photo courtesy of socialmeda.com
Dear buyers and sellers.
I thought I should take a few minutes to talk about San Antonio's real estate market and the things I've been noticing. These are my thoughts on what's going on in the world of real estate and I hope you find them useful. I love San Antonio and I love being a Realtor® here. Its been a tough ride this last year at times, but as we step into our second month of 2009, I've begun to see a few things that I thought I would share. If you have questions or comments, please comment on the post, I'd love to hear your thoughts, comments, and yes, even criticism (I enjoy hearing all viewpoints). This is a long post, so if you aren't interested in one section, skip down a bit - there's a bit of information for everyone in it.
It was a rough year for most. We heard the news barrage constantly about the housing markets across the United States, unemployment, the stock market, the upswing in gas prices that hurt us all (except for Exxon Mobil apparently), and how dismal Christmas was for retailers. If you weren't depressed at the beginning of the year, you were probably starting to feel it by the end of the year. But, like most rough times in history, people soldiered on. I have always had the viewpoint that regardless of the situation, its what you make of it. The real estate markets were on the news 24/7 and if you haven't heard the word "foreclosure" you probably live in a cave (and I think even the most hermit-like person probably has heard it at least once). By the end of the year, it was the hot topic just about everywhere I went.
photo courtesy of Corey Leopold
Let's talk foreclosures.
Since its the hot topic, I thought I'd share my personal thoughts on them. Everyone wants a "steal." Everyone wants to find that million dollar home for $100,000. I certainly would love to find it. Foreclosures don't exactly work that way. There are the occasional stories of someone finding that gem, but they are few and far between (and I have heard few of them locally). The word foreclosure itself has come to mean several things to most people, so let's take a minute to look at the difference between them.
Short sales - A short sale occurs when an owner sells the home for less than they owe on the property (the purchase price comes up "short" of what is owed). This usually happens as someone nears foreclosure and takes some time and effort on the agent's and owner's part. Basically, the agent with the bank's permission lists the house for sale at a price under what is owed and the bank then becomes the seller - accepting, rejecting, and countering the offers that come in. If an offer is made that settles the loan balance, (example: a seller owes $100K, they list for $90K and an offer comes in for $110K in a multiple offer situation) there is the possibility that the seller can walk away with cash, but it is not the norm. Usually the seller walks away empty handed, but they avoid foreclosure and the associated stigma of it.
Pre-foreclosure sale - This is much like a short sale, only the listing price will pay off the loan balance, commissions, and any associated costs with the offer (closing costs, title, survey, etc. - it all depends on the circumstances of the offer). It could be a clean break, where the seller makes no profit or it can have a final profit to the seller. It really depends on the sales price of the home, the loan balance, and the costs of selling the home. This is basically a sale to prevent foreclosure when the seller (and agent) know they can sell the property for a full valued price before the bank takes over.
Foreclosure - Simply put, the seller loses the property and the bank takes over. The property is now fully owned by the bank and the seller has the dreaded foreclosure on their credit report. This is never a good option. At this point the bank can decide to go in several directions. They can sell the property or the can hold onto it. The decision is all based on the bottom line of the lender. They can go through several steps to sell the property as well. They can list it and sell it on the open market or they can take it to auction. Here in San Antonio, all auctions take place at the Bexar County Courthouse. These are not for the faint of heart. Most of the people bidding on the properties are savvy investors who have done this before and have done their research of the appropriate price point to buy the home at. If the bank chooses to sell the property themselves, it is known as an REO property (real estate owned) and can be found on our local MLS or various other sites.
Many buyers use sites like RealtyTrac and Foreclosures.com. My thoughts on these sites? Don't bother with them. Why do I say that? Anytime someone has mentioned one of these listings to me and sent me a link, I find that the property is already gone. These sites pull listing data and then don't clean it out often enough, so many of the properties you see are no longer available or the information isn't correct. I don't want to trash these sites, but so far I have found no value in them at all. If you want to search for foreclosures on your own before speaking with an agent, use First Preston Management or Southwest Alliance (for HUD homes). These are up to date and you can set up alerts to new properties as they become available.
photo courtesy of woodleywonderworks
For the buyers.
