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A victory for value

published Saturday, May 5th, 2012 at 10:20 am by Badger Realty

For today, we’re going to turn a blind eye to the notion of “Location, location, location” and focus our attentions on pricing.  I received a call from an old friend last week and our conversation turned to my living situation.  He did all the wiring in the house I built and was basically calling to just catch up.  It should be noted that he currently has a house listed for sale in the same town where I live.  As it came to light that I had sold my Jackson NH real estate in just two weeks, he (jokingly) called me a few nasty names and then asked how on earth that happened.  The discussion turned, shortly after telling him what a great agent I had, to pricing.

Our two houses certainly have their differences.  He has more land, I had a better view.  He’s on a private road (Yes, it’s THAT house!), I was on a main road.  His house was built in the 70′s, mine was built in 2010.  His is a one story ranch with a full basement, mine was a 2 story cape with a drive-out basement.  At the end of the day, you could argue that we are going to be attracting two very different buyers.  But they also have their similarities.  They are both houses, not condos.  They both have small manageable lots and convenient garages.  Their sizes were close enough to attract the same size buying family.  So how do you compare them with their speed of going under contract?  How did one sell in just two weeks while the other sits vacant and on the market for nearly a year?  One of the answers to that question is price.

For argument’s sake, let’s assume that my house sold for $200,000 and his is listed at $150,000.  We could argue that there are differences in the buyers in both of those ranges, but overall we can agree that there are buyers out there for both.  Homes sell because of real or perceived value.  Of course there is an emotional element in any purchase we make, but value, which comes down to condition and price, is a critical component with such a large and significant purchase like real estate.

I can’t over-emphasize the role of objectivity throughout this entire process.  Of course my house was the nicest house in the whole world, but for everyone else, relying on the advice and opinion of real estate professionals is likely a good idea.  Talk to builders, appraisers and even go see the other homes in your market that are in your price range.  This will give you the confidence to price your house “right” and get it sold.

One way to approach the pricing of a home is through the rate of absorption (i.e. how much inventory is there and how fast it is moving).  For example, if there are 100 homes on the market and only 10 are selling every month, for a seller to position their home to sell in the next 30 days, they need to be in the top 10 percent in terms of value.  Is their home in the best condition for the best price?  If not, it will fall into the 90 percent that will remain listed for sale until the listing expires or until the seller moves their price enough to motivate a buyer to bite.

Another effective way to price a home is by using price-per-square-foot data.  Basically a home will fall into three categories which are, not surprisingly, based on condition and location.  The top category is newly (or recently) built homes in desirable locations.  The bottom category is homes that are in rough condition or in need of repairs and are in challenging or less desirable locations.  The homes in the middle are the “C” students of the real estate market.  They have the same amenities, condition and location as many of the other homes in the area.  They are not asking for extra credit or headed to Harvard, but they are also not skipping school or dropping out.

As you can imagine, going back to that “objectivity” topic again, getting a seller to admit that their home is “average” can be challenging.  One effective way is to go out and look at the competition.  If you don’t feel comfortable doing that, just a review of plenty of interior photos of recently sold homes will be just as effective.  You can review the images and start to choose the ones that most resemble your own house.  The agent is then able to gather that data and generate an accurate listing price.  The advantage here is you are now focused on SOLD prices instead of LIST prices.

The final method, for today, is to use the three different tiers of price-per-square-foot data and simply “choose your own adventure”.  Gather the listings that have sold, those that are currently on the market and those that did not sell and group them respectively together.  This paints a very clear picture of what range has sold, what the current competition is, as well as how much higher priced those that did not sell were listed.  You are then able to see, and choose, where to price your home.

There are always exceptions to the rule.  Was price the only reason my house sold in two weeks? No.  There is always someone out there looking for what you are selling.  This week, Edvard Munch’s “The Scream” painting sold for $120 million, setting a record for the most expensive artwork ever sold at auction.  Clearly the perceived value was great enough to generate that type of bidding action.  You certainly need to do some comparisons with regard to value, but in the end – the higher the value, the faster the sale.

