Category Archives: Homebuying Trends

Buyers Demand Tech-Friendly Homes

smart homeOne of the most striking results from a recent Better Homes and Gardens real estate survey was that a whopping 87% of luxury homebuyers would not even consider living in a home that isn’t tech-friendly, or “smart.” This wasn’t the only must-have on the mind of these affluent homebuyers — they would also find it hard to live without a garden oasis (53%), an outdoor fireplace or fire pit (50%), and a separate guest house, not attached to the main house (47%).

But look at the numbers differential! Eighty-seven percent is so close to an across-the-board vote that it’s hard not to imagine that the few remaining affluent homebuyers are either from a generation that never had to learn to use personal tech devices, or will simply be spending too much time on round-the-world travel to care how what their house is wired for.

Even if you’re selling a home that doesn’t qualify as “luxury,” these results are worth noting. Buyers of luxury homes tend to set the trends for other buyers. And although clever staging can hide, say, a lack of electrical outlets, more and more buyers may start looking closely at whether your house can actually support their tech needs. And on the other side of the coin, you’ll get an advertising boost if you can describe your home’s technological features and capacities. Automated appliances! Climate control! Intelligent lighting!

What exactly does creating a tech-friendly or smart home involve? Asking tech-savvy friends how they’ve adapted and upgraded their homes is probably a good start for finding practical guidance. Also check out online sources like Globitor’s “Tech-Friendly Tips for Upgrading Your Home,” Lifehacker’s “How Can I Bring My Tech-Unfriendly Home into the 21st Century?,” and CNET’s “Automate this: Smart devices for every corner of your home.”

Strategic House Pricing: A Little Low, a Little High, or Is There a “Just Right?”

savannah houseHere’s a “must-read” for buyers and sellers of real estate this week: Bob Hunt’s article on RealtyTimes, “What Is the Correct Way To Price a Listing?” Hunt analyzes a recent article in the Wall Street Journal (August 8, 2013), which described a study purportedly finding that “higher starting prices are indeed associated with higher selling prices.”

The underlying reason posited by the study’s authors is a phenomenon called “anchoring,” which basically means that home buyers develop a respectful first impression of a home with a higher price tag, and are thus willing to pay more for it in the end.

Kudos to Hunt, however, for pointing out a basic flaw in the study: The price variations they’re talking about ranged from about $117 to $187. Hunt notes that this has all the significance of “a rounding error.” I can’t add much to his reasoned analysis, but let me call those dollar amounts by another name: Puny! As a percentage of a home selling price, so insignificant that they might represent mere quibbles over repairs!

In the meantime, having observed bidding wars on a number of occasions (they’re common here in California), I can say that there are times when underpricing a house has the exact effect that real estate agents anticipate: They bring in scads of interested buyers, some of whom will fall in love with the place and bid amounts that are far higher than anyone would have realistically set as an original list price.

But that’s in one market, and may not work for every house. Once again, I can’t do better than to refer to Hunt’s observation that, “[A]s far as answering the general question, ‘What is the best pricing strategy?’ we still have a long way to go.”

Millennials Are Hip to All the Bidding-War Tactics

firewkIf you’re shopping for a home in a hot market — of which there are many, such as Riverside,  Sacramento, Las Vegas, and Oakland — chances are you won’t be the only one making an offer on any given home. And that spells a bidding war.

It’s a war with an invisible enemy, given that you aren’t likely to know who you’re bidding against. And there’s little back and forth — you have to make your best offer and wait to see whether it’s the chosen one.

Typically, the savvy listing agent will schedule a day for presentation of offers, during which a line of buyers’ agents will troop in to deliver the written documents and make a case for why your offer should be the one the seller favors above the rest.

Chances are pretty good, however, that the other bidders will include some “Millennials” — that is, young-ish people born between 1977 and 1992.  And according to a Trulia study cited in Forbes magazine, the Millennials are the group most likely to pull out all the stops and use “aggressive” bidding tactics.

