A Griffith Listing

Real Estate Services by Jon Griffith

You are here: Home / 2008 / Archives for June 2008

Archives for June 2008

Do You Want to Sell Your Home or Not?

by

Let a REALTOR help you price your home right...As though we haven’t heard this plea enough, it’s time for sellers to let go of unrealistic expectations. There are too many people who are testing the market and aren’t serious about selling their homes and many of them forget that they aren’t the only one taking the hit. When we list your home, our job is to market the home.  We will put it on the market for SALE, not for tour, not for show…for SALE. Right now, more than ever, price is driving the sale of the home.

Supply and DemandSupply and Demand Basic Curve

My goal as your Realtor is to analyze the market in your area and help you determine what the most realistic asking price for your home should be.  It’s up to you to set the price.  It’s up to me to point you in the right direction.

Supply and demand are the two opposing forces that are intertwined in the process of determining the right price.  Typically, when you increase the supply, provided that it is not a response to increased demand, the price of the item falls.  There’s more of it, so the consumers have more choices, and they can afford to shop for a lower price.  If you decrease the supply, as long as it’s not in response to changing demand, the prices tend to go up because there are more buyers than there are items for sale.  (To read my quick article describing supply and demand, please click here)

Is it possible to artificially affect pricing without affecting the supply?  Yes, but it requires artificially altering consumer demand by offering incentives or specials, or conveying a sense of urgency for the buyer.

Is it possible to artificially affect demand by changing the price?  Yes.  How?  Lower the price.  If you offered a gallon of gas at 50% of the surrounding competition’s prices, you’d artificially increase demand for gas in that area.  The problem with this is that the gas station won’t make any money, so lowering the price too much is not in their best interest.

Is it possible to increase the value of a product by artificially inflating the price?  In other words, if I want to sell my peanut butter for $1.00 more than all of the competition, will that increase demand for my product?  Will it increase demand for the product that’s $1.00 cheaper?  No, and no.  Increasing the price of a product that is competing against less expensive products is not going to increase demand for higher prices.

It is our job to get the highest price that we can for your home.  We cannot do this by pricing your home higher than the competition, no matter what the condition of the home.  Even if the home has upgrades, the price you set may be too high for the area to bear.

In order to sell a product to a consumer, the price must be right.  Your neighborhood is like a grocery store filled with products.  Those products are homes.  When you shop in the grocery store, you look for the best products at the lowest price.  Sometimes you pay more for a better product because it has 10% more!!!  Sometimes you pay more because of the brand name.  Sometimes you settle for bargain basement prices because name brand aspirin is the same as the local grocery store aspirin, and you just don’t care.  But, if you find a product that is clearly over priced, it is guaranteed that you’ll pass it by with only a glance.

Manufacturers spend millions of dollars every year to market these products to you.  Realtors also spend their money on your home to make sure that it is marketed as effectively as possible.  If you, the seller, set a price that is too high, you may generate interest in the product simply because it’s on the same block as more realistically priced homes, but nobody will buy it, especially when three other identical products down the street sold at a price far lower than yours.

“But our house is upgraded.”

There is a very clear difference between a home that is upgraded and a home that simply has new features that are already expected.  Is it really upgraded, or is it just more sellable?  Just because a fixture is new, or tile has been laid doesn’t mean that you have a home with upgrades.  What it does mean is that you have a clean home.  What makes those items upgrades?  The quality of the items.  New linoleum is still linoleum.  It doesn’t increase the value of your home nor will it command a dollar for dollar investment recovery at sale.  A pool is a great feature to have, but what type of pool is it?  Is it a pool that most people expect, with a diving board and/or decorative rocks surrounding the perimeter, or is it an enlarged spa?  In Arizona, in the 200-300K price range, a pool adds about $5,000 in value.  Sometimes more, sometimes less.  This really depends on how many homes in your sub-division have pools.  In some countries, as you can see in the illustration, pools are in very high demand.

