The Housechick Blog

I’ve got a buyer thinking about making an offer on a short sale property.

Remember, a short sale is where the owner owes more on the house than they can sell it for.  They’re most often incredibly long, frustrating sales, and often, the sales never actually complete.  You have to get the lender to agree to take less than what is owed, and, well, I don’t want to go into a huge short sale discussion now, but know that they’re often ugly transactions. 

On the plus side, if the listing agent deals often with short sales, knows that they’re doing, then you’ve got a better chance of actually purchasing a short sale home.  That’s a better chance, but still no guarantee.

Today, there are 665 single family homes in the Greater Tucson area marked as a short sales in the Tucson MLS.  In the last 6 months, 139 disclosed short sales have actually sold.

Which makes the chances of a short sale closing roughly one in five. 

Last time I ran that calculation back in March, it was one in ten. 

Progress? 

I had one of my properties re-roofed last week, and the experience really drove home two points for me:

1. If you’re selling a home and it needs a new roof - just put it on now while you have time to gather and compare bids.  It’s expensive, yes, but it takes a potential huge objection away from the Buyer as a negotiating tool.

2. If you’re buying a home and the roof needs to be replaced, make sure the Seller is going to be on the hook for any extra costs that might be incurred when the roof is replaced, for any extra damage that the roofers might find.  Many times, you can’t get on a roofer’s schedule fast enough to have it all done before close of escrow.

My roofer found a layer of insulation we didn’t know existed and huge patches of dry rot and dry wood termites that we had to correct - which came close to doubling the cost to replace the stupid thing.  Can you imagine if you had just bought a house and the roofer bill came in at twice the estimate due to the unexpected damage found underneath old layers of roof?  You better make sure that the Seller is going to pay that bill.

Photo via Flickr, courtesy of marielito

I had a different post planned for today, but thought this would be more interesting.

I’m pricing a home where there have been no solds in the neighborhood for the past 6 months, so I had to go back a little further than I might normally, so that I can extrapolate the current potential market value. 

And I must say, normally sold prices don’t line up so clearly over time.  Guess which two solds are distressed sales?

And granted, this chart doesn’t take into account the condition of the properties - but I’ll throw in that they range from original (from the late 1970’s) to partially updated and the one I’m pricing is completely remodeled.  Of the two active listings, the higher priced one is a partial remodel with 4 poor pictures, while the other one has no interior pictures and a single line description - it’s a relative unknown at this point.

I’ve decided what I think is an acceptable range of values for the property - what say you?

How much is this home worth in today’s market?

When you sell your home in Tucson, there’s a spot in the MLS where you get to tell other agents the rules about showing your home.  Can they give you a 30 minute heads up call and then go show it?  What if they call and get voicemail?  Can they leave a message and just go?  How much notice do you need?

It’s really up to you, the seller, to decide what kind of notice you need, but understand that the more difficult you make it to show your home, the fewer agents will show it.

Pretty typical around here is a 30 minute courtesy call, and if the agent gets voicemail, they leave a message and then they just go.  As an agent, if you want me to call a home and a work number, I’m more than happy to do so, as long as if I don’t reach anyone, I can just leave messages and go show your home.

I wanted to show a home the other day that said we could come between 10:30 and 2pm on weekdays.  Except my client has a full-time job, so we are only out looking nights and weekends.

There was a house I wanted to show last month where I could only show the house by appointment on weekends, but my clients were only in town from Monday through Thursday to buy a home.  With cash. 

With so much inventory on the market right now, you can’t afford to make your house difficult to show.  I realize it can be inconvenient at times to allow showings with short notice, but if we are to sell your home, we’ve got to make it easy for people to see it!

Home Buyers always ask me: how much should I offer?

I like to ask them how they prefer to negotiate.  Are you a low-baller?  Or more of a "this is my firm and best offer" sort of person? 

Personally, I like to craft offers that I think are just below their threshold of acceptance, to put something in front of a home seller that is just low enough that they aren’t sure they want to take it, but just high enough that it’s tempting for them to just accept it and have it done with, if you know what I mean.

But - as a person buying a home - you need to negotiate in a style that is most comfortable to you, so that regardless of the outcome of the negotiations, you’re satisfied with the process.  As an agent who’s worked with many buyers and sellers, I’ve seen all kinds of tactics and strategies.  And at one point or another, those strategies have all worked and they’ve all failed.  Everyone’s different.

So - what’s your negotiating style?

I’ve talked about range pricing effectiveness earlier here, and then again here when we learned the Tucson MLS doesn’t dictate the stated list price when range pricing a home, other than to say the list price must be within the range somewhere.

I’m always curious to see what sort of marketing works best.  After all, the point is to sell homes quickly and for a good price.  Knowing what works and what doesn’t is valuable to me and my Sellers.

So we peek one more time at range pricing.  As the market changes, so must our marketing.  Check out the previous results, then read on.

Over the past 6 months, single family homes only, greater Tucson area:

• 271 out of 3261 homes that sold were range priced, roughly 8%.
• 43% sold for greater than the list price - typically the low end of the range
• Average range between list price and top of range: $21,585
• Average Sales Price for Ranged Priced Homes: $255,841
• Average Sales Price for Non Ranged Priced Homes: $304,122

Let’s look at a smaller area.  Central Tucson had roughly 10% of the sold homes over the last 6 months range priced.

