As of this morning (2/24/12), there are 16,589 properties actively listed for sale in the Arizona Regional Multiple Listing Service, well below our peak inventory levels in the 50,000+ range at the height of the foreclosure crisis. Moreover, there are currently more homes under contract (19,962) across the Valley than currently available to purchase. 7486 properties closed escrow in the last month. At this rate, our market has just over 2 months of inventory. The supply of quality homes is anemic to the point that multiple offers and bidding wars are erupting across the greater Phoenix area on new listings. By any reasonable measure, we have stumbled into a strong seller’s market early in 2012.
So it’s time to throw your house on the market, right? As in all matters, it depends.
The case for selling
You have been trapped in a home you couldn’t sell for the past several years. Eager to downsize, upsize, relocate, etc, you’ve put your plans on hold while the market languished. Not convinced that this break in the clouds isn’t just a temporary mirage versus a sustainable recovery, you aren’t going to look a gift horse in the mouth. Buyers are buying, and climbing over each other to do so. With the summer coming up, you are going to cash out what’s left of your equity so that you can finally get on with the next phase of your life before the winter/spring visitors leave, gas prices shoot through the roof and the market returns to its regularly scheduled slump.
The Case for Waiting
Yes, the market is changing. The Real Estate signs that once lined your street are disappearing. The last house on the block sold in a day for 10k over list price. It reminds you of the market conditions from 2005 that temporarily shot your value through the stratosphere. Now your house is worth about what you paid for it in 2002. You are tempted to throw your place on the market now that there are buyers for it, but you won’t have much left over for a down payment on another place. Further, you know this is the beginning of the recovery. Why sell at the low point when values should continue to climb for the foreseeable future? You’d like a new home that more closely reflects today’s needs, but aren’t willing to dump the current one at a price that might look low with a year’s hindsight.
The Case for Compromise
Can you cover your current mortgage by renting out your house? If so, and you have the financial means to qualify for another loan without selling, you might consider that route. For those who are optimistic that the current market is a sign of better things to come, this tactic covers two bases: 1) Secures the new property at today’s prices before appreciation takes further hold, and 2) Allows for holding on to the former property for another year or two of market gains before selling for a better price.
Which Road is Right for Me?
There is no one-size fits all equation for the buying or selling of homes. In addition to the financial variables at play, there are personal and emotional considerations that don’t fit neatly into a spreadsheet. The best advice I can offer is to take a close look at your chief objectives before deciding whether this is a “good” or a “bad” time to sell your home. Real Estate sales do not take place in a vacuum. The sale of a home must be considered in tandem with the subsequent purchase and vice versa.
It is a good time for sellers, in general, but that doesn’t mean that there isn’t an even better time coming, or that it’s the “right” time for you.
Don’t hesitate to contact us for a complete review of your unique circumstances to determine if now is the ideal time to take the Real Estate plunge. We pledge objective analysis and honest opinion. Nothing more, nothing less.
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“So what do we think of Toots?”
Rochelle Laraway waited the three seconds it took for her husband to look up from his notes.
“Toots,” the software engineer questioned, pulling his keen eyes from the meticulously organized data on the yellow legal pad.
“Mr. Bartowski,” Rochelle replied. “Don’t pretend you didn’t notice.”
She pinched her nose and waved a hand in front of her face; her flawless skin scrunched up against an imagined stench.
“That’s just mean, Ro,” Shane scolded, unable to suppress a smile. “It could be a medical condition.”
“Yeah, gluteous halitosis,” Rochelle countered with a laugh. “I’m sorry, but he smells like rotten eggplant.”
Shane threw his hands in the air; exasperated, as always, by his wife’s unparalleled aversion to pragmatism. Who knew choosing a Real Estate agent would be the first real test of their young marriage?
“We’re not getting anywhere here,” he declared, focusing on her thick eyelashes as they batted once, twice, thrice.
“Really? I think we are making some progress,” Rochelle argued.
