Rochester MN Real Estate Market Blog » Real Estate Articles

How Not to Sell Your Neighbor’s Home

admin — Wed, 10 Mar 2010 14:50:04 +0000

Sellers typically focus on what list price will sell their home quickly and for top dollar. But when your home isn’t the only one in the neighborhood for sale, your asking price can actually result in selling your neighbor’s home instead.

How? If your home is priced too high, it can make your neighbor’s home seem like a bargain. Inaccurate pricing can result in extended market time which leads buyers to wonder what is wrong with your property, again shifting interest toward other properties in the area which are newer to the market.

This effect is even greater in a down market: higher inventories of homes for sale mean even greater competition for the buyer pool amid already increased average market times. Multiple homes for sale in one neighborhood further intensify the competition for buyer attention.

To increase the likelihood that your home will sell faster than average and for a better price, you need to be sure your initial asking price is appropriate for current market conditions and is competitive with neighboring listings.

Price is one of the first details potential buyers learn about a property, and it strongly influences which homes they preview and consider. Prospective buyers will be comparing your home to the other homes in that price range and in the neighborhood.

Therefore, you need to make similar comparisons when you set your price, identifying the pros and cons of your home with respect to others in the area. The risk of not doing this is overpricing your home with respect to the competition.

Pricing your home right in the first place requires knowing the market and knowing your home’s competition. A Realtor who knows your neighborhood and understands the current market trends can help you determine a range for your initial asking price.

Your Realtor should compare your home to similar homes that have sold recently in your neighborhood, making adjustments for the differences between them. The market analysis should then consider how your home measures up to homes currently listed for sale.

It can pay to be aggressive. Pricing your home competitively can increase the chances that yours is the home that will sell quickly and for top dollar.

The First Offer is Usually the Best — Why Initial Pricing is Critical

admin — Wed, 17 Feb 2010 15:43:51 +0000

There’s an old real estate adage that the first offer you receive is usually the best one, and my experience in 20+ years as a Realtor supports this. I’ve encountered several listings where the seller received an offer early on, made a stiff counteroffer back to the buyer and the buyer headed for the hills. In some cases, as much as 24 months and several price reductions later, another offer finally came in only to be significantly lower than the first buyer’s offer. While your first offer may not be what you were hoping for, it is a good idea to consider several things when choosing how to respond to that offer.

Length of time on the market, time of year, initial asking price compared to the price recommended by your agent, and current competition should all be taken into account when determining whether to accept, reject or counter the first offer you receive.

It may be tempting to hold out for a better price, especially in the first few weeks that your home is on the market when there is a high volume of showing activity. However, that activity typically wanes after about three weeks, at which point the buyers who have been waiting for “just the right house” will have already considered your property. Buyers rush to see new listings, and if it’s the best thing they have seen they will probably make an offer. Most of these buyers have been at it for a long time and know the values very well, in some cases understanding market realities in their price range even better than realtors who have been tracking a broad market. Therefore, an offer received in the first few weeks on the market is probably appropriate to current conditions and worth serious consideration. Comparing the offer to your realtor’s initial price recommendations can help you decide what action to take.

It is especially important to price your home accurately from the outset given the current market conditions. The homes that are selling quickly are capturing prices within an average of 3% or less of the asking price. The longer the home is on the market, the larger the gap between original asking price and sales price.

After the first several weeks, the activity that remains is buyers just entering the market. Since they are at the beginning of their house hunting, they generally have more time to look and are less motivated to act quickly. They are less educated about the market than those who have been shopping for a long time and will err on the side of caution when making their offers, especially in a buyer’s market. Consequently, offers will more likely be lower than early on.

Time on the market erodes value as well. The longer a house is listed for sale, the less interested buyers and Realtors are in the property. People will begin to wonder what is wrong with the property, and even if they like it will offer a lower price so they won’t lose money if they end up having to sell.

Be sure to consider the opportunity costs. While your first offer may be lower than you had hoped, every month you keep the property is another month you must pay mortgage, taxes, utilities, and insurance for a home you are hoping to leave. These costs can add up quickly and end up costing you more in the long run.
Time of year is another factor that can affect the offer. Your offer in March or April will most likely be much higher than in September or October. Sellers who were optimistic in the spring will be lowering their prices quickly to try and sell.

