Five Mistakes Buyers Often Make When Shopping for a Home

[WE REPOSTED MUCH OF THE MATERIAL BELOW—BUT ADEED SOME CLARIFYING COMMENTS AS WELL AS CONTRIBUTED OUR OPINION TO MAKE THE MESSAGE MORE SPECIFIC TO OUR MARKET]

You’ve seen every house on the market and you’ve finally found the spot you can’t wait to call home. In fact, you’ve mentally decorated it and planned your new life, down to the barbecues and block parties you’ll have with your awesome new neighbors. Sweet!

Don’t get ahead of your skis.

As you know, you still have one giant hurdle to overcome: You’ve got to make the offer that wins the house. And in a highly competitive housing market, that can be easier said than done. Don’t blow your chances with any of these common home offer mistakes.

  1. Dragging your feet

If you found the ideal property, the worst thing you can do is wait to make an offer. Of course, you’re allowed to have some feelings of uncertainty—after all, this is likely the biggest financial decision you’ve made in your life. But the longer you vacillate, the greater the chances you’ll set yourself up for failure.

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“Time kills deals,” says Andrew Sandholm of BOND New York Properties, in New York City. “Dragging your feet means you could wind up paying more in a bidding war situation or missing out on the property all together.”

Not only should you be emotionally ready to pounce, but be logistically ready as well. That means pulling together all your paperwork—bank statements, pre-approval letter, and any documents supporting proof of funds—while you’re house hunting.

  1. Offering your max pre-approved amount

Today’s sellers are often besieged by multiple suitors, and the successful buyer will be one who’s prepared for a bidding war. The best way to arm yourself for battle is to make sure you’ve got a strong financial arsenal. That means getting pre-approved (do this now, if you haven’t already) to show a seller you’re financially prepared to buy a home—their home.

When you make an offer, beware of submitting a price on your pre=approval that exactly matches the amount you were pre-approved for, says Chuck Silverston, principal at Unlimited Sotheby’s International Realty in Brookline, MA.

You want to show financial strength. It’s better to have an approval for the highest loan amount you are qualified for—the difference, will be your down payment.

An exact pre-approval could make a listing agent nervous because not only does the buyer not have any room to increase their offer if they are not the highest, they may look stretched on paper if the home doesn’t appraise.

  1. Using an obscure lender

Also consider using a well-known local mortgage lender or bank. But before you do, be sure and speak with us. Many agents are leery of certain lenders. You’ll want to make sure your lender has as strong a reputation as that of your agent for closing transactions. Choosing an out-of-area lender could worsen the likelihood of your offer being accepted.

  1. Having unnecessary contingencies. We wrote an in-depth article about just how much having a contingency in your offer could cost you. If a buyer is nervous enough to want to back out of a deal on a contingency, that is sufficient reason for a seller to be nervous as well. By adding a contingency to their offer, the buyer is shifting the risk of an unknown to the seller, instead of absorbing it themselves. Better to pay for your own additional inspection if you need one prior to delivering your offer, so it’s not contingent upon it. If the contingency is for the appraisal, understand that you are liable for only 80% of the difference. Want to make your offer really stand out? Increase the down payment from 20% to 25% and the seller will feel much more comfortable—especially in a bidding frenzy where the home is selling for far over the asking price. Why? Because it will have to appraise for far less.

If you want the full explanation, read this article we did on how to calculate an appraisal value for you home.

  1. Letting outsiders sway your offer

When you’re buying a home, you probably want a second opinion. And what you’ll probably get is more like a third, fourth, fifth and so on. We get it. But beware of letting these people—who mean well but probably haven’t seen the many, many other homes you’ve seen—influence your offer.

The trusted adviser does what they think is best and tries to protect the buyer and usually slams the home. Unfortunately, they don’t have the education in seeing the other 10 homes you’ve seen, or understand today’s market. This is especially true if there’s a generational gap. Your parents, as well meaning as they may be, no doubt haven’t kept up on the values. If you hired a professional REALTOR to help you, it’s really best to listen to their advice first, and bounce your thoughts off of your other confidants as a secondary avenue.

