure to contact your agent for a showing, both of us knowing no such thing would ever occur.   If someone were to call this guy 5 minutes after our last email and said “I’m looking for a two bedroom condo in Albany Park” I guarantee you the neurons would not fly across his brain making the connection.

The reality is realtors don’t work that way.  They rely on database searches to match clients with properties. And it’s not only too bad but extremely short sighted. Not only is there a chance that we might buy another house someday but we would definitely recommend a good realtor to our friends and relatives when they do their House-Hunting Adventures, because Good Realtors are hard to find these days. Rusty is certainly proof of that.

___

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post using those buttons under the headline.
• follow me on Twitter
• see some mildly amusing photos and posts on my Facebook Fan Page.
• Subscribe by email below.

The latest Facebook algorithm changes might cause you to miss some of my posts and you don’t want Facebook deciding what you can and cannot see do you? Type your email address in the box and click the “create subscription” button. !”

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.

The Green Zone Litmus Test

Since this blog started out about house-hunting and it lives in the Real Estate section of ChicagoNow, I figured I should still occasionally write about Realty, property and related topics.

What is the Green Zone?

In certain local Real Estate Circles, the term Green Zone refers a subset of neighborhoods that are set apart from the rest of the Chicago neighborhoods. These GreenZone Hoods tend to be the more popular neighborhoods that college graduates, new transplants and DINKS tend to gravitate toward.  The areas have established amenities, high property values, and low crime. The Green Zone term was a reference to Baghdad. Just like how folks refer to the south and west sides as Chiraq now.

But what exactly makes a neighborhood part of the Green Zone and where does this GZ fall on the map of Chicago?  It is like porn, you know it when you see it, but it is hard to define.

High concentration of Trixies and Chads? Check.
Starbucks? Check.
Lululemon? Check.
Trendy restaurants? Check.
Close to El? Check.*

* Not TOO close as in to hear it in your bedroom and not too far as in not too far to walk in in-climate weather.

By informal Consensus, the following neighborhoods are considered GZ by the majority of the current real estate pundits:

Lincoln Park
Bucktown/Wicker Park
Lakeview
Southport
Roscoe Village
Andersonville
Ravenswood
Lincoln Square
South Loop
West Loop
Streeterville
Gold Coast
River North
Millennium Park/Loop

So looking at the neighborhoods from the above list, I asked myself what do these very diverse neighborhoods have in common?  I came up with 5 categories that each one scores relatively high in.  So I give you the GZ Litmus Test.  If you can score high in four of the following five, the neighborhood is Green Zone.  [I’ll leave defining a neighborhood and sub-hoods, e.g. Lincoln Square and North Center are more or less covered by Ravenswood, to another forum].

The GZ Litmus Test

Relatively Low Crime:  This should be obvious but I’ll emphasize that there’s probably no such place a crime free zone.  For GZ def purposes, No noticeable gang presence and very little graffiti.  The level of Violent Crime should approach zero.  See Gary Lucido’s post on this.

Schools:  public schools are decent enough to send kids if private/parochial is not an option.

Walk-ability:  Proximity to amenities is again subjective but I’ll say if you have a decent sized park nearby and a mix of restaurant types to frequent without repeating one during the week.  Independent coffee shops, boutiques and local alternatives to big box stores goes a long way.  Dog Parks.

Access to public transportation:  whether you use it or not, the ability to get around town. Availability of cabs should factor in here.

Desired Housing Stock:  This is a little tricky so I’ll go by way of example.  Downtown has luxury high rises, Lincoln Park has Vintage buildings, River North and Wicker Park have converted lofts.  Others on’ list have new construction with great amenities.  Conversely, hoods within the Bungalow Belt are probably never going to be.

So if you step through this, Old Irving Park fits, but Albany Park doesn’t.  For now. Some hoods are on the cusp like Ukrainian Village and Logan Square. West Town isn’t GZ just yet, but it is definitely getting there. Some neighborhoods will never get there.

