Home Valuation is not a science.  We are in a complex market.  Are prices heading up again?  Are they stabilizing?  Are prices yet to take a hit?    How then can we truly find an appopriate price for a home?

It takes local knowledge from a seasoned professional to really come up with a true value of a home.  Maybe even an appraiser can not come up with a real value if they are “out of area.”   There is no way these appraisers (or agents from out of the area) could have actually gone into the comparable homes.  A local real estate agent who specializes in your neighborhood most likely will have been inside (maybe even more than once) most of the comparable homes in your neighborhood.   Local real estate agents preview homes constantly as they come on the market during broker open tours as well as when they are showing property to their buyers and/or they have just been in the house since – as local area specialists you’d think they must live in the neighborhood and know the neighbors.    Knowing the comps on paper and knowing the comps in person are two very different things.  As an agent we can certainly gleen certain information from the MLS data – pictures, description, agent notes often tell a certain story, but being there in person really is the only way to “know” a house and it’s flow, footprint, flaws, etc.  These are what really add or subtract from a homes value.  Square footage, year built, recent remodels – granite, stainless, wood floors, etc… – do add value as well.  But a quirky floor plan is hard to forgive. 

Just looking at the comps on paper again is just not enough.  Digging deeper, making some phone calls and researching time on market, distressed or not seller situation, what type of financing was used?  These are all conditions that could make a difference in the pricing of a home, which in turn may or may not hurt the price of your home.

Noting the difference between the “asking” price of a home and then the “selling price” of  a home can tell a story in itself.  Clearly there is a relationship between time on market and the selling price.  The closer to the list date typically closer to the list price a home sells for.  The longer a home sits on the market, the further away the sales price is the original list price.  How many price changes were made on a listing before it sold?  These are all ways to really help determine what a home’s true value is.  Often, a home that is priced right to start with will sell for more than a home that overprices and then follows the market down in price.  This type of sale typically ends up as a loss for the seller.  It languishes on the market and then looses steam and people start to wonder what is wrong with that house and in the end it sells for less – typically.

Valuing a home requires a full inspection of a home – inside and out.  A discussion with a homeowner as to what improvements have been made can add value to a home and without knowing what those improvements are one can not accurately price the home.  Obviously, market conditions drive the price as well.  How many homes are currently for sale in that market?  What has sold recently?  What homes are pending sale and will offer the latest comps to come?

$/sq ft – can be useful in a “cookie cutter” neighborhood where all the homes were built the same year and have not been remodeled too much yet – think a newer planned unit development.  (You know – there is floorplan A, B or C.)  In an average suburban neighborhood built in the 50’s, there is too much differnce in all the homes – remodels, additions, improvements, etc to compare them this way.  One can come up with a general average dollar per square foot, but of course the smaller the home that greater that number will be and vice versa.

As you can see, it’s not a science.  There are so many factors.  Please be sure to call a professional realtor in your area who is knowledgeable and who has been “around the block” for a while as they will have been in the comparables and will know it by heart typically.

Realtor Magazine January 2010 issue has a great article I wanted to share entitled, “10 Big Impact, Low Cost Remodeling Projects.”  I found it interesting as Laura and I specialize in getting our sellers’ homes ready for sale and more often than not a lot of these projects + a list of our own is included here.  Nice to get some affirmation that our list matches up in most cases with this list.  Here it is:

1) Tidy up the Kitchen Cabinets – Potential buyers do open the kitchen cabinets.  Homeowners can add roll out organizer trays so that when buyers peek in, they feel like there’s lots of room for their stuff.  (This holds true for your closets too – adding closet organizing systems are well worth the investment.)

2) Add or replace tile – By retiling very inexpensively, you make a room look way cleaner than it was.  Wake up a tired kitchen backsplash or bathroom vanity with new tile.

3) Add a breakfast bar – When a wall separates a kitchen from dining or family room, cut out an opening between the two rooms, add some granite or tile countertop, pull up a couple of barstools and voila – breakfast bar.  Taking the entire wall down may also bring back some of the expense as well, as open floor plans are one of the buzz words these days.