  1. Not selling yourself

Wait, isn’t it the seller who, you know, does the selling? It might not sound quite fair, but in a seller’s market, you want to make sure you—the buyer—look as good to the seller as that picture-perfect house looks to you, Silverston says.

And it’s not just about looking good on paper. In fact, Silverston says, the offer process begins the moment the buyer steps through the door at the open house or showing.

“In today’s highly competitive environment, the listing agent is trying to determine which buyer will be the easiest to deal with,” he says.

That’s why buyers should avoid pointing out defects, asking a lot of nitpicky questions, or even insulting the owner’s taste by discussing changes they want to make.

“Basically buyers who act less than enthusiastic will see themselves at a competitive disadvantage when sellers are comparing multiple offers,” he says.

And, don’t forget to help seal the deal with a love letter—a personal touch could be enough to boost you to the top in the seller’s mind.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario

How Much Should I Bid to Win the Home?

How Much Should I Bid to Win the Home? You’ve found the ideal home, and now it’s time to make that offer. The offer to beat the other five offers you hear the sellers may be receiving.

When trying to determine an offer price, where do you start, or stop? Of course, your agent should be armed with the recent sales in the area to help you understand at what price the home you’re interested in could sell for.

Remember that in most cases, the buyer that was willing to pay more for the home than any other buyer is the one that typically wins the bid. So, you can forget about saying you don’t want to overpay in this market. By definition, if you won the home in a multiple bidding situation, you probably overpaid. But relax, now your home will be the sales comparable for the next buyers, that likely will now have to pay more than you did. Think of it to some degree like musical chairs, get your home before the music stops. The sooner you get into an appreciating market, the sooner you get to begin enjoying the appreciation, instead of bidding against it.

How to Set a Fair Price

Deciding what to offer can be a nail biting experience. You don’t want to lose the home, but you also don’t want to be blindly bidding against yourself. How much is too much? When you can’t afford anymore is one good threshold. But assuming you’ve looked at what the market bears for like properties, it’s likely that you’ll already know where you think the home should sell. So, pick a price and stick to it. Ask yourself, at what price am I willing to let go of this home? That way, if you win the bid, you’ll be happy and if you lose, you’ll at least know that going any higher just didn’t make sense. Remember, you have to sleep at night so you’ll have to live with whatever decision you make—choose wisely, and remember, sometimes you just have to let a home go if you are up against an overzealous buyer.
How Much Does the Home Need to Appraise For?

Lenders typically want you to put down 20% to have some skin in the game so to speak. Though as lending trends are beginning to loosen, some 10% loans are available.

Let’s say the offer you are going to make on the home you like is for $1,000,000. If you were putting down 20% that would be a $200,000 down payment and the lender would put up the remaining $800,000. Now the home must appraise for full value-—$1,000,000, as the lender will only lend 80% of wherever the home appraises. And that’s what makes sellers nervous—especially if your offer price is a new high water mark for the neighborhood. But if you could put down 25%, the home would only need to appraise for $937,500, giving both you and the seller some breathing room and peace of mind.

Here’s how the calculation works:

“X” = ((Offer price – Down Payment) ÷ .8) or (80%)
Where “X” is what the home must appraise for given the Down Payment.

So in our above example,

$1,000,000 — $250,000 = (25%)= ($750,000 ÷ 80% ) = $937,500.

 

We also wrote an article about Contingencies, which explains what happens when a home doesn’t appraise

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario

Days on the Market—What’s in a Statistic…

How long it takes when selling one’s home to get into contract is one of the most nerve racking periods during the home sale process—for sellers, but how long should it take to sell a home?gambling

Don’t gamble on the outcome. Our study shows that selling a home too fast or having it take too long can be detrimental. Not every case is the same, and not every market has the same perception, but on the Bay Area, specifically the mid-peninsula, statistically, there’s a sweet spot for selling a home quickly, and getting the most money at the same time.

One must understand how potential buyers view this statistic in order to evaluate why there’s a correlation.

When a home is being sold “off-market”, or off the MLS, buyers can have a difficult time ascertaining the intrinsic value. If a seller is asking “X”, potential buyers might think it’s worth the asking price—perhaps more, or less, who knows?