When a house sells quickly, there can be the temptation to second-guess whether the home was priced appropriately to begin with or whether a higher price was possible. However, if the proper price range is targeted when the house is first listed, the actual selling price is likely to be higher. Longer market times typically mean price reductions. Current market conditions have homes selling at within approximately 3% of the asking price, and the longer the market time the larger the difference between sales price and original asking price. This means there’s a very small margin for error in pricing the house from the outset.

The bottom line is that you are never in a better position to get the best price for your home than when it is fresh on the market. Even if the offer and subsequent negotiations are less than you are hoping for, don’t kick yourself months or even years later wishing you had taken the offer. That real estate rule of thumb stays true: your first offer is usually your best.

Rochester Area Market Conditions – February 2010

admin — Wed, 17 Feb 2010 15:13:33 +0000

It’s February so it’s not too soon for crocuses and “for sale” signs to start popping up in front yards all over town. New listings were on the upswing in the first month of the year, heralding the beginning of the spring market.

The number of total active listings in January, 2010 was up 44% over January, 2009. The number of homes going under contract and homes that closed were down 15% and 16% respectively, and the median sales price was down to $149,000 from $153,400 for the same time period last year. Average market time to pending increased in January to 140 days, just over 2 weeks longer than the last month of 2009 and 3 weeks longer than last January.

The supply/demand ratio reached its highest level since last January with just over 15-1/2 months inventory, a normal occurrence this time of year as more homes come on the market in anticipation of the spring selling season.

For the latest in all the local real estate stats make sure to check out http://www.shawnburyska.com/real-estate-statistics.php

Shawn Buryska ABR, CRS, GRI
Coldwell Banker Burnet Realty
507-252-6745
www.ShawnBuryska.com

Foreclosure Sales – Worth the Extra Effort

admin — Tue, 09 Jun 2009 23:54:54 +0000

In the current economic climate, foreclosure sales are increasingly common. Frequently these properties are appealing because they are priced to sell, often well below market value. However, there are several obstacles and pitfalls that a buyer can expect to encounter. The savvy buyer knows that forewarned is forearmed and approaches the purchase of a foreclosure property accordingly.

In a foreclosure purchase, the buyer is dealing with a financial institution rather than one or two individuals. The inherent bureaucratic (chain of command) and pragmatic (maximizing return and minimizing loss) differences typically result in longer turnaround times for the initial purchase agreement, subsequent changes and processing of final papers. The home buyer should not be surprised if it takes as long as a week or two for a response to their initial offer as their offer must go through several layers of approval at the financial institution. During this time it is not uncommon for the bank to contact other interested parties in an effort to start a bidding war. Buyers should be prepared for this process to take time.

Again, since the seller is a financial institution, foreclosure properties are almost always sold “as is,” meaning there will not be allowances for upgrades or improvements nor are adjustments likely for any structural or safety issues that may be uncovered during a home inspection. Nevertheless, the buyer should pay for a professional home inspection and be present during the inspection to ask questions and understand what exactly they will be looking at cost-wise. Chances are a foreclosed property has not been well-maintained for quite some time. It may still be a wise investment, but the buyer will need to take the home’s condition into consideration when determining their offer.

The buyer will need to pay for the home inspection and may also need to arrange (and pay for) having the utilities connected and disconnected for the inspection. Financing can be affected by the inspection findings. FHA loans, for example, have strict requirements about the conditions of the purchased property including, among others, the home must be free of mold, peeling paint and broken windows; railings must be tight; electricity to code; and the roof must have at least three years’ wear left. Any relevant issues must be fixed prior to closing for FHA to approve the loan, but there are risks to a buyer making improvements to a property they do not own.

Again, since the sale will be “as is,” there are no guarantees or warranty on the property. The buyer can consider purchasing a home protection plan for peace of mind. There are exceptions and exclusions, however, so the buyer should read the fine print before enrolling.