“Progress,” Shane wondered. “Thus far, we have determined that Mrs. Dahl has a voice like shrapnel and reminds you of my mother …”
“Grr,” Rochelle growled.
“… Mr. Shroeder, or should I say, Jerry Maguire,” Shane continued, “is too slick.”
“Show me the money,” Rochelle squealed.
“And now poor Mr. Bartowski is a touch malodorous,” Shane finished.
“A touch malodorous,” Rochelle gasped. “The man is a walking septic tank!”
Shane bent back over his notes, tugging on the sleeve cuff of his lightly-starched cotton button-up exactly three times before picking up the pad.
“I knew it would come to this,” he confided. “So I went ahead and compiled a list of pros and cons for each candidate.”
Rochelle slouched back in her chair with arms crossed. Her dark eyes brimmed with skepticism. She was stunning.
“To take emotion and irrelevant personality quirks out of the equation, I assigned each one a number at random,” Shane said. “Remember, Ro, we’re selecting a Real Estate agent, not a travel companion.”
Rochelle remained silent.
“Agent number one is a twenty year veteran of the business. Strong interpersonal skills, strong sales record,” Shane began. “Numerous productivity awards and industry designations. Works for a boutique brokerage that specializes in both our area and the luxury market.”
“Likes pina coladas and getting caught in the rain,” Rochelle deadpanned.
“Negatives,” Shane continued, ignoring her. “Unimpressive web presence, including a non-user friendly website. More emphasis on print marketing than internet advertising. High commission rate.”
Shane waited a beat, expecting another retort from the resident smart alec. When he didn’t get one, he continued.
“Agent number two is a sixteen year vet. Decent web presence. Equal emphasis on online marketing and traditional methods. Not as many sales in our neighborhood as Agent One, but more total sales in the last twelve months. Works for a large brokerage with a national buyer referral base. Slightly better commission rate.”
“Go on,” Rochelle prodded, warming to the analytical approach despite herself.
“Chief negatives include a high volume of listings, and being slightly out of area. Will our home receive the attention it requires? Will we get passed on to an assistant?”
“Agent number three is the most tech savvy,” Shane continued. “Amazing website, near the top of virtually every Google search term for our area. Very user-friendly. More reliance on tech than traditional marketing means less intrusion from tour groups and open houses. Best commission rate of the bunch. Very aggressive.”
“Negatives,” Rochelle prompted, now leaning forward with elbows on knees; the palms of her hands supporting her delicate chin.
“Only four years in the business,” Shane obliged. “Fewest total sales, none in the immediate neighborhood. Never heard of the brokerage.”
“Number two,” Rochelle announced.
“Just like that?”
“Yes, just like that,” she confirmed. “And that’s your choice, too.”
All Shane could do was smile. Married less than a year, and she already knew him inside and out.
“See, babe,” he crowed. “Logic and reason. It’s all about choosing the right tool for the job, not a best friend.”
“Shall we meet our agent,” he asked with a wry grin, tapping the notepad three times before flipping the page.
“Drumroll, please,” he requested.
Rochelle obliged by rolling her tongue and patting her designer blue jean-clad knees.
“And the winner is … Hans Bartowski!”
Rochelle groaned and buried her head in her hands.
“Reshuffle the deck,” she instructed through her fingers. “We are not listing with Captain Flatulence.”
“You mean Toots,” Shane corrected as he tore the sheet of paper from the pad, folded it three times and set it aside.
“So now what?”
“We tried it your way,” Rochelle advised. “Now we try mine.”
Now it was Shane’s turn to groan as he emptied his mind of reason and held on for the ride.
One of the more confounding logistical quandaries that can arise in Real Estate is the classic chicken or the egg paradigm: Does one sell a house before knowing where he is moving, or does one buy a new house without having his current one sold?
No doubt, the dilemma of which cap to doff first has vexed many a consumer. Selecting the correct course of action is dependent, like most things, on a variety of factors. For the sake of clarity, we will keep things simple.
