It is all about the price.

It is always nice to hear "the experts" verify what I have been saying. In pricing homes it is critical to get it accurate right out of the gate. I have often stated that starting too high often results with a lower selling price than if you had been properly priced at the start.

I have the experience to assist you in  getting your home priced right, it takes experience, knowledge, understanding and sometimes a measure of "gut feeling."  I suppose much of that actually comes from experience, it goes beyond the actual numbers sometimes to a sense of what the trend is, even before you can quantify it with hard numbers.

Now here the actual research with thanks to KCM Blog.

The Research

Are there any negative effects from changing the listing price of a property?  This question haunts Brokers/Agents as well as sellers of property every day.  At present, there does not seem to be a consensus answer to this question within the professional real estate community.  Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.

In Knight, the impact of changing a property’s listing price is investigated.  Additionally, the types of property that are most likely to experience a price change are also estimated.  The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.  Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts.  Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.

Implications for Practice

Sellers as well as Brokers/Agents should therefore be aware of the critical necessity of getting the price correct from the start.  Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average, according to Knight.  Brokers/Agents’ desire to take a listing and get the price right later will ultimately lead to their working harder according to Knight, and they are not doing their sellers any favors.  Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.

Interestingly, I have found in my own research that the direction (up or down) of the listing price change does not matter.  A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices.  Therefore, get the price right from the beginning.  It is best for all.

 

Back to Business-Listings Needed-Boise Area Inventory Down

Well Memorial Day weekend has come and gone, with the normal, it seems, rain and cool weather for all your campers, although it did get nicer as the weekend progressed. I did not do the camping thing, I just stayed in town and worked around the lawn and such. But I did take a couple day breather from the real estate whirlwind. It is now back to business, with a couple of closings this week along with an inspection, walk throughs and new listings.

Speaking of new listings, I need some more! Sales are up and inventory is down. It is hard to keep up the personal inventory. So if you are interested is selling give me a call and we will "get er done!"

Bank of America offering Idaho Home Owners $2500 to $30,000

So did you see this news? I would not hold my breath for the $30,000, I suspect they will be few and far between. But it is still great news for Idaho home owners under water with their mortgage and needing to do a short sale. Through personal experience I can tell you that their short sale processing has improved dramatically.  If you happen to in this situation, let me help you.

Bank of America says it will provide up to $30,000 in relocation assistance to delinquent borrowers who work with the bank to obtain a preapproved short-sale price before submitting purchase offers.

Short sales must be initiated by the end of this year and close by Sept. 26, 2013, to be eligible for the payments, which will range from $2,500 to $30,000 at the completion of a qualifying short sale. Payments will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations, Bank of America said in announcing the program.

The program -- based on a similar incentive offer Bank of America tested last year in Florida -- will be available nationally. But Bank of America anticipates the greatest response will come from borrowers in California, Nevada, Arizona, Florida, and other states hit hardest by the economic downturn and falling property values.

Customers who believe they may be eligible for Bank of America's short-sale relocation assistance program may contact program specialists at (877) 459-2852. Qualifying short sales that have already started but have not closed may be eligible for the program.

Bank of America says its short-sale initiatives have generated 200,000 short sales in the last two years and another 30,000 in the first three months of this year.

Last month, Bank of America announced it was shortening decision times on short-sale offers to 20 days, down from 45 days or longer.

 

Will the Mortgage Forgiveness Debt Relief Act be Extended?

I  seem to talk a lot about short sales and for good reason, there is still a good portion of Idaho's  sales in this situation.  I have posted many times regarding short sales and you can review those old posts to learn all about it. I have also mentioned the importance of getting going on a short sale if one is going to need one due to the Mortgage Forgiveness Act being set to expire. This is a big deal with a HUGE impact to borrower/sellers in this situation, and foreclosures as well.

So the question becomes will it be extended? I think it is likely and the following opinion agrees with me. But with the U.S. Congress, do you ever really know?

Many of our readers have asked whether or not we believe theMortgage Forgiveness Debt Relief Act of 2007will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.

The reason this act is important in today’s housing market is that, without the act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.

In February, DSNews reported:

“Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007…

In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications.”

The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.”

In today’s political environment, the passage of any budget proposal could be considered doubtful. However, both parties seem to be in agreement that this provision should be extended. We can only hope that it doesn’t fall victim to an election year.

Disclaimer: As with all tax issues, we strongly suggest you consult with your accountant to find out how this may impact you and your family.

 

 

Idaho Short Sales: The Mortgage Originators Role in the Process

Here is a point that is often overlooked as we as agents and buyers work through the short sale process, the role of the buyer's loan originators  in the process. An experienced one can assist greatly in accomplishing the goal that everyone has but can sometimes seem elusive. GETTING THE DARN DEAL DONE!

Buyers,  there are lot of short sales out there, and in most cases a lot of potential buyers for those homes. The use of an experienced mortgage officer and an experienced buyer's agent can help tremendously, contact me today!