****************
Thank you for reading and I hope you will comment below. Do me a favor? Click my “like” button and join our Facebook community.

You’ll find funny, informative links and interesting pictures.  Don’t worry, your Facebook feed won’t get overwhelmed.

Happy Reading!  Follow Mysteries of Life on Twitter (@MysteriesOLife), Facebook or subscribe via email.

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!

___

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post
• see some mildly amusing photos and posts on my Facebook Fan Page.
• follow me on Twitter @Icarus2013
• subscribe by email below

if your inbox is lonely, type your email address in the box and click the “create subscription” button. My list is completely spam free. By the way, do you have Gmail? If so, make sure you go into your “promotions” box and drag one of my emails over to your “primary” box. That way, you’ll never miss one of my posts!”

The Mythical and Elusive Creature known as The Comp

Today I want to talk a little bit about comparable sales, or “comps” as the realtors call them. If you want to sell your home, you have to figure out how much can get for it. Sure you could just add the amount of money you want to how much you still owe on your home but this strategy seldom works. How much your home is worth to you and how much your home is worth to someone else can often be numbers that are light years apart.

The elusive Comp searches out recent activity

Alas, A home’s fair market value is determined by what a qualified buyer will pay for it at any given moment in time. Sort of like the old commodities explanation: if you can find someone to pay $500 for a watch, that watch is worth $500, otherwise, it’s only worth whatever you can get for it.

During the Boom, a lot of people were willing to pay a lot for “watches” that may or may not have been worth the asking price. After the Boom ended, it took a long time for sellers to realize that they were not going to find someone to give them their asking price. Unfortunately, it’s hard to take a loss on a property because we are usually talking about tens if not hundreds of thousands of dollars. So before you waste anyone’s time, especially your own, trying to sell your home, you want to get an idea if what someone will pay is even in the ballpark of what you owe.

The only way to estimate what that Qualified Buyer will pay for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the “comps”. – Most listing agents will do a formal version of this process called a Comparative Market Analysis.

Before the days of the internet, comps were a little tricky to come by. Agents might not have known about a listing or recent sale in time to add it to their CMA. Or they would cherry picked listings to justify their case for setting a price.

In all fairness, unless the homes are part of a subdivision built by the same developer where the only difference is one house has red shutters and grey siding and the house next door has grey shutters with red siding, it can be hard to make an apples-to-apples comparison of one home to another.

“To determine which homes you should compare against your own, you’ll want to target a search area of about a quarter- to half-mile radius around your house. It helps if the homes you research are in the same school district as yours and the neighborhood is generally the same as your own. You’ll want to focus on homes with approximately the same square footage and number of bedrooms that are a similar age, condition and style home with comparable features and upgrades. All of these factors will help determine how a home is priced. ”
Source: sharimack

Today comps are more real time. There’s still a chance for error. Certain Realty Websites will simply grab everything on the market in a 1 mile radius, divide by the number of properties listed and spit out the average. Some agents, even when doing the formal CMA, don’t always weed out dissimilar properties. Over the years I’ve had agents offer to run CMAs and I always take them up on it because I need a good laugh and don’t have cable.

They’d show me listings that were miles away or me condos with more bedrooms and/or bathrooms than I have. An extra bathroom might not throw a comp off a lot but an extra bedroom is a different animal.

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 is more upgraded, spacious or better located than the comps, or if the market has shifted since the time the comps were sold, it might warrant listing the property at a price higher than the comps indicate. Otherwise, you have to price it right if you want it to sell or even get any showings in the first place.

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.

___

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post
• see some mildly amusing photos and posts on my Facebook Fan Page.
• follow me on Twitter @Icarus2013
• subscribe by email below

if your inbox is lonely, type your email address in the box and click the “create subscription” button. My list is completely spam free. By the way, do you have Gmail? If so, make sure you go into your “promotions” box and drag one of my emails over to your “primary” box. That way, you’ll never miss one of my posts!”

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.