Paint is not an upgrade.  An air conditioner just like the neighbor’s is not an upgrade, even if it was installed yesterday.  Sure, it’s new, and that may influence whether or not someone will consider your property, but it will not support a higher price.  It is a deferred maintenance item.  An air conditioner twice the size of the surrounding neighborhood could be considered an upgrade, unless you’ve upgraded yourself out of the market.

Basically, anything that is expected to be in a standard single family home in the 200K – 300K range will only add to the sellability of the home, not the value.

Be careful when you spend money on your home, because some items don’t fit.  A 6-Burner Viking Gas Stove in a 300K Home with Corian counter tops and laminate floors won’t increase the value of your home.  It will make it sell faster, true, but you won’t recover your costs.  Nobody expects there to be that high of an upgraded item in your home.  Consider upgrades to be vast improvements over not just the condition of the previous item, but also the quality.  The items you perceive to be upgrades may only be what you believe to be upgrades and the rest of the world may expect more.

The Bottom Line

Your house has an inherent value to someone.  Until the home closes escrow, your home’s value is basically unknown.  What you do know is:

  • How much others have paid for similar homes, recently.
  • How much you paid for your home.
  • How much money you put into your home.
  • How much you still owe.

The average return on Real Property is around 4% annually.  2005 really screwed up homeowner’s perception of value in housing.  If you purchased your home in 2003 for $150,000.00, and you apply the average rate of return, a realistic price for your home in 2008 would be about $185,000.00 give or take.  That’s $7,000 per year in value, and it’s realistic.  If your neighborhood comparables show that properties just like yours are selling in the $220,000 range, then your return is HUGE and you need to realize that it’s completely abnormal.  Many homeowners screwed up by tapping into that artificially bloated equity to upgrade their homes or buy other properties or a boat or other luxury item.  Now, they think they can recover it, and they can’t.

Let’s just hope that Sellers will become more realistic about looking at how much value they have gained already and consider it a blessing, and to not be greedy.  If you are thinking about selling your property, and you thought it was worth more than it actually is, think again about your reasons for selling.  If you must sell, get realistic about the price and sell.  The offers are there and there are plenty of hungry buyers.  If you don’t have to sell, hold the property or rent it out and take a small monthly hit for a while.  You’ll benefit from it in the long run.

If you have no idea whether or not you’re in the right position to sell your home, give me a call at (602) 312-3262 and I’ll be happy to work up a Market Analysis of your home so you can make the right decision.  When you’re ready to list your property, know that I will take care of you through the entire process and in the most cutting edge ways.

I hope to hear from you.

It’s Not All About Business

by

Watching this video this morning reminded me that even though we live in a small world most of the time, there is a vast expanse of culture out there to discover and experience. After you’ve settled into your new home, consider taking time away from your busy schedule to discover a new and exciting place.

Oh, and don’t take life so seriously. Let loose and have some fun, no matter how stupid you think they think you look. We’re here one time, make the most of it.

Digital Signatures vs. Digitized Signatures

by

I used to teach real estate agents how to use their technology in a forward thinking way. Most of them didn’t understand the concepts. The ones who did understand already understood before coming to me because they had the ambition to learn on their own. They typically just used me as their general consultant and laptop provider. A select few picked up on the concepts, but there’s still a bit of confusion regarding digital signatures versus digitized signatures.

Anything that is converted into a format that a computer can read is said to be digital. The screen I’m looking at now is digital, it’s fed by tons of ones and zeros. So in essence, whatever you see on the screen is digital.

When we speak of digital signatures regarding contracts in real estate, what we’re referring to is the ability to authorize a document as a fully executed contract without bringing pen to paper. Some people would say that hand writing your signature on the screen of a tablet computer is a digital signature. While it’s on the screen and in a computerized format, it’s still a digital representation of a hand-written signature, so it’s not really a digital signature.