The inherent complexities of the foreclosure sale also increase the likelihood that the closing will be delayed given the amount of paperwork, number of people involved, and the increased signatures required to sign off. Buyers should anticipate a delayed closing and be aware of the daily cost incurred by the buyer if they are responsible for the delay. Sellers typically have no penalty for delaying closing and therefore less of an incentive to close on time. While this doesn’t mean a delay is inevitable, it behooves the buyer to insure they have everything in order for a timely closing as well as setting a realistic closing date from the beginning. Buyers should plan on retaining their current residence for at least a week or two past the planned closing date in the event of a delayed closing.

Despite the additional complexities involved in purchasing a foreclosure, the possibility of getting a great deal on the home of your dreams makes it worth the extra effort. Working with a Realtor experienced with foreclosure purchases can help the process go smoothly from offer to closing.

Tax Credit Available for First Time Home Buyers

admin — Thu, 18 Dec 2008 01:52:17 +0000

Amid the economic upheaval, there is good news for first-time home buyers – a tax credit of up to $7,500. Even better – the definition of first-time home buyers includes those who have not owned a principal residence in the three year period prior to purchasing a qualifying home.

The tax credit, established through the Housing and Economic Recovery Act of 2008, is available only to first-time home buyers and only for homes purchased on or before April 9, 2008 and before July 1, 2009. Any home that will be used as a principal residence qualifies, including single family detached homes, townhomes, condominiums, mobile homes, and houseboats. New construction is also eligible, as long as possession or occupancy occurs within the parameters defined by the law.

For the purposes of this law, a first-time home buyer is defined as someone who has not owned a principal residence during the three years prior to the purchase of the qualified property. For married taxpayers, neither individual may have owned a principal residence in the previous years. A buyer will not be disqualified from the tax credit if they own a vacation home or rental property not used as their principal residence.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Eligibility is determined based on modified adjusted gross income. Partial credit may be available for those with higher incomes; however, individuals with a modified adjusted gross income exceeding $95,000, (or $170,000 for married couples filing jointly), will be ineligible for the tax credit.

The tax credit is equal to 10% of the qualified home purchase price, but is capped at $7,500; for homes purchased for less than $75,000, the credit will be 10% of the purchase price.

There are no special forms to fill out and no pre-approval necessary. The credit is easily claimed on the federal income tax return. Plus, the credit can be claimed on the 2008 return for a home purchased in 2009. If the tax credit exceeds the taxpayer’s outstanding liability for the year, the taxpayer will receive a check from the government.

The credit is like an interest-free loan, and it must be repaid to the government over a 15-year period. Payments do not have to begin until two years after the credit is claimed. If the home is sold before the credit is repaid, the outstanding amount will be paid from profits on the sale. If there is insufficient profit to repay the credit, the remaining amount will be forgiven.

For first-time home buyers (those who are truly new to the market and those who have not owned a principal residence in at least three years), this tax credit can make it easier to transition into home ownership. Combined with housing inventories increasing, prices decreasing, and mortgage rates dropping even lower, this tax credit may just make the difference in making home ownership a reality.

Source: federalhousingtaxcredit.com

This article is informative only, based on information available at time of publication, and is not intended to provide tax or legal advice. Please be sure to consult with a tax advisor or legal professional about your particular situation prior to making any decisions or taking any action.

Identity Theft and Real Estate

admin — Wed, 17 Dec 2008 01:51:42 +0000

Obtaining home mortgage these days has gotten a little more involved but is still relatively easy to obtain if your income is in line with your debts and the house you want to buy is in a price range that is affordable for your budget. The last critical element is good credit. With good credit you’ll have no problem obtaining a home loan as long as you meet this basic criteria. Good credit for some however has become more difficult to provide because of an unfortunate case of identity theft. Recently my wife and I became potential victims when a thief came into our garage, found my wife’s purse, stole her credit card and promptly went shopping at Wal Mart. Fortunately they only took her credit card and not her entire purse otherwise our predicament could have been much worse. Others have not been so lucky when the thief takes more then credit cards. They steal their identity and open numerous credit accounts without the victim’s knowledge. Many times the victim doesn’t know whats happened until they apply for a credit card account or a home loan. By that point their dreams of owning that new house are abruptly halted as it can take months to clear up the mess the identity thief created. How can you prevent such a tragedy? There are several easy steps you can do to practically eliminate the possibility of this happening to you. For more information on this topic go to the FTC’s Identity Theft website. Also take the Identity Theft Risk Factor Quiz to see how likely you may be in becoming a victim of identity theft . It’s a great time to buy a house and keeping your credit in order is key part of that process.