When that same homes goes “Live” to the entire community of house hunters and REALTORS®, if no offers materialize within the first 10 days—or on offer day—it’s a safe bet that the home is overpriced for the value offered, and will more likely than not eventually, sell for less—and savvy buyers know this.

If hordes of buyers line up right away to make offers, buyers looking on will feel confident that the home is priced well—or even too low. Conversely, if the home languishes on the market more than 14 days, and there’s scant interest, it’s a pretty good indication to buyers that the home may be priced too high—or worse that there’s something wrong with the home. In either of the latter cases, buyers will often sit back and wait to see what happens. They typically wonder when, and or if, the seller will lower the asking price.

This is when the tables shift and buyers are empowered to make offers at or below the seller’s asking price.

As a seller the last thing you want to do is overprice your home. Trying to alter a general opinion that there may be something wrong with your home puts a seller in a quandary, if not a perilous position.

Sellers can’t advertise that there’s “nothing wrong with their home”, since certainly every home has some inherent flaw. What they’d like to advertise is, “There’s no reason you shouldn’t be buying my home—it’s just as good as all of the others”. Except that, it’s probably overpriced.

What other factors can cause the days a home is on the market to creep up? In addition to the number one factor of overpricing a home, there’s accessibility and presentation.

Making your home hard to show can be hugely detrimental to getting the most buyers in to see your home. Making it “appointment only” or having it shown through your “agent only” will invariably limit the number of potential visits to your home.

When Real Estate agents set up a day to show their buyers homes, they know everyone’s time is limited. It does no good for them to show buyers so many homes that their buyers become overwhelmed, so agents will limit the showings to as many as they can comfortably fit in. If your home is hard to get into, they might save it for another day—or they might skip it altogether. Often a buyer will find a suitable home on their first outing.

Buyers are busy people. Often they are juggling jobs with long hours, pets and/or small children as they traipse around trying to find a suitable home. Having an open house where they can leisurely stop by on a weekend afternoon will benefit the accessibility of your home and increase the showings. Think how many mid-week dinner time appointments can be deferred by inviting buyers to a weekend open house.

Is one weekend enough? Many times it can be, but then you could be missing out on that one high bidder who was out of town on a business trip, or heavenly forbid, a weekend getaway from the stress of house hunting.  Imagine how frustrating it is for buyers who finally take a break for a one-week vacation only to learn that there dream home sold before they could return. And if you’re a seller, imagine potentially leaving that much money on the table.

Lastly, but certainly not least, is a home’s presentation. Not all sellers nor their agents present homes the same way. Some sellers despite their agents’ vehement admonitions will still cook a fried fish diner right before a critical showing. Real estate agents can also sabotage a seller’s likelihood of a sale by not realizing the importance of market saturation advertising—tapping onto the full potential of the internet with international and social marketing which includes the latest 3D virtual tours, video and of course Facebook and Twitter portals.

Our Next Post…Photographing Your Home—It’s Not Child’s Play. The photography of your homes is best left to professional. Too often we see homes presented with pictures taken from a cell phone.

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Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

 

 

 

Negotiation is for Monkeys

Every seller wants the best representation possible when selling their home, but good negotiation skills which are a critical component, are fast becoming a lost Frequently Unasked Questionsart.

Speak to any agent and they will no doubt claim to sell your home for the most money in shortest amount of time—but can they all really be the best?

We’re heard sellers tell us that “any monkey” can sell a home in our market right now, and they’re probably closer to the truth than we’d like to admit. But these “monkeys” they refer to are certainly not going to get their sellers the most amount of money.

It’s tough to see the whole picture when you see homes on your block being listed with inexperienced agents, or a veteran agent who still faxes paper contracts back and forth, yet they both sell their listings for thousands of dollars over the listed price. The seller walks away happy with the results, and nobody will ever know how much money might have been left on the table.

Forget about marketing as an important variable in the outcome—for now. Let’s focus on the day offers are due. Many agents are so excited when they get 20 multiple offers they strut around their office wearing it like a badge of honor—but clearly they are merely underpricing homes rather than fighting for top dollar. Once they have dozens of offers to wade through, what they do next weighs heavily on the outcome for the seller.