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Posted in Jackson NH Real Estate, North Conway NH, Real Estate for sale in Mt. Washington Valley, Sell your NH Home | No Comments »

Smarty Pants 2.0

published Saturday, April 28th, 2012 at 4:30 pm by Badger Realty

We got some great feedback from our story last week so we decided to share a few clarifications and thrown another log on the fire.  Financing is currently a steaming hot topic and I’m guessing, will be for some time.  Today we’re going to go further down the path of financing on a private road.  Our friends at Northway Bank sent over a few clarifications that should prove helpful for anyone thinking of buying or selling Jackson NH real estate situated on a road that is not maintained by the state or local municipality.

One of the biggest factors in nearly all of these conditions for financing is “who” is providing the financing.  As most of you are aware, a very small percentage of loans actually stay with the bank they were initiated through.  They are more commonly bundled together and sold into the secondary mortgage market.  Because these larger corporations and investors are typically more gun-shy than your local bank would be, they tend to require a more stable situation with the property being sold.  Because your local bank is more likely to consider all of the factors that you, as a person, bring to the table, your chances at getting a more creative solution to your financing are much greater.

The first place this comes to light brings us back to the issue of the road maintenance agreement.  A local bank is more likely to not require a formal or recorded road maintenance agreement for what they call “portfolio lending”.  These are mortgages that will remain with that particular bank for the life of the loan.  Of course there are always exceptions.  One example was with a property on a class IV town road where the “road” was literally a goat path and the homeowner could not get fire coverage because emergency vehicles could not pass to get to the house.  Without insurance coverage (or more literally protection for their investment), the bank could not do the mortgage.

There are always exceptions to the rules.  There are many different lending institutions and many varieties of those that play in the secondary mortgage market.  Freddie Mac, Fannie Mae, VA, FHA and the list goes on.  One of those exceptions is that Freddie Mac is one of the only of those larger institutions that will accept or buy mortgages that do not have a formal road maintenance agreement.  Mostly all of the others still do.

How about if we move a bit closer to the actual structure on the lot?  The question came up about the presence of a shared septic between multiple lots without any formal agreement.  This issue can muddy the waters a bit. (Sorry, I couldn’t resist!)  Because septic systems are governed by the Environmental Protection Agency, most local banks will not have a problem with financing either home.  At the end of the day their position tends to be – if the state has approved the septic for use by both properties, who is the bank to come along and say it is unfit?

Once we step out to the larger investors, the rules change a bit.  In general terms, the investors in the secondary mortgage market want to be sure that the specific property they are taking as collateral has all of the components to function independent of any other lot.  In the case or the shared septic, it almost always comes down to which of the lots the actual septic system is located.  We ran into a similar issue with my friends and their struggle last year.  The septic is municipal but the houses up the road, including the one they wanted to buy, all have their sewer pipes running under the homeowner’s property at the beginning of the road.  Since the “system” was essentially out of the control of the “upstream” properties, and there was no formal agreement in place, the investors were leery of getting involved.

It is safe to say that anytime a property cannot stand on its own with regard to services that make the property livable, the secondary market is going to shy away.  I think you’ll have some flexibility with phone lines and likely cable television.  But, when you start talking about shared water, septic, power and even driveways, you’re going to have better luck staying with a local bank that lends the money directly.

It is important, as buyers and sellers, to put ourselves in the shoes of an investor.  If the entity you are investing in has the potential to be rendered “useless” or unlivable, you are more likely to move on to the next opportunity.  When you are going to sell a home or looking to buy a home, take the time to assess the viability of your investment.  If you find yourself explaining lots of little “hiccups”, it is likely time to take a step back and get those items cleared up.  You will increase the salability of you home for all involved.

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Posted in Financing and Mortgages, Home Improvement, Real Estate for sale in Mt. Washington Valley | No Comments »

Smarty Pants

published Sunday, April 22nd, 2012 at 7:21 am by Badger Realty

We are dealing with a far more educated consumer in today’s North Conway NH real estate marketplace.  There are studies that tell us 60% of the sales cycle is already complete by the time the customer makes that first phone call.  This is both encouraging and horrifying as a business owner, and that includes our buyers and sellers.