If you have a boatload of equity in your current home, have flexibility with the ultimate selling price and have the financial wherewithal (cash in hand or the ability to obtain a new loan that is not conditional upon the sale of your home) to purchase a new home prior to selling your existing one, then you are the rare individual in the enviable position to call your shot. To eliminate the prospects of a double move and the fear of obligating yourself to the sale of your home without clear knowledge of where you are heading, you will likely opt to buy first. Especially if you are not convinced that the home of your dreams is lurking in the market at present, it makes sense to locate the next property before committing yourself to the rest of the process.
As most buyers are reliant upon the proceeds from their current house to purchase a new home, however, the above scenario is a pipe dream for the less well-heeled. Most will face the stark reality that they are simply hamstrung on a purchase until they sell their existing house.
So how does one combat the fear of committing to destinations unknown when putting a home on the market?
The ideal method is to negotiate a purchase that is conditioned upon the ultimate sale of your home, but few and far between are the sellers who will entertain straight contingent offers of that ilk. The preponderance of bank owned properties and short sales in the present market makes the task even more arduous as contingent offers are simply not entertained by the banks. Only the most patient seller will take a flyer on an offer from someone who has to sell a property to make the deal work. And if you happen to find such a rare bird, you’ll likely have to overpay for the home due to the weakness of your position.
When purchasing first or conditionally is not an option, the best compromise is to make your offers after you have accepted a contract on the home you are selling, but before it has closed escrow. With a buyer in hand, it is considerably easier to approach another seller with an offer. More attractive than a straight contingency in which you still have to line up a willing buyer, you can structure your offer to be subject to the successful close of escrow of the contract currently in place. This is not only more appealing to the seller, but if you have negotiated a longer close of escrow on the home you are selling, you can build in a little time to locate a property and negotiate a contract, thus avoiding a dreaded double move. Timing the closings can be tricky, but if done correctly, you can move directly from one home to the other without having to put your gear in storage while you, the kids, your dog Sadie, and the goldfish check into the Holiday Inn for a few weeks.
Naturally, to make this scenario work perfectly, you have to do your homework in advance. Even prior to listing your home for sale, start looking online at the available inventory. Get in the car with your agent to look at homes that fit your parameters. Get preapproved with your lender so that you are ready to pounce at a moment’s notice, as the right home for you is often right for someone else, too. Wasting time getting your preapproval in place after you find the property opens the door to not only unrealistic window shopping, but losing an ideal candidate to a buyer who is one step ahead. Do your due diligence up front and you’ll be ready to enter the scrum as soon as your home attracts a buyer.
To be sure, coordinating the near simultaneous buying and selling of homes is a stressful undertaking. You will experience Exorcist moments in which your head spins around a full 360 degrees. Understanding the process and the steps you can take to increase your chances of success will limit the projectile vomiting, however.
So which comes first, the chicken or the egg?
It varies from coup to coup, but in the end, it’s all protein.
Selling a tenant occupied home … how do I put this delicately … kind of sucks. That’s right, selling a home with a tenant sucks.
Why, you ask?
Because there is little to no motivation on the part of the occupant to participate in the process. Think about it. With zero financial stake in the sale of a property, why would anyone care to have their daily lives disturbed by pushy Real Estate agents and their snooping clients? As such, tenants tend to make home showings more difficult than owner occupants.
You want to show the home in an hour? No, today is impossible.
Tomorrow? No, tomorrow doesn’t look real good either.
Given that a landlord or an agent of the landlord cannot legally enter the premises in cases of non-emergency without permission or 48 hours written notice (under the AZ Landlord-Tenant Act), it is not uncommon to come across such tenant-occupied listings that require 2 days minimum notice prior to showings. These constraints cost owners more than a few showings, particularly those of the spur of the moment, I’m in town to buy a house today variety.
In a market choked with inventory, especially in the lower price points where rental properties typically live, few will bother looking at the homes that are difficult to view. There are simply too many readily accessible options to make special plans to see one nondescript investment property.