One of the most disturbing and glaring differences we see is how agents negotiate on the seller’s behalf. The lost art of negotiation on the part of many REALTORS® is leaving money on the table for their sellers and dashing the hopes of frustrated buyers.

A little history…Agents have a fiduciary duty to their clients. In a nutshell, it is the highest of all duties to be had. A fiduciary duty is the highest standard of care in either equity or law. The Fiduciary duty is a legal requirement of loyalty and care that applies to any person or organization that has a fiduciary relationship with another. Think of the historical roll of a fiduciary as a similar role the Secret Service takes upon itself to protect POTUS. OK, so now you know how serious the fiduciary duty is.

Then why do so many agents seemingly treat this highest of duties so callously? Simply put, they probably don’t know any better.

If you are selling your home, a breach in this sacred fiduciary duty could cost you thousands of dollars and the same holds true if you are a buyer.

Here’s where the art of negotiation is being lost and hence the fiduciary duty being broken. It’s the agent’s job to get you top dollar for your home. Skipping steps and poor negotiation skills can come close to treading on intentional negligent conduct (or fraud) on the part of your agent.

When enlisted as a real estate agent to sell another’s real property, the bond of fiduciary is created. Fast forward to when five offers arrive on the day set-aside for the bidders to present offers. We’ve seen it many times—an offer is submitted by each of the agents and late at night we get a call that our offer was rejected, or hopefully accepted.  But when agents don’t bother asking each buyer if they can go up any higher in price, it’s tantamount to leaving a lot of money on the table. Agents are becoming increasingly lazy as they coerce their sellers into taking the highest offer rather than counter other potential buyers to see who will offer the final highest and best offer. Agents defend the lack of counter offers and asking buyers to go up in price by concluding “It’s not a fair practice when a buyer has already offered over the asking price”. Our position, clearly, this has nothing to do with worrying about the other agent’s feelings—it’s about the fiduciary duty to a client.

For example, we had buyer who made an offer on a home in Redwood City and there were seven other offers. Our clients offered $1,350,000. We got a phone call at 9:00 PM telling us our client’s offer was third highest, and that the seller had accepted a high offer—we were told over $1,400,000.

Apparently over the weekend the winning bidder (buyer) backed out of the deal and without as much as a phone call to us they accepted the second highest offer for $1,375,000 as a replacement. They never bothered to check with us because if they had, they would have learned our buyers were also willing to go over $1,400,000 to get the property. This agent cost their seller over $25,000.

But there’s a better way to do things. When we’re on the receiving side of listening to offers, we vet each one as they are presented to ascertain if this is their clients’ highest and best offer, OR if they would like to be involved in a counter offer situation should one develop. We’ll be blunt and tell the agent that their client’s offer is not high enough, and if they want to compete they had better increase their price to their highest and best. This way when we meet with our clients—the sellers—we’ve already developed the best offer to present, and counter offers are rarely necessary.

And it’s not always about the almighty dollar. Sometimes vetting the offers beforehand means asking an agent why they have an appraisal contingency with a 50% down payment. Contingencies shift the burden of the unknown to the seller and we’d of course like to see as few in a contract as possible. Asking the right questions at presentation time may mean the opposing agent can go sharpen their pencil and come back with a cleaner or better offer.

We once had an agent wax on about how we were “…shopping her offer around” to get more money for our sellers. Simply put, we unapologetically agreed.

 

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years’ experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

 

 

 

Best Way to Sell A Home

Agents can be their own worst enemy when what they should be doing is finding the best way to sell a home.Frequently Unasked Questions

The real estate business is hard enough without agents making it even more difficult. Many of our clients assume we work 24/7 and the business practices of many agents essentially ensures that we do.

There’s no standardized best practice when it comes to lunching a home for sale. Homes pop up every day of the week and offers are entertained anywhere from before a home even hits the market, to hours, a few days or weeks later.

Take for example our local market where with very little inventory, homes are flying off the shelf. Unless there is some sort of structure to the launch and contract review day, one could never get a day off as every time a home would hit the MLS agents would have to scurry over and get their clients in within minutes or the home might be sold.