You're at an advantage at the moment. There are several conditions that are making this a "buyer's market." First, there is a large inventory of homes on the market. In all price ranges, all shapes and sizes, and all neighborhoods. You have a large selection to choose from. Start running searches on the internet and you'll see what I mean. The availability of foreclosures has brought prices down in many areas and when inventory is high, sellers are forced to be competitive. If the same house on the same street is up for sale, a seller is likely to list lower to get a quick sale or throw in extra money for closing costs, repairs, updates, etc.
Second, interest rates are low. I'm sure you've read this a million times and wonder why we don't tell you exactly what the rate you will receive is. The reason is simple, they are constantly changing and because the interest rate you receive depends on many variables we can't just give you an one, because yours may be different than the current market rate. Also, there are laws on how we can advertise rates to you and violating those laws can be devastating. Your best bet is to speak with a lender and get pre-approved. Pre-approval is an important step in the home buying process and should be done early in the game. By doing this, you nail down a price you can afford and I often find that people think they can afford up to a certain level, but a pre-approval shows them different (up and down). By getting pre-approved, you'll be one step ahead of the game and on that first trip out to look at homes, if you find one you just have to have, you'll be prepared to move on it. With tighter credit standards then previous years, a good lender can also help guide you to better credit scores if there's a few things that might cause a rejection of your approval.
Third, the first time homebuyer's tax credit. Up to $7,500 waiting to be handed out to you thanks to the government if you purchase before July 1, 2009. A first time homebuyer is defined as someone who hasn't owned a home in the past three years, so its possible to have owned a home before and still qualify. I am actually planning a post to further explain the tax credit, so look for that soon.
Fourth (and this one is one you may not have thought about before), real estate agents had a hard year last year as well. We're all looking for new clients. We all want to help. Many agents are working harder to provide better customer service to their clients (I know I do) and make sure not only that you get what you want in a home at a price you can afford, but we want your future business as well. I'm a noticing a shift in the level of client-service being provided and I couldn't be happier about it, this is what we are here for, to help our clients not just to chase commissions. When the markets were hot, agents got a bad name for some of their performance - many agents are now working to correct that perception, so you can benefit from this. Of course, the best part about being a buyer is that someone else pays for your agent's work (there are cases where buyers pay, but that's not typical). Why not seek representation by an agent and know that the details are looked over and someone is "on your side" and "there to help."
The bad news? The phones are ringing again. I am seeing bigger numbers of people looking to buy and beginning their searches. I think we'll experience an upswing in sales in the upcoming months and because of that, the "buyer's market" may not last forever.
photo courtesy of Tracy O
For the sellers.
Now, if you've just read the "For the buyers" section, you're probably feeling hopeless. Don't. While houses aren't selling as fast or as for as much as you might want, there is good news. With a few sensible decisions, you can get your home to sell. In a "buyer's market" more work needs done, but it is not impossible to sell your home.
First step? Clean it up. Paint it. Make those repairs you've had on your list of things to do for so long. Look at the outside of your home and pretend you're about to buy it. What do you like? What do you hate? Be objective in all your feelings towards the home. Stop looking at it as your home for a few minutes and think its any other house on the block. I'm sure you have neighbors that you sometimes think, "I wish they would clean up their yard." Think of your home as if you didn't own it. Be critical. Be harshly critical. Buyers want the best, so why not make your home the best? Some people would disagree with me that this is the first step, but there's a reason for my thoughts on it. When an agent comes to your home on a listing appointment, you want them to be impressed as much as you want a buyer to be impressed. If the agent gets the listing right then and there, they'll probably want to take photos and get right to work. We know how important photos are these days with anywhere from 80-85% of buyers looking on the internet before they get to the point of visiting homes in person. If you didn't do all these things before the listing appointment, the photos will reflect the house in its former state - you want to show off the best view of it possible.
Home staging is a booming business for a reason. Statistics suggest that staged homes sell faster and for more money. According to a survey by HomeGain.com, 94.6% of homes staged by an accredited professional home stager sell in 35 days or less. Those are great results. Many people's perception of home staging makes them think that they need all new furniture and decor. This isn't necessarily the way to do it. A great home stager will work with the items in your home and perhaps recommend a few purchases. I haven't worked with her personally, but I have heard rave reviews of ActiveRain's own Monica Vera of LMB Design here in San Antonio (from other agents that I look to for advice and opinions). Many Realtors® have seen the power of staging and are now incorporating stagers into their listing presentations.