So how does the owner of such a home counter the tenant malaise that is killing his/her ability to sell prior to the expiration of the lease (inviting the holding costs and desperate pricing decisions that can accompany a vacancy)? By incentivizing the tenant to participate in the process.
It frankly amazes me that tenant-occupied properties are often so difficult to show when the remedy is so readily apparent: money.
Offer your tenant a discounted rate on the rent or nominal alternative compensation ($500 is a lot of money for the average tenant) if the home sells while they occupy it. By doing so, you will not only encourage your tenant to eagerly agree to the showings that were formerly abhorred, but will provide the requisite motivation for showing the home in its best condition as well. Get the tenant on your side by offering a stake in the outcome and watch the beds make themselves, the dirty socks disappear from the living room floor, the food-caked plates on the kitchen counter find their way into the dishwasher.
When you empower the powerless, everyone benefits. From the only perspective that matters in a Real Estate transaction – yours – that means minimized holding costs and maximized sales price. Cool beans.
Selling a home is not rocket science, just an exercise in the practical study and application of human motivation. For your own sake, you have to step outside of your head every once in a while to learn how to help others help you.
This is your Jerry Maguire moment. Don’t blow it.
Open houses were how I made my initial bones in the Real Estate business. One of the tried and true methods for encountering the home buying public in its natural environment, it proved to be the old school prospecting technique that was the best fit for my sensibilities as a rookie agent. Why sit in a hermetically sealed cubicle, cold calling non-receptive “leads,” when those with an interest in a product type, if not the actual product I was hawking, would willingly walk through the front door and engage me in non-abusive conversation? Actual face time with actual consumers, you can’t beat it.
Lacking a single stalwart in my empty stable of listings at that nascent stage of my career, it wasn’t unusual for me to sit open the listings of colleagues. One in particular still stands out. A gorgeous semi-custom Spanish style home in McCormick Ranch, I couldn’t wait to throw my directional signs all over the neighborhood and wait for the inevitable human deluge. A planned community that is one of the few pockets that produces enough traffic to make the exercise worthwhile, chances were good that I would pick up a few decent buyer leads, if not sell the property on the spot.
The day before the scheduled open house, I met the owner at the property to introduce myself and assure him I was not a kleptomaniacal serial killer. Satisfied I wasn’t there to steal the toaster, he proceeded to give me the tour. I’d already previewed the home prior to selecting it as a viable open house candidate, but I was happy to oblige the owner’s turn as proud tour guide.
Until we got to the fun bubble.
A property that featured newer construction and more modern architecture than neighboring subdivisions, granite countertops, porcelain tile flooring and additional hot button features too numerous to count, and the poor, misguided soul had it in his mind that demonstrating the “fun bubble” feature in the swimming pool would sway potential buyers to slap their cash down on the barrel. Now, I like fun, and I like bubbles, but frankly, this bubble was apathetic at best. As I have yet to encounter the buyer who includes a fun bubble amongst his/her criteria, however, the fun factor is largely irrelevant. Your pool could turn into a cauldron of unmitigated mirth at the turn of a rheostat, and I am still not demonstrating it to every buyer who walks through the front door. That’s not salesmanship. That’s “What do I have to do to get you in this house today?”
The oft overlooked component of selling is the ability to discern what is of material import to a prospective customer, and what is … well … a fun bubble.
Following a buyer around a home like the security guard at Ross is more likely to result in a restraining order than a ratified purchase contract. Selling the brushed nickel doorknobs, blood red curtains, pewter towel racks and five-bladed ceiling fan to the prospect who is only interested in the room dimensions is a losing proposition. You run the risk of chasing away a perfectly good buyer before reaching an item of any import to him, and/or missing a chance at the other prospect wandering down the opposite hallway unescorted while you yammer on about the Pella windows on a home that is $200,000 out of mark number one’s price range.
Enthusiasm and pride of ownership is commendable, but leave some mystery for the second showing. Gotta make sure the hook is firmly set before we can encapsulate your buyer in a bubble of home buying fun.