Thankfully, many local agents set a date to entertain offers so that buyers and their agents aren’t scrambling to see all of the available homes at a moment’s notice.

Recently, a new standard of practice has started to develop as some agents have begun listing properties before the weekend—holding one weekend of open homes, a Tuesday Broker tour, and listening to offers the following Friday. That equates to 7 days on the market. And while it brings some semblance of order to our otherwise chaotic trade, it’s not the best course of action to get the seller the most for their home.

The first issue is the earnest money deposit. Listening to offers on Friday is fraught with anxiety as our contracts default to 3 business days to deposit the buyer’s consideration (deposit) into escrow. A Friday offer date means the buyer’s deposit money doesn’t even hit escrow until Wednesday of the following week—five days after contract ratification. Even if the buyer’s agent changed that in the contract to 1 business day, the deposit is still not due until Monday after a weekend of new open homes. It’s not unusual to see a buyer get cold feet or see a better home over the weekend and decide not to deliver the deposit. No agent wants to find themselves trying to resurrect a highest offer a week later yet they continue to put themselves and their sellers at risk.

Another issue is sufficient market awareness and, the mere practicality of seeing a home, analyzing the recent sales in the area, reviewing the reports and making an informed offer. Most buyers today spend more time choosing their washer and dryer than they do actually buying their home—it’s an unsustainable pace and will invariably lead to lawsuits.

Anecdotally, we’ve encountered many buyers during our first open house praying that we will be open one more weekend as their spouse was out of town for the week. If you market your home for less than one week you’re potentially missing out on interested buyers who may be unavailable during that small window. And imagine the frustration when buyers who take just one week off to get away during their year long home search are out of luck when the ideal home gets listed by one of these agents the week they are away.

Our research indicates we’ve received some of our highest and best offers often from a buyer who saw the home at the second open home. On a home we just listed and sold with four offers in 11 days, had we heard offers before the second open house we would have missed out on two of the suitors (bidders) who came through the second weekend.

But who is to say our strategy works the best? The numbers do. We consistently outperform other agents with the percentage over the asking price we net our sellers. And it’s not because we under price our listings. We do this by sticking to a formula with proven results. We’ve also never had a buyer voluntarily back out of one of our listings once in contract. We contribute part of this success to slowing down the process and not putting people in a foot race. We think that market saturation is good for sellers and buyers as the sellers get maximum market attention and buyers have more time to digest whether a home is right for them before they get into escrow.

The numbers below represent all of the homes sold in Belmont year to date. Notice that there’s a sweet spot where too many days on the market and a home gets far less, and too few not enough.

Sellers who marketed their home on average for ten days received more than agents who took offers too soon. It’s also interesting to note that of the 67 homes which have sold thus far this year, the highest over asking a seller received was 46%–marketed for 10 days. In fact eight of the 14 homes which sold 20% or more over asking were listed for greater than 10 days but less than 14.

Median
% over Asking Days on Market
>20%

10
15-20 %

9
10-15%

12
5-10%

8
0-5%

34
< 100%

33

mortgage-rates27-300x300

 

Many agents banter about claims that they will sell your home for more money in shorter period of time—but we have the numbers to back us up. We base our system for marketing homes on a proven strategy that nets our sellers consistently more than the other top agents in our territory. Our listings are all on the market for 11 days which accounts for two weekend of open houses, one broker tour and offer date after the second set of open houses. To find out what else we do, contact us directly to learn more about our progressive services.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Why Are Interest Rates So Low and What Does it Mean to Me?

Unasked2 copy Whether you are thinking of buying or already own a home the current historically low interest rates may help you save thousands of dollars.

Rates in the last week have averaged the lowest point since records were first kept over 30 years ago. Refinancing today may help you save hundreds of dollars in monthly interest payments but even more important are the long term savings.

Rates are low right now because the financial crisis in Europe is driving the appetite for U.S. bonds which in turn raises the price and lowers the yield (interest) payment. And since mortgage rates roughly track the 10 Year Treasury Bond you can see where rates are headed and why. Rates are the lowest they’ve been–period.