I am a research and data fiend.  I’ve been told I tend to over-analyze things, but in the end I’m glad to have gathered as much information as possible and, hopefully, made an informed decision.  This is how our society works now.  We have seen it in the real estate world for a few years and it has made its way into nearly every level of commerce.  I buy almost everything I own through an online shopping site (named after a river in South America).  The main reason is they provide user reviews and recommendations.  There is nothing like the collective knowledge of 500 people that have already purchased and utilized the product you in which you are interested.

As real estate professionals, we try to make the transaction as smooth and painless as possible.  We end up educating our clients on a myriad of topics since no two deals are ever the same.  I’d like to explore a couple of the more popular questions we run into and see if I can offer some insights.  Since the banks have snugged up their lending standards to more logical levels, we have seen an increase in questions related to the location of a property on a private road.  If you were reading along this past fall and winter, you know my friends lost out on a house solely because of this hiccup.

The main point of contention is the actual maintenance of the road.  Because we live in a state where snow is most always a factor (no comments on this year, please) the lending company wants to be sure the owners will have year-round access to the property.  This assumes, of course, it will be a permanent “owner-occupied” property.  If the buyers are not dealing with financing or it is simply a summer cottage or vacation home, the rules significantly change.  If there is nothing in writing that states how the road will be maintained, the banks will likely be unable to approve the loan.  They want to ensure the new owners will have ongoing access to their property.

This can easily be rectified with a very simple document.  When I sold my home I met with my neighbor who shares the driveway or “road” with me and we crafted a “road maintenance agreement”.  Because he does not have a house on his land yet, we agreed to place the burden of maintenance on my side of the road.  It also explained that once a home is built on his lot, the maintenance would be shared equally between the two parties.  We took the extra step of recording this with the county.  Should the new owners decide to sell the home or once my neighbor sells his lot, this document will already be in place and this hurdle will not cause any further hiccups for future transactions.

There is still a pile of concerns surrounding this issue.  What if someone on the road refuses to sign the agreement?  What if a tree falls on the road and the properties farther down the road cannot access their homes?  Who pays to have the tree removed?  Are there liability issues if there is a car accident on the road? If the tree falls in the road, did anybody hear it?   I’m sure this list could continue forever.  I had a nice conversation with a real estate attorney friend of mine and he offered up his favorite answer to all of these questions:  “It depends”.  There are so many variables to take into account for each of these that a single answer or article is not nearly inclusive enough.  Attorneys will call on both statute and case law that provide a base from which to work.  Then all the factors for your specific scenario come into play.

One of the other popular questions we get that also utilizes that nebulous “it depends” answer has to do with heat and other utilities.  Providing a buyer with the previous owner’s (or tenant’s) utility usage values is really a subjective exercise.  It is important to ask the buyers how they will be using the property (full time / vacation) and have a good understanding of the seller’s current usage.  Since I started working out of my home office, my gas and electric usage jumped way above the levels they were when I was out of the house all day.  Lights, electronics, heat and even air conditioning play a significant role in my utility bills and would vary greatly from someone using the home for weekends only or even someone who works outside of the home.

Last but not least, we are going to circle back around to our old friend financing. As we have mentioned, banks have now resorted to exorbitant requirements for home loans such as verifiable employment and a decent credit score.  The nerve!   One might argue that if a bank is not willing to lend someone money, nobody else should take that risk either.  While this may be true, there are other reasons that owners might be interested in financing the deal themselves.  When I bought the land I built my house on, the seller provided the financing.  This not only limited the down payment I needed to come up with but also simplified the purchasing process overall.  The seller had an attorney draw up the necessary mortgage papers and enjoyed the benefit of collecting the associated interest payments for the life of the loan.  This worked well for them since they did not need the immediate influx of cash and were able to make a little extra money on the transaction.

The lesson here is not to be afraid to explore other options for home ownership.  My friends that lost that opportunity last year are still pressing forward and looking for other creative ways to purchase a home.  Being self-employed for less than two years will force me to seek alternative financing options this summer as I begin my property search.  There are various options available to get you into that home you’ve been dreaming out.  Rent-to-own, owner financing and even buying with another person or family are all viable solutions.  The key is to ask the question and keep exploring the possibilities.

Imagination is more important than knowledge. For while knowledge defines all we currently know and understand, imagination points to all we might yet discover and create. – Albert Einstein.