How Bad Is The Housing Crisis?

admin — Wed, 30 Jul 2008 01:39:06 +0000

The media has made much to-do about the housing crisis but is it really a crisis at all? Yes real estate sales have been down slightly in the Rochester area for about the past 18 months but that is coming off the heels of almost 10 years of unprecedented growth. Prices in the Rochester area are down about 5% overall from the 2006 highs. Some markets are better than others but overall we are doing fairly well. For a really good perspective on this issue see Dennis Kneales commentary on the subject at: http://www.cnbc.com/id/15840232?video=780461999

Understanding the Current Financial Crisis

Quick Tour of the All-New ShawnBuryska.com

admin — Wed, 05 Mar 2008 00:59:58 +0000

My theory throughout my career has been if you can freely offer people solid and helpful advice you’ll stand apart from crowd.

When the internet started to be used by the masses, I saw it as the perfect venue to offer buyers and sellers a resource where they could get their various real estate questions answered. I wanted to make sure my website was a comprehensive compilation of information for both buyers and sellers. I’m happy to announce the latest version of ShawnBuryska.com. There’s a new look, but more importantly, there’s even more information for buyers and sellers then ever before! Here’s a quick tour.

Search Area Homes For Sale has an all new interface and a much more powerful database engine allowing home buyers to highly customize, save and view their searches. There’s an all new auto-notification feature of new listings as well, plus the ability to save your favorites and track any status or price changes.

My Listings For Sale has been revised to allow search engines such as Google to more easily pick up those pages, making those listings easier to find and more visible on the web. The buyers have an easier time finding what they are looking for and my sellers have additional exposure on their homes.

Current Interest Rates is a new feature and updated daily with the latest interest rates from Burnet Home Loans.

Real Estate Calculators has been updated so now you can calculate your Olmsted County real estate taxes based on the county’s assessed value. You can also see how much mortgage lenders are willing to lend you based on your income and debt. How fast can you pay your house off by making extra payments? That’s in there as well!

The Buying/Selling a Home sections have been rewritten to better assist and help buyers and sellers understand the process of buying or selling a home.

Real Estate Articles is an archive of my past articles that have been featured in my newsletters and posted nationally on sites such as Realty Times. How did I do in the words for my most recent clients?

See the all new Testimonials section for unedited comments from my buyers and sellers.

For those who are interested in trends and local real estate statistics the Real Estate Statistics section will answer all your questions and more!

Check out the new site and tell a friend. I hope you will find it informative and helpful.

Understanding the “Foreclosure Crisis”

admin — Sat, 09 Feb 2008 00:42:20 +0000

For several years low interest rates and low down-payment percentages enabled home buyers to get into increasingly larger and more expensive homes. As home prices rose, home sellers took advantage of the “equity” in their existing homes to move up to even bigger, more expensive homes. Housing prices continued to rise, bringing talk of a housing bubble and speculation regarding what would happen when the bubble burst.

During the last year we’ve been experiencing the fallout from the bursting bubble as the high volume of homes for sale pushed prices down and homeowners found themselves unable to get out from under unaffordable mortgages.

Now the big news is the “foreclosure crisis” and what this means for the housing market.

One of the challenges in trying to completely understand the magnitude of this “crisis,” is identifying and interpreting the data correctly. The most commonly cited resource for foreclosure statistics, RealtyTrac, is a marketplace for foreclosure properties. The site’s data includes several types of foreclosure filings in determining their statistics, including default notices, auction sale notices and bank repossessions, making it possible for a property to be included more than once in certain statistics.

According to RealtyTrac (realtytrac.com), foreclosure filings increased 75% in 2007 from the previous year, with more than 1 percent of all U.S. households in some stage of foreclosure, up 79 percent from 2006. There were 1,285,873 properties in some stage of foreclosure during 2007. Nationally, there were 215,749 filings in December, nearly double that of December, 2006 (97%).

In 2007, Minnesota ranked 25th in country in terms of foreclosure filings with 11,557 properties having some level of foreclosure filing (default notices, auction sale notices and bank repossessions). Minnesota’s foreclosure rate (.513%) was half the national average (1.033%) in 2007.