4) Install granite tile instead of a slab – Everybody likes a “granite kitchen.”  Installing granite tiles can be a much more budget friendly way to perk up that kitchen than the higher end slab material.  Although in our higher-end market, it may be worth the money to install the slab.  There are many “pre-fab” granite installers these days, that can do granite counters for much less than the custom guys.

5) Freshen up a bathroom without retiling – With a dated bathroom, putting in a new medicine cabinet ($100-$150), light fixtures ($75- $100), a faucet ($75 – $100), and a vanity ($200 – $300) can bring back your investment right away.  Add a new glass shower door for extra panache.  Bathrooms are on the “highly important” list of most buyers.  This is somewhere you really want to spend money and make it right.

6) Freshen up the basement – a finished basement is very well received vs. a cement block storage room (like most basements.)  Most of us here in Southern California don’t have basements however – so this isn’t on the top of many lists here.

7) Add a room – Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall.   Especially when it’s a 2 bedroom home, a 3 bedroom is much more desirable in today’s market.  With more and more people working from home a 4th bedroom is even more desirable.

Spruce up cabinet fronts – painting, re-facing, re-conditioning, adding new hardware are all great ideas for cleaning up the kitchen and adding that “updated” look.  In this same vein, how are the appliances in the kitchen?  Adding a new appliance suite (matching finish) can be quite affordable as long as you stay in the mid-range of choices.  This highly appeals to buyers.

9) Replace light fixtures – In foyers, bathrooms, kitchens, dining rooms, bedrooms – all those old overhead light fixtures – change them out for newer, more modern fixtures.  And if the kitchen has one of those fluorescent light boxes – get rid of that and put in new drywall and can lights.  This is big bang for the buck.

10) Tech up the garage – Replacing the garage door opener with a remote touch pad entry system ($425) makes it look like a high end system.  Also consider a new roll up garage door and opener in place of an old manual door.  Those really date a house.

I am going to add #11 to the list as well as a few other important light remodeling projects that will reward you with big returns upon the sale of your home.  #11 to me is one of the most important projects any homeowner can embark upon to bring big returns!

11) Painting – inside and out.  Wow, now this really can update a home instantly as well as clean it up and make it ready for a new buyer.  This will bring you the biggest bang for the buck!

12) Landscaping – get rid of those old 1950’s shrubs and put in some more up-to-date environmentally friendly plantings.

13) Front door – the curb appeal of your house is so important and as the buyers stand at the front door awaiting their agent getting the keys they notice the front door and patio.  Make this area shine.

14) New interior door hardware – Do your door handles match?  Are they working?  This really updates a house – believe it or not.

15) De-Cluttering – this requires little monetary investment – merely time packing or giving away.  The less the buyer has to focus on that is not your house, the better!  Put it away and save time packing after your house is sold!

If you need us to come and help you get your house ready for sale, we will go through room by room with you as to the many changes you can make to help get your more bang for the buck!

Who might buy your house?  Who is out there in great numbers becoming our workforce right now?  The Millenials – the people born between 1980 – 1995.  What are some of their characteristics so you know who you need to appeal to? 

Millenials are a tech savvy bunch having grown up with computers, cell phone, text messaging and multi-tasking as an everyday function.  They were doted on by their parents, part of team sports, mommy & me groups, and laden with trophies from participating in sports where there were no winners or losers.  Their priorities are simple - they come first.  So how does one prepare to sell their home to a “Millenial, Generation Y’er?”

First of all, you need to reach this group via tech savvy marketing materials – posts on blogs, Facebook, Tweet’s on Twitter, and other internet based marketing.  Traditional flyers and newspaper ads don’t titillate this group.  That means great (not just good) photos and virtual tours are a must for this group.  It must be “app-able” for the phone.