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Trust Your Gut

published Monday, April 9th, 2012 at 8:46 am by Badger Realty

It’s like asking a painter if he thinks you should change the color of the interior walls of your Jackson nh real estate.  Or, better yet, asking the unscrupulous car salesman if the vehicle you are test-driving would be a good purchase.  I’m not saying you won’t get an honest answer, but in any situation you should use your own instincts and intuition and make the decision for yourself.  Of course, another great idea is to solicit input from an impartial third party.

There are numerous times in life in which we’re provided information and are left to determine the value of the data on our own.  Some of these decisions are life changing.  The choice to sell or stay, the choice to buy or rent, even the choice to keep dating or pop “the question” are all game changers and should be made with thoughtful consideration and not necessarily outside influence.  I find this to be true when it comes to the constant stream of data we receive from those involved in real estate.

Make no mistake about it, I understand that present company is included in this equation and people in glass houses shouldn’t throw stones.  My encouragement to you is to simply take what you read with a grain of salt and take that extra step to filter the data stream through your own situation.

One of the more amusing things I find when reading industry blogs, articles and magazines is the incredible inconsistency of the message.  If you have been reading along with me over the past few months you know that the pattern has not changed.  I have lost count of the number of days we find articles in support of buying real estate and articles warning us of impending foreclosures and falling prices.  There is truly no wonder people have a diminished sense of trust with real estate professionals.  The real crime here is in throwing the baby out with the bathwater.

It is no secret that the lifeblood of the real estate industry is the sale of properties.  If nobody buys real estate, nobody in real estate makes a living.  This is not just limited to sales agents and brokers, but also directly impacts appraisers, inspectors, lending institutions, attorneys and more.  But something I learned a long time ago is that integrity, customer service and a good reputation far outweigh the benefits of any sale.

While we laud the benefits of the current incredible interest rates, increased inventory and numerous aggressively priced homes, those need to be balanced with your own personal needs and current financial situation.  Your own personal situation is the single most important factor in how you interpret the constant flow of data you are presented.  There are broad, blanket statements made on a daily basis about the real estate market.  And this is nothing new.  For as long as there have been media outlets, there have been broad statements made about any number of financial, social, economic or even athletic topics.

I was taken aback, in reading the Boston Globe last week, that none of their staff writers picked the Red Sox to finish the season in better than 3rd place.  While initially this was a little surprising, it occurred to me that they had all utilized their extensive experience combined with what they saw in Spring training, to establish an informed assessment of the team’s chances.  While it may have looked a little “off” to have such a pessimistic view of the season, I quickly realized it was simply realistic.  We need to take the same perspective when filtering the constant din of stories and articles about the real estate market.

One of the first things you learn, when you start dabbling in real estate, is it is an extremely local market.  Almost nothing you read or hear on a national level will directly relate to your own neighborhood.  My parents live in a town in Florida that is seeing sales of 250 homes a month.  They live in a town that sees almost 400 homes built every month and enjoys a constant flow of people looking forward to starting their retirement in this small area of the state.  This certainly puts the national news stories in perspective.

We enjoy the same sort of environment here in the Mount Washington Valley, though not nearly to that scale.  We are fortunate to have a strong second-home market and a very desirable place to call home.  And we’re not alone.  Just this week, in a story from CNBC, we learned that homes in Midland, TX take an average of 71 days to sell and are only 1% discounted from the original list price (on average).  That’s a healthy seller’s market to say the least.  In fact, the gist of the whole story was highlighting towns across the country that are enjoying quick sales, minimum discounts and an overall healthy market.

I love that real estate is on everyone’s mind.  We are fortunate that the industry we are in is a topic of conversation from the boardroom to the bar room.  It is an easy topic to bring up in conversation and many of us in the industry can’t go buy a gallon of milk without a friendly face bringing it up.  My caution and our recommendation for you is to simply filter what you hear and read with the lens of your specific town or area.  There is a good chance the truth is in there somewhere; the onus is on you to find it!

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Posted in Jackson NH Real Estate, Market Update, Real Estate for sale in Mt. Washington Valley | No Comments »

Does their bum fit the seat?

published Friday, April 6th, 2012 at 1:46 pm by Badger Realty

I write this today with a smidge of trepidation in my fingertips.  One of the toughest phone calls to make, as a service providing professional, is the call to a client with news that the “service” is not complete.  In Jackson NH real estate, especially in what we refer to as a “buyer’s market”, the justification conversation to an unhappy seller is not one of our favorites.  So what are we to say?