The 1,232 Minnesota filings in December 2007 represented an increase of 1.82% from the previous month and 71.83% from December 2006. For the fourth quarter there were 4,092 filings in Minnesota, an increase of 2.2% from the previous quarter and 113.35% (3834 properties with filings).

The rise in foreclosures presents challenges to both buyers and sellers. Sellers will encounter additional competition, exerting further downward pressure on home sale prices. However, while foreclosure properties may be lower priced as the seller tries to recoup some of their losses, buyers need to use extra caution when considering a purchase. These properties typically have not been well-maintained and may require costly improvements or upgrades to be habitable. A professional home inspection is essential when considering a foreclosure property. Traditional sellers are more well-advised than ever to be sure their property is in pristine condition to outshine the competition.

While the rise in foreclosure activity shows no signs of slowing down anytime soon, the government is working to assist financially troubled homeowners. In late 2007 President Bush announced a deal with the mortgage industry that would freeze some mortgage interest rates for up to five years. For details on this program, contact the Hope Now Alliance — a private-sector group of lenders, loan servicers and mortgage counselors – at 888-995-HOPE or at www.hopenow.com.

Timing the Market: To Sell or Not to Sell in a Down Market

admin — Tue, 02 Oct 2007 00:35:03 +0000

Every book I have read on trying to time the stock market says don’t. Most financial advisors recommend getting in and staying in with the proper asset allocation for your particular risk tolerance. When the market is up you’re in good shape, and when it goes down you have some protection built in through your allocations.

While that’s all fine and good in the financial markets, what is the advice when it comes to the real estate market? Should you sell in a down market? Should you wait for the market to improve?

I always advise my clients to consider what they are going to be doing with their proceeds after the sale. If they are getting out of the real estate market altogether and the proceeds are going to the bank or some other investment vehicle then there is nothing wrong with waiting to list until the market changes, unless of course they think they can make up their losses with their new asset allocation.

If they want to downsize in the real estate market it may also make sense to wait, assuming the move is optional and waiting doesn’t cramp their lifestyle.

However, if you’re thinking of moving up in a down real estate market it can make a lot of sense to sell rather than wait. There is never a better time to make a move up in real estate than when the market as a whole is down. True, you will probably not come out as well with the sale of your house, but you will more than make up for it when it comes to buying on the other end.

For example, assume you own a $150,000 house and you’re ready for a $300,000 house. If the market is down 5% then unfortunately your current house is really only worth about $142,500. It’s tough to ask much more than that and still be successful. However, if you are willing to sell for a bit of a discount here’s what’s waiting for you. Assuming that $300,000 house is also down 5%, then you’re buying that house for $285,000! You accept a $7,500 loss when you sell, but you make $15,000 when you buy! It can get even better depending on the price ranges in which you are buying and selling. Every market has its “hot spot” and its “not-so-hot spot,” meaning price ranges where things are selling well and where things are not selling well at all. If you happen to be selling in the hot spot and are buying at an overly saturated price point there may be even greater savings on the buy side and not as much of a loss on the sale side. Typically the higher priced homes are the ones not selling as quickly, which is why moving up in a down market can work for you.

Current interest rates are another important consideration. If rates are favorable then you are able to make up for your losses when you sell by securing a good interest rate on your purchase. A 1% increase in interest on a $200,000 mortgage will cost you over $47,000 over the life of a 30 year loan. With interest rates currently near record lows it’s something to consider.

Another common question is whether to sell in the fall or wait until spring. The answer follows my advice as a whole in selling in a down market. It is harder to sell in the fall because there are fewer buyers in the marketplace, but if you’re willing to take a slight discount and you do actually sell your home, you will be in a great position as a buyer. In March, the seller who just listed is less willing to deal – their home has very little market time and the busiest market lies ahead of them. That same seller, having toughed it out for many months and facing the prospect of still having their property over the winter, will be very happy to see you in the fall. This can, again, mean a very good price for the late-season buyer.

To summarize, in most situations it can make a lot of sense to sell when you are ready and willing and not to worry so much about timing the market. If you really look at the big picture, it’s not so costly after all.