I got a little worried upon first reading the word “aggressive” in the headline, picturing fresh-faced young ‘uns stalking other prospective buyers and slashing their tires, or resorting to underhanded negotiating tactics. No, it turns out they’re just ready and willing to unleash the full volley of tried-and-true ways to make their bids stand out, such as writing a personal (and mildly pleading) letter to the seller, bidding an amount over the asking price (duh), asking friends and family for a loan to help fund the purchase, and removing contingencies from the offer (such as inspection or financing).

Still, the fact that the other age groups surveyed were LESS likely to adopt any and all of these tactics suggest a bit of heel-digging-in. Wannabe buyers who make conservative, “not a penny over asking” offers rarely win bidding wars, and may end up spending more than they would have as home prices eventually outpace them. See “How do I make sure my home purchase offer is the strongest?” for more information.

Friday Real Estate Fun: Ideal House Features

kittyOne of the fun parts of shopping for a home is dreaming about all the great features you’d like to find there — and then maybe being surprised by a few that you didn’t expect or know existed. With that in mind, check out “27 Things That Definitely Belong in Your Dream Home.”

Me, I like the hidden room — it evokes childhood reading about castles full of secret passageways and oubliettes.

Of course, homebuyers will have to listen to the voice of practicality all too soon, and I’m not just talking about affordability. Look at how many commenters pointed out what the neighborhood cats are likely to do with the sandbox! For more on practical matters, see the “Choosing a House” section of Nolo’s website.

 

In Housing Limbo, Sellers Scramble to Find New Homes

IMG_4418“I really hope I don’t have to move in with my mother-in-law.”

“I’ve had to move into a rental in a scary part of town — there goes my down payment for the next house.”

“Well, at least my parents haven’t done anything with my old room.”

These are all from stories I’ve heard on the local, Bay Area grapevine.  Anecdotal accounts, it’s true. But I’d hazard a guess, from the current state of the real estate market, that plenty of other recent home sellers are having the same trouble.

They couldn’t afford to buy a second house before selling the first one — banks aren’t exactly sympathetic to carrying two loans these days. But after the sale is done, they have nowhere to go. Inventory is low, and in this part of the country, multiple offers are becoming normal again — at tens or even hundreds of thousands of dollars over the list price. (Remember when the market felt so slumped that it could never unslump? Weird.)

The only silver lining to the low inventory is that buyers are often so grateful to be in contract to buy a home that they’ll bend over backwards to accommodate sellers’ needs to stay a little longer, an arrangement outlined in Nolo’s Q&A, “What happens if we’ve sold our old house without buying a new one?” But even the most sympathetic seller isn’t going to want to wait around forever.

Scary Stats on How Quickly People Buy a Home

IMG_4403According to the National Association of Realtors® Profile of HomeBuyers and Sellers 2012, typical U.S. home buyers spend a mere 12 weeks searching, and view only around ten homes, before settling on the one they ultimately buy.

Let’s think about that for a minute. Twelve weeks. About three months.

That’s a very short time, in which a whole lot has to happen. The front end of the transaction alone is plenty time-consuming — prospective buyers occupy themselves viewing houses online and on foot, meeting with realtors, researching comparable values, writing up offers, negotiating over a purchase contract and repairs, researching and applying for mortgages, arranging for home inspections, buying homeowners insurance, and so on, until the deal is closed. (The closing usually happens about six weeks after the buyers’ offer is accepted by the seller.)

Behind the scenes, of course, there’s plenty more going on: Clearing out closets, holding a garage sale, trying to figure out where the hell you tossed your last pay stub because the mortgage broker has to have it right this minute, researching moving companies, finding new schools and doctors, and oh yeah, trying to hold onto your job in the midst of all this, because you’re going to need it to pay the bills.

Intimidating enough picture for you? This should serve as a reminder to get as much done as possible BEFORE you get serious about househunting. At least the clearing out of closets can be done well in advance.