There’s a handful of high end sales in there though, so let’s just look at the under $500k crowd for a second:

I think it is interesting that range priced homes go for 99% of the listed price, while traditionally priced homes go for 95% of list.  Some sellers build in a bit of negotiating room in their price, so perhaps they are expecting to come down a bit, while the range pricers state their estimated negotiating range up front so that offers come in closer to their range.  However, average sales prices and price per square feet is lower across the board for range priced homes.

Last time, when we looked at the Northwest, the range priced homes did better in terms of price per square foot and sales price to list price.  Here we see Central is just the opposite. 

Ultimately, I think range pricing is a marketing tactic, and like any marketing tactic, it requires judicious use.  I don’t believe every marketing technique is appropriate for every home, and certainly that applies to every marketplace as well.  Given current Buyer expectations and our current Tucson real estate market, it would seem range pricing isn’t the best pricing strategy at this time.

Just found a document released by the Tucson MLS regarding range pricing.

Range pricing is saying that a seller will accept or counter offers between $X and $Y.  It’s basically a marketing technique, trying to get more eyes on the house because it will appear in a wider set of search results, especially with online home shoppers.

The problem is that most of the Tucson home search sites only list one price, so you think a home is priced really well, and then you read the description and realize it is range priced.  So what number do you put into the one big price that most people look at?  The top of the range?  The bottom?  Something else entirely?

Turns out, the Tucson MLS says that the seller can decide whether the listing price is set at the low end, the high end, or somewhere inbetween.  For example, if a home is range priced between $474,000 and $515,000, then the most visible price listed in the MLS system can be either of those numbers or some other value within the range.

The Tucson Association of Realtors MLS says they won’t interfere in how agents and their clients determine listing price, as such interference arguably invites allegations of fair trade and anti-trust violations.  By dictating how agents market their listings, TARMLS would be limiting or controlling the business decisions of agents and their clients, which they believe would invite litigation.  Furthermore, they say, compelling the seller to set a list price at the low or high end of the variable range would "place the MLS in close proximity to price-fixing."

Agents are required, however, to disclose range price listings in the first line of the description.

We talked about range pricing last year. I think I’ll re-run those numbers and see if anything has changed. Stay tuned…

Another question via the Plugoo widget.  See that box on the side there?  Say hello if you see me online.  If I’m at my computer, I try to stay logged in, so hopefully it’s not too hard to catch me that way.

So - you had your home appraised, and it came in larger than what the assessor says.  Is that a concern?

Ah - maybe.

If you’ve got an older house and we’re talking about a small size differential, then I’m probably not too concerned if I’m the homeowner, or even if I’m the person purchasing the home.  I’m told the assessor sometimes measured the exterior of the house and subtracted a percentage to account for interior walls to find the square footage, whereas an appraiser usually measures each room.  There are many ways to measure square footage, you’d be surprised.

If the appraiser and the assessor figures are vastly different, then it starts setting off warning bells in my head.  Was there a large unpermitted addition that the assessor doesn’t know about? 

Normally, if I see significant discrepancies between assessor and any one else’s square footage estimates, I have the house formally measured.  There are companies that measure homes and guarantee their results, like Floor Plans First.  Especially if you’re trying to price and sell your home, it’s important to squeeze out as much square footage as possible, so you can get the most value out of the home.

Good news is that FHA limits were raised for Tucson, and that sort of loan only needs 3% down, which means it is becoming more popular among local home buyers.

Bad news is that FHA has more strict requirements than conventional financing for the condition of the home.

For example: we have Termites in Tucson.  I’d say 75% of every house more than 30 years old will show some signs of current or previous termite infestation, or will have a bit of dry rot.

FHA requires that termite damage be repaired. 

Now, most people, if the termite damage is minimal, sort of cosmetic, they’ll have the property treated and won’t go back and fix all signs of infestation. 

If someone is buying a home with an FHA loan, they’re going to require that the signs of termites are fixed, which may mean filling, sanding, and repainting some wood, or replacing damaged fascia (dry rot there too).  Hopefully, it’s not too big of a job. 

So if you’re selling your home right now, and it’s priced under FHA limits ($316k or less), I highly recommend you get a termite inspection NOW.  If the inspector notes anything on the report, go ahead and fix it while you have the luxury of time.

Got an email from someone who wants to sell his Mother’s home.  It’s a big two story house, and it’s not only expensive to keep up, it’s too much house for one person, she is beginning to need to live with assistance, and the house itself is slowly falling into disrepair.

Never the most fun scenario, but it’s a task that needs to be done.

As is common in this situation, the house is not only mildly in disrepair, but it is outdated as well.  And in a market like this, we’ve got to take care of that before we can sell it.

The trick is balancing the money you put into repairs with the potential increase in selling price.  We could easily spend $20k-$30k on this home, but we’d never get it all back out.  There’s a point where the return on extra improvements starts getting smaller and smaller, so we’re aiming to come right up to that line.

Musts for this home? Fresh paint, new carpet, a thorough cleaning, and moving all the stuff out.  New sinks and faucets all around, new kitchen counters, and a couple landscape improvements.

Really want to have done?  New light fixtures.  New range.  Exterior painting.  Staging.  Some accent paint colors, perhaps.

Big cost items for this house will be the roof repairs and the polybutylene repipe - those two alone can eat $15k without blinking an eye.  The owners are going to have to decide if they will go ahead and fix those things now or wait for a Buyer to request them.  If it were me, I’d fix them right away, but it’s not my money to spend.

We’re getting estimates for the various items; they’ll start chipping away at their task list.  In the meantime, I’ll be checking out the competition so we can figure out when we’ve reached the stopping point for our improvements.

Photo via Flickr, courtesy of Sunfrog1.

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