___

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post
• see some mildly amusing photos and posts on my Facebook Fan Page.
• follow me on Twitter @Icarus2013
• subscribe by email below

if your inbox is lonely, type your email address in the box and click the “create subscription” button. My list is not only spam free.

Hold your horses Condo Owners, it’s not 2005 pricing just yet

For the last several years, real estate insiders have been claiming that this year is the year the market returns to normal. It appears that they are finally correct since inventory is low and sale prices have increased for SFH. It seems every day a new listing appears only to get snapped up under contract before the weekend’s schedule Open House. So this would be a perfect time to put your condo on the market, right?

Not so fast. While the numbers for SFH are improving (I don’t have them in front of me, go read Gary Lucido if you want charts, graphs and math), it’s not the case for condos.

There were just too many condos built and/or converted during the boom which means that inventory is still high and many are also going through the Short Sale/Foreclosure process. This means that as soon as you put your place on the market you are competing with all your neighbors who overspent during the boom and are stuck with underwater property.

That isn’t stopping some from trying though.

This 2/1 condo came on the market a couple weeks ago for $225K. It does have parking but why would you buy it when you can get this 3/2 condo for $25K more?

Keep in mind these are also asking prices so if you use the 10% off Ask Price that the Realty Cartel is comfortable with, you could end up with an extra bed and bathroom for the same price!

Or if you don’t want to blow your budget, why not get this 2 bed, 2 bath for $149K?

The bottom line is if you want to sell your condo this year, you need to set the price as low as possible. Instead of putting money into the place to improve it, use that money at the closing table to reconcile what you owe the bank and what you get offer-wise.

If instead you want to recoup as much money as you spent on your place, well then as the Friend’s Theme song goes…this isn’t your day| your week | your month and certainly not your year!

Like Cubs fans you will have to wait until next year for sales data to justify any type of price increase in the ball park of what you are looking for.

___

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post using those buttons under the headline.
• follow me on Twitter @Icarus2013
• see some mildly amusing photos and posts on my Facebook Fan Page.
• Subscribe by email below.

The latest Facebook algorithm changes might cause you to miss some of my posts and you don’t want Facebook deciding what you can and cannot see do you? Type your email address in the box and click the “create subscription” button. !”

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.

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.

If you like what you read, please follow me on Twitter and like Mysteries of Life on Facebook and be sure to roll over the Like button, then click “get notifications” on the drop-down menu, that way Mark Zuckerberg’s new filtering system won’t keep you from knowing when I post something.

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.

Super Bowl is over, time to get selling or buying, or both

So now that the Super Bowl is over, people’s thoughts have returned to the spring realty market. Specifically, is this a good time to sell? Most everyone agrees that it is still a good time to buy. So the only remaining question is, is it a good time to buy and sell?

At brunch the other day a friend said she thought she could sell her place for break even but Cannot bring herself to do it because she paid “all that money for it.” I said “that’s because you’re thinking of it like Microsoft stock — you bought at $50/share and now it’s $25/share and you just know it can go back up to $50 a share”.

She completely agreed with my assessment yet she is also going to continue to be a reluctant landlord. She and her spouse they were discussing keeping the condo into retirement.

If this were last year, I’d say sell as soon as you are at a point where you won’t bring money to the table, even if you don’t get a dime back. However now that the market is starting to improve, it  might be prudent to hold on to your property assuming you have a stable renter that doesn’t have the drama llama as a pet.

It’s really an algebra problem:

Let X be your mortgage, which principal decreases by $4K/year. Let Y be you Property Value which rises by 3% per year. At what point are you:

1. no longer underwater?
2. Able to sell and get some cash back after transaction costs (note: not necessarily profit)
3. Able to sell for more than you bought?

My wife and I think that by the time we even reach #1 with her South Loop condo, we will be so close to paying it off that it would be fine to keep it as an in-town or a dorm room for our future kids could live if we are lucky enough to afford UIC tuition when they are college age.