Courtesy of KCM Blog

A key component to the success of a short sale involves working with a Mortgage Originator who is well versed in the short sale process. The short sale negotiation process is a patience testing task. The complications are many, however if the buyer is securing mortgage financing and is working with an originator that understands that short sale process the buyer and seller can be rest assured, in most circumstances, that the transaction will get to the closing table.

There a 5 key questions to ask when choosing an Mortgage Originator for the purchase of a short sale transaction.

1.) Are they versed in the Anatomy of the Short Sale process?

The proper mortgage origination process pertaining to a short sale purchase is a bit different than a normal non-distressed property purchase. However, it is always my belief that in order to lead the cavalry one must have sat in the saddle. Putting this in terms of the short sale process, in order to originate a loan for a buyer who is interested in a short sale, one must understand the entire anatomy of the short sale process. This includes the challenges that the sellers faces regarding financial difficulty and hardship, the challenges that the selling agents face regarding listing and negotiating the short payoff and most importantly the strict timelines that come along with a short sale transaction.

2.) Will they issue a “TRUE” pre-approval prior to Short Sale approval?

A complete short sale package should include a mortgage pre-approval for the buyer if the buyer is securing mortgage financing to purchase the property.  The originator should have taken a full mortgage application, documented income, assets, reviewed the buyers credit and submitted the file through the appropriate automated underwriting service (ex DU,LP) prior to issuing a pre-approval letter to the buyer.

The pre-approval process for a short sale transaction should not be any different than the pre-approval process in a non-distressed sale. Having said this,  we have closed over 2500 short sale transactions nationwide. Many times, because of the long timeframes that are involved in a short sale, originators are not properly pre-qualifying the buyer prior to short sale approval. Originators are waiting until the short sale is approved by the short selling bank to submit the client profile to underwriting and is some cases to even issue a complete pre-approval. That is too late!  In every circumstance the pre-approval process should be done thoroughly before the short sale approval.

3.) Will they order the appraisal prior to Short Sale approval?

In a non-distressed sale typically, once the purchase contract is signed, the Mortgage Originator or their processing team will then order the appraisal for the property so that it may be reviewed by underwriting. Underwriting will then make sure the property is acceptable as collateral based upon the loan that is being applied for.

This process should hold true if the buyer is buying a short sale. Many times however, the appraisal is not ordered until the short sale is approved by the short selling bank. Often, this will delay the closing timeframes.  Also, consider this, if the short selling bank based upon their appraisal, counters they buyer with a higher price, the buyer who has already had their appraisal done will have the ability to issue a rebuttal based on their appraisal.   The Buyer’s/Lender’s appraisal is a great tool to negotiate value disputes with  short selling banks.

4.) Will they communicate with the Short Sale Negotiator?

There is one line of communication that is a must during a short sale.  This is the communication between the Short Sale Negotiator and the Mortgage Originator. The Mortgage Originator should be in touch with the negotiator on a weekly or bi weekly basis to obtain the status of the negotiation. It is imperative that the originator be informed of such deadlines as closing dates, approval expirations, BPO time lines, contract changes etc.

5.) Will they keep the Buyer engaged throughout the process?

In a non-distressed sale the timelines are usually short from pre-approval to closing. The potential buyer will obtain a pre-approval for mortgage financing; they will shop for a home, make an offer and then close on the property.  Most cases this process takes between 30-60 days.

In contrast, the short sale purchase timeline could take the normal 30 to 45 days of shopping but, from the time a buyer puts an offer on a property to the time they actually close could take 90-120 days. During this time frame, the mortgage originator must keep the buyer engaged. The information gathered in the pre-approval process meaning paystubs, bank statements etc. will need to be updated appropriately so that when the short sale bank issues their approval the buyer is ready to close on time and within the approval guidelines.  All too often short sale negotiators are asked to obtain short sale approval extensions from the short selling bank because the buyer could not close on time. Most of this stems from the Mortgage Originator scrambling to obtain last minute documentation that could have been avoided if the buyer’s credit file was routinely updated throughout the entire short sale process.

In closing, with the abundance of short sale transactions permeating the marketplace, it is imperative that all interested parties to a short sale work with a Mortgage Professional that understands this segment of the marketplace. By keeping the 5 questions above in mind, you may alleviate the possibility of a short sale transaction failing because of buyer financing falling apart.

 

 

April sales come roaring back…17% increase…really!

Thanks to Marc Lebowitz of the Ada County Association of Realtors for this April roundup.