One of the core concepts of the REALTOR organization is honesty.  And just like Billy Joel says, it’s “…mostly what I need from you”.  Here are a few ideas from our years of experience that might shed a little light on how to handle your home that is just not selling as quickly as you had hoped.

I would first contest that the old adage “Location, Location, Location” should be adjusted to “Price, Price, Price”.  There are a hundred clichés that go along with this.  My personal favorites are: “A product is worth exactly what someone is willing to pay you for it” and “There is a bum for every seat”.  I restored a heavily damaged Corvette a few years back.  As the second child in our family, I was essentially the reason my dad had to give up his own back in the 70s.  (For some reason, Chevrolet didn’t include car seats with a 1969 t-top.)  I’ve always felt a little guilty, so this was a great way to get him back behind the wheel of some muscle.

The “sweat equity” involved in this kind of project is such a subjective amount, assigning a value is nearly impossible.  The true value of that project is either your own personal pride or the amount of cash in your pocket that someone was willing to give you in exchange for the product.  In my case, it was the look on my dad’s face when I pulled into the driveway and tossed him the keys.  This car is clearly worth more to the two of us than to anyone we would find in the newspaper.  We often caution homeowners about doing remodeling projects prior to selling for this very same reason.  There are projects that add immediate value to a home, but doing these projects with a more generic audience in mind will be more broadly valuable and impress a larger audience.  While I don’t think anyone would turn away a free 1991 ‘Vette, the resale on a more modern and reliable car would be faster and attract far more buyers.

Keeping that “value” in mind, it is important to remember that buyers don’t really care how much money you “need” to get out of the sale.  The amount you need to retire, move up, start a business, etc., should have no bearing on the price you set for your home.  Setting your selling price based on what you think your house is worth compared to what your neighbor’s sold for is also dangerous.  We all are convinced that our house is the best on the block.  But, the only real opinion that matters is the buyer’s.  An objective look at the house, neighborhood and overall market along with a detailed CMA should be your roadmap for pricing.

One of the most common hiccups we see sellers making is pricing their home based on greed instead of true market value.  This is a tough pill to swallow, but it will have a significant impact on the speed of the sale and the interest in the home.  Pricing your home 10 – 20 percent above the market value “just in case” you get a bite is a dangerous game to play.  I will admit that it actually does sometimes work.  Every once in a while, a vastly overpriced home sells because they found the right bum for that seat.  But serious sellers trying to move their home should steer clear of this tactic.  I know numerous brokers who will turn away a listing client for just this reason.  If you want to “test the market” and sit on your home until that “one in a million” buyer comes along.   I wish you all the best.  When you are finally ready to get serious about selling, by all means give us a call.

When I listed my house, my broker suggested small items such as adding closet doors and a few small trim pieces to “finish” up the house.  While these items would not have been “deal breakers”, they eliminated them from the discussion and made the showings more seamless.  We always encourage our sellers to walk through their home with objective eyes and remove any of these small issues before listing the house. If the buyers feel they will need to paint, replace carpet, improve landscaping or some other perceived issue, the offer will be made with those costs in mind.

Aside from price, that first impression is critical to the sale of your home.  We have talked about it before, but it bears repeating here and is always the number two item discussed with sellers.  Your house needs to be pristine, neat and clean for every showing.  This includes the basement, garage and the front lawn.  If the buyers can’t “connect” with your home and imagine it as their own, they will likely keep looking.

Last, but not least is availability.  Buyers can’t buy what they can’t see and making your home available and open 100% of the time is always the best option.  I can tell you first hand, this is not the most convenient thing in the world, but the annoyance will pay dividends when your agent calls with that first offer.

I was fortunate to have my house go under contract just 2 weeks after it was listed.  I paid attention to the CMA my broker provided and priced it accordingly, I scrubbed and cleaned the house for every showing, enough to make mom proud, and I accommodated every request for showing regardless of day or time.  The buyers clearly agreed with the value we put on the home and apparently their bum fit the seat!

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