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When to Adjust Price

There was a time when a price reduction tainted a listing. That was several years ago when listings in many areas sold quickly. At that time, it was assumed that something was wrong with a listing if it needed a price reduction.

In today’s market, price reductions are common. Sometimes, sellers aren’t content with listing unless they try a price that’s higher than what the comparable sales data indicate. Or, a price reduction could be necessary simply because it’s difficult to price homes in a changing market, particularly if the local housing stock is varied in size, condition, age and style.

It’s easier to establish current market value in housing developments where the homes are similar to one another, particularly if there are a number of recent comparable sales. It’s hard to price right for the market in any neighborhood if few or no homes have sold recently.

It’s best to list your home at a price that buyers will perceive as a good value. Overpriced listings sit on the market. Real estate agents and buyers forget about them.

The home-sale market slowed in some areas this summer. Today’s buyers are cautious about buying. Some are back on the fence waiting for a clear sign that the market has hit bottom and that prices won’t drop further.

Although some markets appear to have stabilized, there is no guarantee that prices won’t slip. Buyers who realize that they can’t time the market and who want to take advantage of low interest rates are moving ahead with their home search. They are very selective, are buying for the long term, will wait for the right home, and won’t pay over market value.

HOUSE HUNTING TIP: As difficult as it may be for sellers to consider a price reduction after only a couple of weeks on the market, this is often the best strategy. Buyers and their agents focus on the new listings. If you bring your home on the market priced too high, but it’s otherwise a nice house in good condition and in a good location, a price reduction early in the marketing period is likely to attract the attention of agents and buyers who still have the listing fresh in their minds.

Make sure that your agent gives your listing a renewed marketing effort to generate enthusiasm about the property. More than 85 percent of today’s home buyers use the Internet to search for a home. Some sign up for services that notify buyers when a new listing is submitted to the multiple listing service (MLS) and when there is a price reduction or pending sale.

Depending on your local market, you may need to lower the price more than once, particularly if you waited months to make a price adjustment. If market values have moved down since you listed, you could find yourself out of sync with the market again. Don’t rely on what your neighbors are asking for their homes. If they aren’t selling, they are probably overpriced for the market. Rely on sales of comparable properties that closed after you put your home on the market.

THE CLOSING: Ideally, you want to reduce the price before your competition does

Need to Knows

There are obvious decisions that need to be made before embarking on a home purchase. How much can you afford to pay? How much do you feel comfortable paying? Which neighborhoods offer the kinds of homes and amenities — like good schools, shops and transportation nearby — that you want? How secure is your employment? Do you have enough cash reserves for emergencies?

In addition to these practical considerations, you should find out as much as possible about the local area. Does it have a strong and diversified economic base? Is employment improving or are employers laying workers off? Are businesses moving into or out of the area?

Are new facilities planned that will impact the community, like a freeway that might change the character of a neighborhood by creating unwanted noise? This could negatively impact property values.

However, a new rapid transit station under construction within walking distance of where you want to buy could make commuting to the closest urban center easier. This might have a positive impact on local property values and cut your commute time considerably.

HOUSE HUNTING TIP: Residential real estate is a localized business. Home prices differ from one area to the next. State laws governing home-sale transactions also differ. Federal law requires sellers to disclose lead-based-paint hazards. But, state laws differ on whether or not sellers need to disclose other defects, like a drainage problem. Many states have mandatory seller disclosure requirements. In other states, seller disclosures are voluntary, not mandatory.

Agency relationships also vary from state to state. For example, dual agency, where one broker represents both the buyer and seller, is illegal in many states. It’s legal in others. In states where dual agency is legal, like California, the broker has a split loyalty to the buyer and seller.

It’s important that your real estate agent explain the different agency relationships recognized in your state, particularly if you’re coming from another state where different agency relationships are recognized. You should also find out how much disclosure about property defects you can expect to receive from the sellers. You should always have a property you’re considering buying thoroughly inspected by qualified professionals. Include an inspection contingency in the contract even if the sellers have provided presale inspection reports.

Work with a knowledgeable, experienced local real estate agent that can inform you about issues, statutes and ordinances that will affect you when you buy or sell a home in the area. Many real estate companies require buyers and sellers to sign generic disclosures, sometimes 10-18 pages long, covering such things as ordinances, disclosures and agency laws, rent control and schools.

THE CLOSING: Be sure to read these and ask your agent if you have any questions. Most buyers and sellers don’t take the time.

Sonoma County 2010 Market Report

market report    can also be found by logging into:  http://www.inkswitch.com/viewItem.php?itemID=49849

HUD Monitors REO vendors

The U.S. Department of Housing and Urban Development (HUD) has hired a consultant to help it track the performance of vendors it employs to manage, maintain, market and sell foreclosed FHA homes.

HUD is using a real estate owned (REO) performance evaluation model developed by Walzak Consulting Inc. of Deerfield Beach, Fla., to measure whether vendors are following HUD guidelines and providing cost-effective and reliable performance, the company said.

The model will allow HUD to understand what factors produce the best results when measuring vendor performance, and reward top-performing companies by assigning them more properties to manage.

Under a new Federal Housing Administration management and marketing program detailed in a November 2010 Federal Register notice, HUD employs three types of vendors to help it dispose of REO properties:
• Mortgagee compliance managers, who are intended to protect HUD’s interests by reviewing property inspections and providing guidance to lenders on their responsibilities;

• Field service managers, who inspect, secure and maintain properties;

• Asset managers, who are responsible for the marketing and sale of REO properties.

Brokers who wish to list HUD REO properties must be selected by HUD’s asset manager vendors.

Any broker can represent buyers interested in HUD REO homes by submitting a broker application and selling-broker certification form to HUD and being assigned a name and address identification number (NAID). Only brokers who are registered with HUD may show homes and submit contracts for purchase.

HUD pays brokers a commission of up to 6 percent of the selling price, to be split evenly between the listing broker and selling broker (also known as a buyer’s broker).

Before HUD REO properties are publicly listed for sale, they are evaluated to determine if they qualify for a “first look” and direct sale to local governments and FHA-approved nonprofit organizations. Those properties are generally located in designated Revitalization Areas.

HUD REO properties that are not sold under any special programs are listed on HUD Home Store and multiple listing services, and offered on an exclusive, priority basis to owner-occupant purchasers. Following an exclusive sales period, unsold properties are then made available for purchase to all interested buyers, including investors.

As of November 2010, HUD’s inventory of REO properties totaled 55,486, up 37 percent from the same time a year ago.

Not including reverse mortgages, FHA insured loans on 6.75 million homes, up 18 percent from November 2009, and 568,863 of those loans were in default — an 11 percent increase from a year ago.

Although some of those borrowers will be able to get current on their loan, obtain a loan modification, or negotiate a short sale, many will be foreclosed on. Lenders convey properties that complete the foreclosure process to HUD after filing an FHA insurance claim.