Sales in April 2012 were 645 in Ada County, an increase of 17% compared to April 2011.   Year-to-date sales are 2,012; 11% over the first three months of 2011. Dollar volume for April was up 33%! New homes sold in April increased 78% over new homes sold in April of 2011!!...and are up 56% YTD. Historically, April sales outpace March by an average of 10% or less.  April 2012 sales increased by 25% over March 2012. Nationally we know that one job is created for every two homes sold.  With 2,012 sales so far in 2012 we have helped to bring 1,000 jobs to Ada County.  We also know that for each homes sold there is a $60,000 cash infusion to the community; based on YTD sales we have added $120Million to our valley’s economy so far this year. Of our total sales in April… 36% were distressed….down 6% from March 2012. In April 2011, 56% of our sales were distressed. There was an interesting reversal in the make up of distressed solds.  In January 56% of distress properties were REOs and 44% were short sales.  In April the ratio was 60% short sales and 40% REOs. Whether this is a short term effect or a real indication that we are clearing our the “shadow inventory” remains to be seen in coming months. Pending sales at the end of April were 1,195; an increase of 5% from the end of March. In general pending sales in April are the highest of the year.  The percentage of pending sales in distress decreased 2% from March, totaling 31% overall. We were averaging close to 50% of pendings in distress over that last five months; but have decreased steadily since January.  Of Pending sales in distress, short sales outnumbered REO’s 2 to 1. At the end of April, we had 25% more sales pending than at the end of April 2011. April median home price was $158,777; up 19% from April 2011; and up 4% from March 2012. Median home price is up 15% since January of this year and above $150,000 for three months running. New Homes median price for April was $193,308; a decrease of 4% from April 2011. The number of houses available increased slightly for the first time in a couple of years. At the end of April our total active inventory was 1,993 homes. This is up 6% from March and 25% less than last year at this time.  Possibly the increase in median price is enabling some real move up buyer activity. At the same time, the percentage of distressed active inventory dipped 3% to 30%. This is the lowest number we’ve seen in several years. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase. Of our Distressed Inventory 93% is Short Sales and only 7% is REO. The price point with the largest increase in available properties is $200,000 to $250,000 which added 50 units in April. In Ada County we now have less than 3.4 months of inventory on hand. The price category in shortest supply is <$119,000 with 1.7 months. In the range of $120,000 to $159,999 we have 2.7 months. All price points up to $250,000 have less than 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average. Multiple offers are much more prevalent; now becoming the norm. Based on April sold data, our most desirable price point is <$120,000 at 26% of all sales; down 4% from last month.  The next largest price point sold is $120,000 to $200,000 which increased by 20% from March.  The biggest increase was in sales between $200,000 and $250,000; which were up 200% from January 2012. Comparing Sales to Inventory, for key price points… @<$120,000 we sold 66% of all that we had in April; for $120,000 to $160,000 we sold 50% of all that was available; for $160,0000 to $200,000 we sold 40% of the total available. There is no longer any doubt that, in Ada County, we are going to have a heck of a spring season…and the future is looking brighter by the day.

 

Boise-Meridian-Nampa Real Estate, Sales are Brisk!

Well business has been booming, I have had buyers buying, and listing homes that are quickly selling. On many of the low to moderate priced homes multiple offers situations have become the norm. A couple of examples, I have a new listing in Nampa at $89,900, I have three offers to present to the seller tomorrow and will likely have at least one more prior to that. (I have had 4 agents call about this morning.)

On Friday I wrote an offer for some folks on a home in Meridian, $240,000. It is a short sale  and received at least two other offers besides ours.  Ours was accepted and now we proceed down that path.

I am including a national story about sales being up and comparing the headlines and the cautionary notes and tomorrow I will be putting a local story of Ada County's sales and stats. My last post highlighted Boise as one of the 10 top turn around cities in the nation. Please give me a call if you are looking to buy of sell, I can help!  208-602-0055  or Roger@lowesflatfee.com

We believe the housing market is recovering. We believe that sales will be robust through the rest of the year. However, we also believe that the increase in demand will not impact prices in a big way as we think there will also be an increase in the supply of homes coming to the market. This increase in supply will offset the increase in demand. The increase in supply will be fueled by two categories of inventory:

1. Foreclosures entering the market as a result of the National Mortgage Settlement


2. Pent up supply of homeowners who have been unable to sell their homes over the last several years

There have been several recent headlines making strong statements about home values in the country. We must be sure to read the ENTIRE report – not just the headlines. Here are four headlines and the portion of the report that reflects the caution in their ‘cautious optimism’.

HEADLINE:

LPS Home Price Index Shows U.S. Home Price Increase of 0.2 Percent in February; Early Data Suggests Further Increase of 0.3 Percent is Likely During March

CAUTION:

“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”

HEADLINE:

Foreclosure hotspots show signs of housing turnaround

CAUTION:

“However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed.”

HEADLINE:

Fiserv Expects Home Prices to Stabilize

CAUTION:

“On the other hand, nearly one-half of the metro areas, or 191, saw prices decrease by more than 2 percent, including double-digit losses in Atlanta (-12.8 percent), Reno, Nevada (-10.8 percent), and Tucson, Arizona (-10 percent).

In the fourth quarter of 2011, the average price of a U.S. single-family home fell four percent from the year-ago period, and Fiserv Case-Shiller projects a further decline of 0.8 percent by the end of 2012.”

HEADLINE:

Home Prices in March Show Monthly Gain: CoreLogic

CAUTION:

“Even with price gains above 5 percent for leading states and CBSAs, Capital Economics said in response to the CoreLogic report that over the year, prices are more likely to stabilize rather than make a dramatic climb.

“There are fears in some quarters, triggered by recent disappointing GDP and payrolls data, of a sharp slowdown in economic growth which could derail the fledgling improvement in the housing market,” said Paul Diggle, property economist for Capital Economics.”