In fact, the item that should perhaps go at the top of your “Do it now!” list has to do with another scary statistic, this one from the Federal Trade Commission: Around 5% of consumers find errors on their credit reports — errors serious enough that they could end up paying more for loan products such as, oh, I don’t know, maybe a mortgage?

Let’s bring in another important number: It can take up to 45 days to get credit report errors corrected, as described in Nolo’s article, “How Fast Can Home Buyers Improve Their Credit Score?” Yup, some advance work could really pay off.

Athletes Who Over-Customize Their Homes May Have Trouble Selling

foosballIt’s not a problem that most of us will ever have — but it’s a good reminder of the general principle that homes fixed up with special features to suit the owner might eventually drive away would-be buyers. “Over-customization,” you might call it. Athletes with multi-million dollar contracts seem particularly prone to this syndrome.

Take a look at Tiger Woods’s $6 million digs for example: It’s not easy to dwarf a house with its own amenities, but this place comes close, with a tennis court, diving pool, lap pool, running track, boat slip, and golf green.

According to “Broke,” the 30 for 30 film by Billy Corben, one of the first things an athlete often does after hitting the big time is to buy a house for Mom. And another one for himself — a big one, with lots of rooms, perhaps a bowling alley or two. And then he goes on to buy a few more houses for friends and relatives. The title of the movie should tell you where all this often winds up, with the houses on the market or in foreclosure within a few years.

Alex Rodriguez is getting credit, however (in Darren Rovell’s article in ESPN), for having had the foresight to add nothing more than an indoor batting cage to his Miami Beach mansion, even while he poured in over $7 million worth of  improvements. (He added white oak flooring. a zen garden, a rooftop deck, and so on.) A-Rod bought the place for $7.4 million and recently sold it for $30 million.

The buyer was not an athlete, but a businessman. And that’s “an important distinction,” says Rovell,  “since so many athletes customize their homes so much that they find trouble selling them to anyone outside the sports world.”

So, there you have it. Best stick to a foosball table, that you can take with you when you move.

Really? Sellers Can Paint the Walls in Actual Colors?

For a while there, “neutrals, neutrals, neutrals,” seemed to be running a close second behind “location, location, location,” for favorite real estate tag line. Home sellers were advised to paint as much of their house as possible before putting it on the market — and to paint only in inoffensive yet alluring shades of what you and I might call tan, grey, and white. (The paint vendors, of course, call them “bisque,” “barley,” and other similarly tasty terms.)

SONY DSCBut hold everything: The word on the street now is that “bold colors” work very well if you’re trying to sell your home to “millennials,” or buyers currently in their 20s and 30s. This according to experts quoted by Richard Eisenberg in his article “How Boomer Home Sellers Can Hook Millennials.”

If you believe the paint companies, “Emerald,” “Aloe,” and “Lemon Sorbet” are what’s trending now. In fact, florals, patterns, and wallpaper are said to be making a comeback, too.

Pity all the home stagers whose websites include “Before” and “After” pictures in which they painted over perfectly respectable colors with shades of blah!

Wedding or Down Payment on House: Which Comes First?

wedding cakeA wedding is often referred to as the happiest day of someone’s life. But young couples are increasingly willing to put that day off until they’ve bought a home together, according to a Coldwell Banker survey reported on by Haya el Nasser in USA TODAY. In 2012, nearly one fourth of homeowners between the ages of 18 and 34 purchased a house together before they were married, along with smaller percentages in the upper age brackets.

The article explains this trend in terms of timing and financial savvy. Home prices are low, as are interest rates — and both might rise in the very near future. For committed couples, taking time and money out to plan a wedding might risk delaying or derailing their homebuying plans. One commentator even posited, “It’s almost like buying a home is the new engagement ring.”