If you think about the past 30 year trend of interest rates, which have averaged around 9%, it’s easy to guesstimate that the odds are good rates will be higher in the future rather than lower. What does that mean to you? If you are considering a purchase it means that there are two ways to look at it: if you buy a home at today’s rates either your monthly payment will be substantially lower or you can buy a considerably larger home for the same amount of money. In fact a payment on a $1,000,000 home ($800,000 loan) would be around $4,234 per month as opposed to $6,437 at the average historic 9% rate. But that doesn’t even begin to tell the whole story.

Not everyone stays in their home for Fhfb_contract_rate30 years but this offers up a substantial savings in interest payments. Most people aren’t aware of the long term costs of home ownership so you’ll be interested to note that at today’s rate your total interest payments over 30 years would total $725,000 and at the historical 9% rate it would be as high as $1,517,000–over double the interest payment for the same home. What could you do with an extra $793,000?

Perhaps rates will never be as high as they were back in the late 70’s and early 80’s but rates have still averaged 6.7% over the last 15 years during a time of historically low rates.

Case-shiller MSANow combine this with the recent decrease in home values and it’s hard to argue that waiting to buy a home will significantly benefit you.

Median Price Methodology–What’s Your Home Really Worth?

Unasked3 As a frequently unasked question and part of our real estate REVEALED series, we delve into how the median price is determined and reported for your city.

Listen right here or subscribe to our Podcast by clicking on the upper left RSS icon.

This graph illustrates the appreciation for homes which sold in the second quarter of 2008 and had previously sold within the last ten years.

Clearly the best way of determining what appreciation is for a particular home is to watch the home trade hands in an arm’s length transaction several times over many years without any major improvements (other than maintenance).

The Case-Shiller Home Price Indices Methodology comes closest to achieving this on a macro level. However there are inherent limitations in the methodology they employ. We’re not here to find fault with their method of data collection and interpretation—clearly it is as good as it gets on a macro-level—but for interpreting micro or niche markets it uses too broad a brush to paint an accurate picture of a particular area’s housing landscape. Here’s why:

·         It lumps many micro and niche markets into one large metropolitan area and cannot effectively differentiate smaller market areas since it relies on huge volumes of data in order to arrive at meaningful results.

·         It uses an algorithm to exclude all old sale pairs to support their assumption that older home sale pairs must have been remodeled. This has the unwanted effect of throwing the baby out with the bathwater, and discards very valuable information on repeat sales pairs which have not been updated over long periods of time.

We have overcome these limitations by being able to use the "sales pair" methodology and exclude homes that have been remodeled based on our personal experience in seeing virtually every home that has sold. In fact some of the home sales used are homes we’ve personally sold in the course of our 17 years in business.

However, due to the relatively small market sample our data will be more vulnerable to isolated sale anomalies but to a certain degree that is mitigated in that 100% of our data is usable—and local.

  • We can also go back to homes that sold recently which have not traded hands in the last 30 years and still included them in our study so long as we can verify they have not been remodeled.
  • We can also distill this information down by neighborhood.

Essentially we have watched the same sales pairs sell and can analyze the empirical and statistical data to offer a sound assessment of a particular areas value trends.

Here are some interesting facts–for 2nd quarter 2008 sales:

·         58 homes sold during this period

·         22 had not sold within past nine years and were excluded

·         11 were remodeled and excluded

·         25 were not remodeled and were used for our study

·         Only homes sold that were purchased after 2005 have sold for less than what they were purchased for.

Of those seven sales after 2005:

                1 was a foreclosure

                1 was a short sale

                1 was an REO (bank owned sale)

                2 non distressed properties showed an average of 11% appreciation

                1 non distressed property lost 15%

                1 non distressed property lost 20%

               

The homes that were selected had sold in prior years and had no extensive remodeling performed. Each sale pair represents the best analysis presently available for tracking the same home exchanging hands over time. Several recent distressed sales have perhaps skewed the numbers in that they were foreclosures selling at what was owed, not what it might have been worth. Nevertheless the data is for the most part reliable and illustrates that only people who overpaid for homes from 2005-2007 may now own a home worth less than what they paid for it as a result of the downturn.

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