My SB prediction was sort of correct. I did pick the Ravens and technically we had overtime in The form of a 30+ minute delay though Ray Lewis was mostly ineffective.  So you should completely follow my advice for the rest of your life, which should last about a Weekend before something I recommend kills you.

Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post using those buttons under the headline.
• follow me on Twitter
• see some mildly amusing photos and posts on my Facebook Fan Page.
• Subscribe by email below.

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.

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.


Thank you for reading and I hope you will comment below. Please also do any and all of the following — I know pushy right!

• “Like” and “Share” this post using those buttons under the headline.
• follow me on Twitter
• see some mildly amusing photos and posts on my Facebook Fan Page.
• Subscribe by email below.

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.

Sellers experiencing painful Learning Curve

In the early days of the Real Estate Bust, many a seller placed their home on the market and watched it sit.  The Days On Market (DOM) would grow to triple digits.  They would try tricks like dropping the price a few hundred dollars and/or relisting to make it seem like it just came on the market.  Most buyers quickly caught onto this trick.

Every owner thinks that their house is special and worth more than the one next door, across the street or down the block. This healthy belief gets even sillier when it’s clear the houses were built by the same builder and have the same general floor plan, number of bedrooms/bathrooms and the only real difference is the exterior paint.

What’s really surprising is that even today owners thinks their place is worth X because the houses across the street sold for X +/- a few dollars last month. The seller fails to account or flat out ignores that the sold house had features his home lacks, like updated bathrooms and kitchens or central air conditioning. During the Boom you could get away with this because “prices could only go up” and “buy now or be priced out forever” mentality.

Yes your house did appraise once for half a million dollars.  Blackberry Stock was once worth $140/share yet today it’s barely worth $8.  The difference is RIMM might release a new widget that brings it back into the smart phone arena.  Your house is not going to jump back to the ridiculously inflated prices we saw during the boom.  Those crazy prices were a once in a generation experience.

Sellers who are new to the current Real Estate market go through a learning curve when they decide to sell their home. They think I paid $X and its 2, 3, 5 years later, it must be worth Y, especially since I changed out the light fixtures. It must be worth more.

If you bought in the last 5 years and didn’t do anything to the property – why do you think you will get more than what you paid?

It’s really a quite simple formula:

Z = Price_Sale – Amount_You_Owe_Bank – Transaction_Costs

You want Z to be a positive number and to be as large as possible. You cannot do much about Amount_you_owe_Bank other than pay it down as quickly as possible. Transaction_Costs are pretty set too.  And you don’t really know Price_Sale until you put your place out there and then it’s too late.

For many people Amount_You_Owe_Bank is higher than Price_Sale and they cannot afford to bring that much money to the table.

The reality is that a lot of people are out there chasing the market. Believe it or not, a lot of people don’t know this or even truly realize how bad the current market is. Yeah they see headlines but unless you are buying or selling a place, you treat it the same way a person who doesn’t like sports treats a headline about the Cubs or the Bears.

So when someone tries to sell today, they go through a few stages.

• Stage 1: My house/condo is worth so much more than everyone else’s on the block/in the building and I should get back every $1 I put into it;
• Stage 2: Okay I may not make any money, but perhaps I can have something for a Down Payment on the next house;
• Stage 3: Geez, at least let me sell for enough to break even;
• Stage 4: Yikes, I have to bring how much to the table?

During the early days of The Bust, the paradigm was price it at or just below the comps and you would be fine. Unfortunately, that paradigm soon switched to if you cannot afford to sell your place (at whatever price necessary) then don’t bother a realtor with putting your place on the market in the first place.

___________________________

If you like what you read, please follow me on Twitter and like Mysteries of Life on Facebook and be sure to roll over the Like button, then click “get notifications” on the drop-down menu, that way Mark Zuckerberg’s new filtering system won’t keep you from knowing when I post something.

Type your email address in the box and click the “create subscription” button. My list is completely spam free, and you can opt out at any time.