Real Estate Mistakes For Buyers and Sellers

10 Mistakes Sellers Make

1. Limiting Showings
Once you have made the commitment to sell your own it is time to mentally move out of the home. It is important to keep your home ready to show at a moments notice even if you are not there. Most buyers will make only 1 attempt to view your home and if it is unavailable they will move on to the next. Having a Realtor® install a Risco Secure Lock Box on your home is a great way to make sure agents can always show your home.

2. Overpricing

This has been a common topic amongst my blogs. A quick review: Overpricing your home leads to less showings, less showings lead to less offers, less offers lead to more time on the market, more time on the market leads to lowered price, a long time on the market with continued lowered price leads to a vicious cycle. In conclusion have a Realtor® price your home correctly the first time.

3. Failing to Stage

Buyers want more than just a great deal these days. It is important to create 1 wow factor in your home. This does not necessarily mean moving out of your home and having a stager come in and make a life sized doll house. Select one room preferably a living room or dining room and create that wow factor. Give potential buyers something to talk about after they see your home.
4. Offering Repair Credits

If at all possible fix the problems in your home before you put it up for sell. Offering repair credits in your advertising creates the impression that your home is a fixer upper.
5. Listing with Discount Brokers

You get what you pay for and now is not the best time to leave the sell of your home to random chance. You need more than a sign in the yard to sell your home. Aggressive marketing, lots of exposure, and a knowledgeable agent are the bare minimums in selling your home in today's market conditions.

6. Discounting Buyers Agents

Offering a reduced commission across the Multiple Listing Service to a buyers agent will often give the impression that you are not motivated to sell your home and that negotiation will not be possible. This information will not be wasted upon the potential buyer as the agent will be sure to let them know.
7. Rejecting Offers

Ridiculous offers will come in on your property. This happens to everyone, it is simply just the way some people view the home buying negotiation process. Do not get angry, this is not an attack on you or your home. Keep your cool and prepare a reasonable counter offer. If the buyer was not interested in your home at all they would not have written an offer and more than likely they know their price is ridiculous and simply want you to counter their offer.

8. Sticking around for Showings

Find some place to go for an hour. If it's nice weather go for a walk around the block and if you have pets, take them as well. Buyers feel uncomfortable viewing homes when the homeowner is home. This can be inconvenient but it will help you sell your home faster. Small sacrifices now will help you to avoid huge price cuts later.

9. Selecting Your Agent On Non Business Factors

Do you have a brother that has a full time job but dabbles in Real Estate on the side? This is often a poor choice of agent to market your home and could potentially lead to relationship breakdown. If you feel this person is offended simply explain to them that you like to keep your financial affairs personal.

10. Not Using A Realtor® To Market Your Home

A Realtor® can save you time, money, and keep you out of court. A large percentage of home buyers use a Realtor® to help them find a home and only a Realtor® can have your home listed on the MLS.

10 Mistakes Buyers Make

1. Not getting Pre-Approved

With changing loan programs and interest rates it is important to get pre-approved. This is the best way to find out exactly what you can afford. I have found that most people typically think their credit is either "good" or "bad" and that is about as far as they go. New FHA programs, for the most part, are not driven by your Fico score. It is important to speak with a loan officer and get pre-approved not just pre-qualified, to discuss your goals and find out what loan program will work best for you.

2. Having Unclear Goals

You will not find a perfect home but you can get a lot closer if you know what is important to you. Make a list of features you would like in a home and rank them in order of importance. How long do you plan to stay in the home? The length of time you plan to live in the home will make a dramatic difference on the loan program and even the home that is right for you.

3. Skipping the Inspection

Home inspectors are relatively inexpensive and could save you thousands of dollars in the long run. You should have an opportunity to inspect the property or have it professionally inspected before you buy the home. After the inspection is complete you may even be able to negotiate the home down. Even on a newer home I would recommend an inspection. Here in Utah if you are buying a home in the early spring, how do you know the hose has not been connected to the home all winter? If you move in and the basement floods this will typically not be covered by the seller or an after market home warranty.