Millenials are very clever, resourceful and hard-working.  They also know what they want and see no reason why they shouldn’t have it.  Buying a home at an early age does not discourage them, especially in today’s “buyer’s market.”  They are happy to throw out a “low-ball” and see no other way to get a property for the price “they” want to pay.  As a seller, you must not be discouraged and take these offers personally.  Any offer is a good place to start the negotiating process.  It is important to remember this, as the Millenials are happy to keep searching.  They will walk away from a good job if they feel the circumstances are not right, so a home purchase is not any different.

Millenials are “family oriented” and “tech savvy.”   They often want to work from home, so a home office is important to the Generation Y’er.  Keep this in mind when preparing your home for sale.  If you have an extra space in the house that is being un-used, it would be a good idea to stage it as a home office showing off your wireless computer technology is also a good idea.

Home sales rise to highest level

in 2.5 years

10.1 percent increase beat analyst expectations by more than sevenfold  

updated 1 hour, 41 minutes ago

WASHINGTON – Home sales far exceeded expectations last month, surging to the highest level in two and a half years as first-time buyers rushed to take advantage of an expiring tax credit.

The National Association of Realtors said Monday that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.

Good news for buyers (and sellers) – 30 year mortgage rates are still low – they have been hovering around the 5% mark pretty much all year.  Currently, the rate is just below 5% – which means you can buy a 30-year fixed mortgage of $600,000 for approximately $3,200 per month – that’s not bad.  Basically, for every $100,000 worth of mortgage you pay a bit more than $500.  Of course, there are fees involved – typically up to 1 point – or 1% which is paid to the mortgage broker for their services.  Other fees include those for escrow and title services and those can add up to another 1% sometimes in fees.  These mortgage fees are a write off on your taxable income (check with your accountant for specific scenarios.)

Last year at this time mortgages were averaging 6%.  The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit.  Rates on 30-year mortgages usually track yields on  long-term government debt. 

So, if you wanted to buy a house here in the Hollywood Riviera that cost $850,000 – and you had $250,000 to put down – you would need a $600,000 mortgage to consumate the deal.  If you could get that 30-year fixed mortgage at 5% (see above example – your payment would be approximately $3,200 per month (+ taxes and insurance, of course)  VS. that same mortgage at 6% or $3600 per month – as you can see there is a $400 difference every month or $4800 per year.  That can make the difference between buying a house or not for some people.  So this year vs. last year is all good for you if you’re a buyer – lower prices for the home you are buying along with a lower price for the mortgage as well!

Wow, here is a photo of a bathroom that is literally covered in personal products.  What a shame, it even looks like an upgraded, granite counter top.  However, you can’t even see it because of all the clutter.  As a realtor who knows the importance of photos in selling the home before the buyer even gets there, this is an example of an agent not doing his or her job.  I would never take this photo!!! I would have asked the homeowner to clear off the counter, or just done it myself!  People out there, if your agent takes this kind of photo and loads it onto the MLS, get rid of them, they are not doing their job!

The U.S. Congress passed a congressional resolution extending through 2010 the current conforming loan limits of $729,750 for high-cost areas, many of which are in California.  This is huge for the South Bay - a very high-cost area of the United States.   $417,000 is the average conforming loan limit in most of the country.  $625,000 is the normal high-cost area loan limit, which is still not enough for most home buyers to purchase the type of mortgage they will need for high -cost areas such as the Hollywood Riviera, Palos Verdes, Redondo Beach, Hermosa Beach or Manhattan Beach for example.  With the average home costing in the million dollar range – even if the buyer has 25% down – they are left with a mortgage of $750,000 (still above the higher conforming loan limit.)  In this scenario, a buyer would need closer to 30% down to make the transaction work with the conforming loan amount of $729,750.  This is important because the rates on conforming loans are much lower than those of “jumbo” loans – loans above the $729,750 limit.

Here is a copy of the press release on October 30, 2009 by C.A.R. (California Association of Realtors)

For release:
Friday, Oct. 30, 2009

Extension of conforming loan limits through 2010 earns praise from C.A.R.

LOS ANGELES (Oct. 30) €“The U.S. Congress late yesterday passed a congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.€™s and NAR€™s efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $625,500 in high-cost areas to $729,750 and extending the limits through 2009. Yesterday€™s actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.