After your home is clean and ready to go, call a Realtor® and tell them your thoughts. What do you want out of the sale? How much would you like to walk away with? What do you think the home is worth? Are you looking to move up or just move out? When do you want to be out by? Telling the agent what your thoughts are helps put them in your shoes and see the big picture a bit clearer. Everyone expects us to communicate well with our clients, but its a two way street...your communication with us only helps us set up a path for you to reach your dreams and goals. In interviewing agents (and although I hate losing a listing appointment to another agent), I suggest you speak to several before you make your decision on any one of them. You need to be able to trust this person, but you also want to be comfortable around them. Having a client who is not comfortable with you is every agent's nightmare. We're a team working on a common goal and if we're not all enjoying the ride, we need to be able to communicate that to each other - and comfort is a big key to that communication.
What should you know about an agent? Speak with them about their marketing strategy. What are their plans? Don't be afraid to suggest something or ask why this or that piece of marketing won't be used. A good agent should have the answer to why they won't do a certain style of marketing (for instance, I don't do print advertising - many agents do it just for the benefit of their seller thinking they're doing something - print advertising accounts for 1% of all sales - its not cost effective and does not typically generate the sale). Talk about what the selling point of the home is. My house isn't anything special, but the seller we bought it from knew one thing was worth knowing about the house. The deck in the backyard is awesome. We turned down a much newer, less rough around the edges home for this one. Why? The deck in the backyard. A good selling point will sell the house for you. You know what's great about your house...tell your agent.
Price is king. Your home needs to be priced according to the market conditions at any given time. A high price often leads to price reductions. As price reductions occur, buyers who are looking see them and think, "well, it went down a few thousand this week, wonder what it will go down next month." Suddenly, although your home is a great buy at the now reduced price, buyers start thinking through the psychology of your sale. If you were to drop the price this week, maybe next week you'll drop it more. As these thoughts fill buyers heads, you get caught up in the waiting game. Buyers trying to time the bottom of the market (or the bottom of your price adjustments) and hoping they can get it for the least amount of money. If you think the price the agent is talking about it way too low, it might be time to consider not selling. I'd rather see someone not list their home for sale than spend months wondering why its not selling and getting caught up in that emotional rollercoaster (I've been through that one myself - not fun at all). Some agents will give you higher listing price than others when you interview them, it is tempting to grab, but remember if the home sits there, you're now stuck with a home with a stigma that may take even longer to sell.
Commissions are always a hot topic at listing appointments. Everyone (including agents) likes to save money. I often hear "XYZ Realty will list my home for X%, which is lower than your commission. Why?" Agents will often lower their commissions just to get the listing. Many discount realty companies will do it for a lesser price, because they don't do much more than put the listing in the MLS and stick a sign in your yard. While the MLS is a valuable tool, when you remember the fact that 80-85% of buyers are shopping on the internet, being on the MLS and having a sign in the yard alone will not help sell your home. Is it possible to sell from just that? Of course it is, but wouldn't you prefer a better chance at selling your house than just hoping for the randomness of someone seeing the sign or looking in the MLS. Lowering the commission will often get you what you paid for. I am not trying to beat up on other Realtors® here, but trying to get you to think of the old adage "you get what you pay for." I also think that if an agent caves in immediately and lowers their commission, what does that say about their negotiating skills? Remember, this person needs to fight for you when a buyer makes an offer...their negotiating skills are very important to you and your sale's final outcome.
The good news? Since there has lately been more interest from buyers in San Antonio, I think we'll be seeing more sales over the next few months. Warmer weather, the promise of good prices, low interest rates, the first time home buyer tax credit - all of these will help spur some traffic and sales. I don't think we'll get back to the heyday of multiple full-priced offers just yet, but at least we'll get back to getting offers and selling homes.
The long and short of it all.
I think we're in for some better days ahead for everyone involved in the process; buyers, sellers, and agents. I know much of what I've written here may seem like common sense, but its based on my personal experiences in real estate and what I've been seeing going on around me here in San Antonio. I hope you can find a few nuggets in there that will inspire you, help you, or move you closer to your goals. As I said before (so long ago), I encourage you to comment on the blog and leave your thoughts or opinions as genuine, frank conversation is something I support on my blog. I may not always agree, but I do like to see all sides of the issue.