4. Not Shopping Mortgages

It is important to shop both interest, rates, fees, and even loan officers. There is no such thing as no cost loan. A lower interest rate will be accompanied by higher fees and a no fee loan will usually come with a slightly higher interest rate. Speak with your mortgage professional about your goals. If you are staying in the home long term it would make more sense to come in with more money up front and pay less for the home over the price of the loan. A loan officer can not give you an accurate quote on a pre-qualification alone. This means getting pre-approved. You will have a window of time to shop for a mortgage where you credit score will not be negatively affected by being pulled repeatedly by lending institutions. This is your opportunity to get pre-approved by more than one lender. Look at the fee's and the interest rate from all competing brokers, but most importantly which broker understands and can meet your needs?

5. Waiting For A Better Market and Interest Rate

In the words of billionaire investor, Warren Buffett, "The rear view mirror is always clearer than the windshield." It is nearly impossible to predict market conditions, however it is possible to come out ahead in both up and down markets. Buying a home should be a long term investment. No matter what the market is doing you can always benefit from home ownership, comfort, security, tax deductions, building equity, and appreciation. Even in a "down" market the average value of a home nearly doubles on a 10 year time line.

6. Not Buying At All

The only reason that I know of for not buying a home is that you simply can't afford it. If you can afford a home and you currently rent chances are you are paying more for rent than you could be paying to be in a home. Everyone pays a mortgage. Will you pay your own? Or your landlords?

7. Forgetting About Closing Costs

There are costs to getting a home loan and "closing" on the home. If you are getting a loan you will have fees such as appraisal, credit report, loan origination, etc. Also the title company has a few fees. First there is a fee for the escrow officer to be there and conduct the closing. The county charges a fee to record the home in your name and you must by title insurance to protect the investor giving the loan from any outstanding liens. These fees are not high and many can be negotiated, however it is better to go into this knowing that there is money required besides the down payment.

8. Not Going Back to The Neighborhood

Many home buyers will look at homes on the weekends and chose a home for purchase in broad daylight. Let me first say that picking a home when you can actually see it is the best way. I would recommend going back to the neighborhood at different times. What happens at night? Or during the week? Does the wind howl after dark? Is it a busy street during the week? You will live in your home 24 hours a day and 7 days a week. It is best to visit the home at different times and different days to avoid surprises.

9. Not Considering Resale

It's easy when you are buying your home to forget to think about what it might be like to sell the home. When looking at homes put yourself into the perspective of the seller. When you buy think about the day that you will sell.

10. Not Using A Realtor®

A Realtor® can save you time and help keep you out of long drawn out legal disputes. In the majority of cases your Realtor
® will be paid by the seller and not out of your pocket. Your Realtor® views dozens of homes a day and knows what to look for. Your agent should be on the cutting edge of changes in the market and real estate laws. Your agent can help you set your goals and set up a plan that will work best for you as well as running the neighborhood comparable sales and active listings to make sure you are not paying too much for the home. Finding you a home is only the beginning of the job for a Realtor®. Don't leave the advantage to the seller.

What are you waiting for?

The timing is perfect:

If you have been on the fence about buying a home and you are waiting for a "sign" that everything is going to be alright, this is your sign! Forbes magazine has recently named Salt Lake City #1 on the top 10 list for "best cites for bargain house-hunters". If that is not enough for you, at the same time that the Forbes magazine came out, Time magazine has published an article stating "Ignore the headlines". Time magazine says now is the time and Forbes says "This is the place".

Why buy in Utah?

Utah is a great place to live. Our recreation and mountainous valley's are out of this world, however this is not the reason Forbes has decided we are the best bargain in the market. Forbes goes on to say that in order to get a great bargain you need a "buyers" market where there is "healthy job growth and more houses available than people to buy them. This is not due to foreclosures and economic downturn, but to overbuilding that should balance out in time." Utah is adding jobs faster than anywhere in the country and our net migration is expected to rise quickly this year. The abundance of homes will be consumed and this market will be ripe for the sellers. The economic boom that is going on right now in Salt Lake city is drawing residents from all over the country. It is said that 1,000 jobs will be created when manufacturing giant, Procter & Gamble open their new paper productions plant in Utah.