What the article doesn’t mention is the starkness of the choice. The average opposite-sex wedding in the U.S. cost $28,427 in 2012, with same-sex couples spending even more. The median price of a home in the U.S. is $184,300. In order to make the standard 20% down payment on that median-priced U.S. house, a couple would have to come up with $36,860. And there are plenty of areas in the U.S. where that median price won’t buy you a garage. One good wedding could easily munch up most or all of your intended down payment.

But here’s an idea for bringing your homebuying and wedding plans together: The biggest cost when holding a wedding is the venue, whose average cost in 2012 was nearly $13,000. If you take that money and spend it on a house with a larger yard, you could hold your wedding right there. And you’d get to enjoy the space for longer than the few hours before the hotel tells you to grab your stuff, wake up Uncle Fred, and go home, please.

Don’t Let an Investor Buy the Home You Wanted!

IMG_5064They’re back! Those steely eyed buyers with pockets full of cash, attracted by the combination of low but rising prices in many parts of the United States.

In some geographic areas, the investors — professionals who plan to rent out or flip the house rather than live there — are actually the CAUSE of the price increases; in others, they’re just one of the active players in a local area with a rebounding economy. (See CNNMoney‘s Real Estate Guide 2013.)

That’s bad news for ordinary mortals, however, who are just trying to buy a family home. Inventory is at its lowest in decades, as a result of builders having folded up their tents and stopped building and banks having made their way through most of their pending foreclosures.

An investor who comes in to buy a house is likely to literally offer all cash; which, even if it’s not the highest offer, can look very attractive to a seller who knows full well that buyers are still having trouble getting final approvals on mortgages.

How do you compete with these investors? First, know that they’re out there, and plan accordingly. (Double check by asking your real estate agent how active investor-buyers are in the area where you plan to buy.) Other potential strategies include:

  1. Bid higher. True, that may take the home out of your price range. But now’s a good time to come to terms with the fact that a house’s list price is just a suggested amount with which to open negotiations. Many houses go for more than the list price, and if you’re bidding against other possible buyers, such a result is all but guaranteed. At a certain price level, investors lose interest — they’re only out to make a buck, and have no interest in whether this is the perfect house in the perfect location for their own lifestyle and dreams.
  2. Pay all cash. Don’t laugh — doing so on a very short-term basis may actually be possible, with the help of your family and friends. Even people who aren’t wealthy may have a nest egg they’d be willing to park in your house temporarily — just until you close the deal and turn around and take out a traditional bank loan. Even if everything goes wrong and you can’t pay it back, they can always foreclose on you and recoup their investment. See Nolo’s article on “Borrowing From Family and Friends to Buy a House” for more information.
  3. If you can’t pay all cash, do the next-best thing(s). That’s making a large down payment, for starters — higher than the usual 20%.  Why does the seller care? Because he or she knows that the less you’ll be borrowing from the bank, the more likely the bank will be to approve the loan, confident that it can sell the house for enough to recoup the amount at stake. And if you can’t manage a large down payment, at least come in with a letter of preapproval from a lender and other forms of proof that your financial situation is strong enough to likely close the deal.
  4. Strengthen your offer in other ways. Remember, when competing against other bidders, you won’t get a second chance at working out the details. You’ll want to concede everything that can reasonably be conceded in order to woo the seller. That may mean offering the shortest closing period you can manage; accommodating the seller if you know that he or she still needs to find a house to buy (for example by offering a rent-back or home purchase contingency); and even waiving the contingency allowing you to make the sale conditional on your satisfaction with the results of a home inspection (though this is risky; you’d want to at least get a friend in there with contracting skills to tell you what you might be getting into).

Bidding wars aren’t fun, and many buyers react with, “I’m just not going to get into any transaction where I’ve got to play that game.” But as long as you don’t lose your head, a bidding war is in some ways no different than buying a house where you’re the only offeror — your job is to calmly, and with an eye on what comparable houses are selling for, choose a price and terms that balance out both your own needs and market realities.

Buyers who wait until the investors lose interest may still be looking for a house a few years from now, when prices really have gone up.