I could take a handwritten signature on one of your personal checks, scan the check into my computer, use photo editing software to extract the signature, and paste your signature on any document I wish. There is no accountability for this. No system in place to protect you, and no way to prove that you actually signed the document. Once I print it, granted I’ll have a forged document, to the recipient, it’s as good as executed.

Digital Signatures work differently than hand written digitized signatures. The digitizer tablet is a convenience and a more advanced way to capture your hand-written signature, and it simply removes one step out of the process of scanning your documents. The digital signature involves no hand-writing, and protects you. Here’s how it works through DocuSign, the company that I use to execute contracts between all parties in a transaction.

On my computer, I draft a document. I print it, and when I select my printer, I choose “Send in DocuSign Envelope,” a small program that I installed when I signed up for DocuSign. The computer whirls and spins and converts the document into a PDF file then uploads it securely to DocuSign. Docusign asks me who I want to send the signature request to, and I select someone by entering their e-mail address. DocuSign then allows me to assign areas on the document that need your initials or signature. I send the document and you receive notification that there’s a document to be signed. You login to DocuSign and setup your account the first time, which involves verifying a few details about you. Then, DocuSign opens the document I sent, allows you to review it, and shows you where you need to “click” to confirm that you agree to the terms. There’s no risk of missing pages where initials should have been because I have defined where you need to sign in advance. Once you have clicked all of the spots you’re supposed to click, the document is considered executed. The document is stored at DocuSign and I am notified that you completed the signing. I download the document from DocuSign and deliver a copy to my broker.

The benefits of this are vast, as long as you have an e-mail account and access to a computer, anywhere. The industry is going to change so much over the next 10 years, and if you’re not in tune with the way of the electronic world, there’s a good chance that you’ll find it more and more difficult to conduct business the old way, as you watch all of the youngsters beat you to the punch.

Down Payment Assistance In Jeopardy

by

For years now, home buyers have been able to receive down payment assistance when buying homes approved for FHA financing. Basically, when the buyer makes an offer, they ask the seller to contribute a percentage of the sales price towards a non-profit company as a gift towards future home buyers. Since the minimum down payment amount on FHA insured loans is only 3%, the buyers could ask for the seller to provide it.

When you purchase a home, you are not allowed to receive funds from the buyer directly to help you with your down payment. The seller, however, is allowed to gift the down payment to non-profit organizations who then provide the same dollar amount to the Title company at closing, covering your down payment obligations according to FHA rules.

The Department of Urban Housing and Development has issued a release that may end this practice altogether.

The purpose of FHA insured loans is to provide affordability and sustained home ownership. Here is a link to the proposal. It’s long, very long, and some of it is quite annoying to read, but it’s there.

[download#2#image]

The problem that we have when someone provides a buyer with funding is that it may be unfair to other sellers. If I am selling my home for $300,000.00 and you need an FHA loan whereby you need to come up with $9,000.00 as your down payment, but you don’t have it, I as the seller could, at close of escrow, contribute $9,000.00 of my net proceeds (the money I make on the home) to that non-profit organization. The non-profit would then turn right around and pay you a gift of $9,000.00 towards the down payment.

By offering you the “gift” I’m basically telling you that I’ll pay you to buy my house over the neighbor’s $300,000.00 home. This does two things. It fulfills the down payment requirement by FHA, and allows the home to remain at full price.

We’re looking at these deals as the current “Sub-Prime” loan, and whenever Sub-Prime is mentioned, lenders cringe. What we don’t want is to perpetuate the idea that any average joe can get into homeownership when many of these people have no business buying homes.

Right now in the market, the opportunity to find a great home for the first time home buyer is at the forefront. If you are a first time home buyer, and you have been responsible about your savings and you have the required 3% to put towards the purchase of your home, then it’s likely you’ll be in good standing for years to come as you build equity and wealth through your home ownership. If you’re just looking to get into a home free, then statistics show that it’s more likely that you’ll also be walking away from that home because you have no real investment in it.