Why buy now?

According to Time magazine, if you plan to buy a home and stay put for at least five years and have been waiting for the perfect entry point, "It's time to get serious before an inevitable rise in interest rates wipes out your advantage". Anything that can be gained by waiting to see if home prices will come down will be offset by rising financing costs. The chances are if you are looking to buy a home here in Utah the prices are not falling so you are basically waiting around for higher interest rates. It is still a buyers market here in that we do have more inventory available than we are used to here, but not by much and with smart buyers entering the market from around the country the gap is closing. Time goes on to quote an example of buying now verses waiting to for prices to fall while rates go up:

If you are looking to buy a home and the current list price for the home is $218,900. In this example you put down 20$ and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Your monthly principal and interest payment on this home come to $994.31. If you wait a year and for some reason that home does drop by 10% to $197,010, but the fed is now trying to stem inflation by raising the interest rate by just 1% to 6.5%, your monthly payment would be $994.94. The point is you are paying the same amount you have saved nothing and if you are currently renting its actually costing you more to stay where you are by not taking advantage of the tax savings.

About what I have said:

In the previous blog I told you not to listen to the media and to listen to a Realtor®. In these two cases I have sighted above I have done the research and agree 100% with the articles. So there you have it no matter what you want to believe you have your local Realtor®, Time magazine, and Forbes magazine agreeing on one simple thing: If you are going to buy this year NOW is perfect time.

-Dave Jungst
(801) 330-3963

What the "experts" are missing

The temperature is nice:

What if I told you that the temperature of the United States was 70 degrees today so dress appropriately. You do live in the United States correct? This has been the problem with the housing guru's featured on national and even local media programs, they keep giving us the forecast and the condition of the United States. All real estate is local, even within the local market real estate is local. There are areas where prices are going down right now in Salt Lake County as well as areas where prices are strong and expected to keep rising by as much as 10%.

Zoom in:

Taking the average and median home price for the state of Utah can give us a vague idea as to what is happening in our state but unless you look closely at the data it isn't really saying much.
We had some builder irresponsibility here in Utah and many builders begin flooding the market with high end homes. One of the primary factors in Utah is afford ability. We are known here for our quality of living and our sense of community not necessarily for our top wages. When the mortgage industry began to mature and learn from it's mistakes in lending, it put these high priced homes further out of reach. We are sitting on an abundance of inventory in the high end being about $500,000 and above for most areas. If those homes are not selling it really begins to affect our averages and makes it appear as if prices are dropping when in fact in most zip codes they are not. Home prices are still gradually rising under $400,000 in the majority of the state right now.

What are current market conditions?

If you really want to know the current market conditions you need to turn to a Realtor® instead of a news anchor for information. You should find out what the market is doing in YOUR price range where YOU are shopping or in YOUR neighborhood where YOU are selling. This is really the only way to truly look at the current real estate market conditions.

The "NEW" importance of pricing your home correctly

Pricing your home correctly:

Pricing your home correctly up front has long been the difference between selling your home quickly for top dollar rather than dropping your price continually while your home sits on the market longer and longer. Correct pricing is the single most important factor in selling your home, there is no amount of home staging that will make up for an over or even under priced listing.

Pricing your listing too high:

The idea of pricing your home too high comes from two different schools of thought. The first and most common reason for this is the "I'll just price my home high to start so that I have room to come down if someone makes an offer". The major problem with that statement is that the offer will not come because the home will not be viewed. A recent study has found that buyers will most commonly search for homes in $25,000 increments, so buyer A will be searching for homes from $150,000 to $175,000 while buyer B will be searching for homes from $175,000 - $200,000. If your home is worth $190,000 and you price it at $205,000 in order to give yourself some room for negotiation, you have just priced yourself out of buyer A and buyer B's search criteria. Also if a buyer does go up in price to see what is available this buyer has seen everything from $150,000 - $200,000 and simply thinks you are way over priced. A buyer will not usually make the connection that you have priced your home at $205,000 so that he will offer $190,000. The buyer will have no interest in going to see your home. An over priced listing will sit on the market longer and the buyer and the agent can clearly see the "DOM" or "days on market" field. The longer the home sits on the market the longer it will sit on the market. Once your price does not bring anyone to see your home for long enough you will lower the price. The home will sit on the market longer. You will lower your price again and this vicious cycle will repeat itself. A home that sits on the market for a long time is usually viewed in the buyers eyes as a "defect" property. They will wonder what is wrong with the home. If you begin to lower your price every two weeks to get it in line with your competition, a savvy buyer will wait and see how low you will go. The second school of thought is personal justification or emotional attachment to the home. The "My home is worth more than the Jones' because (insert any of the reasons why you purchased your home here)". Keep in mind that the reason you picked your home over the other homes in the neighborhood may be the very same reason someone else will pick a different home over yours. Did you pay $20,000 more for your home than your neighbors home because of this reason? If not it would be hard to expect the next buyer to come along to do the same.

Pricing a listing too low:

The only reason that I am aware of for pricing a perfectly good home too low is a need to get out. Usually a financial issue. While it makes sense to buy a home for a great deal pricing your home too low brings up one question time and time again in a buyers mind, "What is wrong with the home". Every buyer is looking for a great deal but there have been numerous occasions where I have taken a buyer to a home that was priced extremely low for the value and they have asked "What is wrong with this home?". Even if the agent does his homework and digs deep and finds the reason to be something as simple as a job related relocation where time is a factor, the idea that something is wrong with the home has already entered the mind of the buyer. If you have an urgent need to get out of your home fast, pricing your home correctly within your comparable sales and competion will actually help your home to sell faster than pricing it way below market value.

Why is it more important to price your home correctly now?

In the section about pricing your home too high, I briefly spoke about the "Days On Market" field that will show up on a listing. This field will allow a buyer to know how long the property has been listed for.








In the figure above you can see this home had been listed for 3 days at the time this listing was pulled. A high number in the DOM field can cause the home to be devalued or even not come up on a search if the buyer is searching for homes that have come available in the last 30 days. When I am showing homes to potential buyers the number one question I am asked is "How long has this home been on the market". This is also a basis for what a buyer will offer, the longer your home has been on the market the lower the offer a buyer will make.

This kind of thinking was often offset by agents taking listings and then pulling them off the market after 30 days and then putting them back on to reset the days on market field. The problem with this, other than it's obviously intended to deceive, is that those of us who track market statistics were not getting accurate information as to the average time a home in a given area would sit on the market before it was sold. The Wasatch Front Regional Multiple Listing Service, in an attempt to give more accurate market data, recently decided to adopt a system already in place in many other markets. The "DOM" field has now been replaced with "CDOM", or "cumulative days on market". If a listing is pulled off of the market for any reason when it is put back on the market the clock will leave off where it was. It is no longer possible to reset the days on market field. If you price your home to high with the thought that you can reprice it and start fresh, you will be disappointed in the results. There is no second chance on pricing anymore.

What if I list it with a different company?

"CDOM" does not discriminate from company to company. If you list your home with "Discount Dollar Realty" and you get the bare bones sign in your yard and listed on the MLS service hoping to save a few dollars, then later decide that based on your less than favorable results you would like to re-list your home with a full service heavy marketing firm, your days on market will not be reset.

The good the bad and the ugly:

The good news is that this will bring more accurate neighborhood statistics and give home owners a much needed realistic view of market conditions in their area. We will now be able to accurately track the average days our homes are taking to sell. Buyers will no longer be deceived by the days on market field.

The bad news is that it may take a little while for buyers to adapt to a realistic "days on market" time frame, but if Realtors® will simply take the time to educate their buyers to the new system I believe this should not have much impact at all.

The ugly. The ugly can be avoided by simply selecting a Realtor® who is willing to do more than just put a sign in your yard to sell your home and is willing to do the research necessary to price your home accurately from the beginning of the listing. Please do not be one of the many home owners that will make bad choices leading to a 270 CDOM. This will affect all of us.

Please feel free to contact me with any and all of your questions, concerns, or comments.