€œThere is no doubt that higher loan limits and the federal tax credit for first-time home buyers have helped stabilize California€™s housing market over the last year,€ said C.A.R. President James Liptak. €œC.A.R. applauds our congressional representatives for their actions to extend the higher loan limits through 2010. They now should focus on making higher loan limits permanent.€

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or €œguarantee.€ Non-conforming or €œjumbo loans€ typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with nearly 163,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Someone help me here…..it’s 2009 and digital cameras have been around for a while now.  Pretty sure you can pick one up at any Target, Best Buy, Radio Shack….heck, I bet you can get one at the drugstore.  But I still see new listings come on the market with no photos.  Saw one yesterday – it was a property listed for $3 million plus.  You’d think for over $3 million dollars there must be something of value to photograph.  Something to show the savvy buyers of a $3 million dollar property – maybe a view, maybe a wonderful spa-like master bathroom, a “stay-cation” style backyard complete w/ pool, spa and outdoor kitchen?  Who knows?  What seller of a $3 million dollar home decided to hire an agent who would market their property without any photographs.  I am sure they are coming shortly – or at least I hope so for that seller’s sake.

And then we’ve got the properties with the “messy” photos – love those!  OMG – might be better off taking no photos?  Check these out – these photos are taken from a townhouse I was checking out for a client of mine.  Makes you wonder doesn’t it?  Who is more at fault here, the seller for letting someone in to take pictures and not cleaning up or the photographer who thought it appropriate to take these photos in the first place or maybe the real estate agent who thought it a good marketing tool for their listing?  Ugh!

   
Nice Kitchen, but the mess is so distracting.        

Are the clothes even going to get clean in this laundry room?

Multiple offers are back….ugh!  How do we agents prepare our buyers for the realities of multiple offers again?  Preparing them is the key here to a successful transaction.  Some tips for managing buyer’s expectations BEFORE they make the offer include:

1) Meeting with your buyers and advising them of the current market conditions.  If buyers understand upfront what to expect they are much less anxious about the process and tend to handle the rejection of not getting their offer accepted much better.
2) Advise your buyer to be prepared for the bidding process.  Have all your loan paperwork ready-to-go.  When presenting your offers include along w/ the package copies of pre-qualification letter, FICO scores (especially if they are high), & proof of funds – this makes you a much more believable candidate.  And as an agent, it makes you someone who shows they are “ready to go.”
3) Have the buyer know what top price it is that is “out of their range.”  That way, if the property sells for more than that price, they won’t be too dissappointed as they will know that it just was too expensive for them.  Be prepared as a buyer to pay your top price.  It is dissappointing to find out a house sold to someone else for a few more thousand than you offered.
4) Keep up a positive attitude when trying to find the right house.  It can be discouraging when you are in a price range where there is little inventory and those that do come on the market sell quickly, in multiple offers and not to you.  The right house will eventually present itself and you will be ready when it does.
5) Work with an agent who is determined to help you find a house…one who does not get discouraged.  Part of the agent’s job is to encourage you and stand behind you – no matter what the circumstances are and no matter how many times/offers it takes to get you the right house.

Hollywood Riviera Market Analysis – 2nd Quarter 2009 Sales

Great news for sellers this quarter, we had a 29% increase in sales volume!  We have seen homes really sell at a fast pace in the past month here in the Riviera which gave us the increase in sales.  Along with the increase in volume however, we continued to see the average sales price decline, but only by 13% if you look at the first half of 2009 vs. the first half for 2008.  Not the horrific numbers that can be seen in various cities across the  country.   We chalk this up to the #1 rule of real estate: location, location, location.  The properties in the most desirable parts of the state will increase in value quicker in appreciating markets and retain more of their value in declining markets.  We are only off about 17% in the number of homes sold so far this year to the same time period last year.  Not too shabby!  The best way to get your home sold for top dollar is to hire a full-time, Riviera Real Estate expert who can stage and market your home for maximum appeal to buyers€¦ give us a call today!