1. Use a discount broker to sell your home.

When the market was going crazy just a few short years ago, selling a home meant putting it into the local MLS and prepare for the frenzy of buyers with multiple offers above list price. The market conditions at the time didn’t require much experience of the Realtor to get top dollar for your home.

That was then, this is now. Discount brokers rely on volume to make up the discounted commissions they charge. That volume doesn’t allow them to provide full services to the seller. Regardless of what they advertise, don’t believe for one second that they will. Their definition of “full service” means putting a sign and lockbox on the property, putting it into MLS, maybe hold an open house and review offers for you. If you consider that “full service”, you’re about to make the first costly mistake.

This market requires experience AND real marketing to get you top dollar for your home. Do some research on discount brokers. What you’ll find is either small 1-2 person operations or larger offices where most of their agents are new to the business with less than 5 years experience. They don’t have the experience or a real marketing system for getting your home sold. 2008 data shows that discount brokers take twice as long to sell your home and get 5% less than a full service broker. Lots of sellers lose thousands of dollars when they choose a discount broker because they’ll save 2% on the commission but net 5% less on the sale. It is totally acceptable to want to save money. But if you do your homework, you’ll realize that hiring discount brokers in this market is “being penny wise, and pound foolish.”

2. Cut the commission.

Just as in mistake number 1, the last real estate boom taught sellers to negotiate down the commissions. In that market, it was hard for Realtors to justify the 6% commission. It led to sellers expecting to pay reduced commissions as evidenced by a huge increase of market share for discount brokers. Once again, that was then, this is now. And now is not the time to be cutting the commission. You want to attract as many buyers as you possibly can. 91% of buyers in 2008 are introduced to the seller by a broker. With lots of inventory and choices available, which home do you think the broker will show their client; the home offering a reduced commission to the broker or a comparable home offering full commissions?

If you want to sell your home for top dollar, you should be increasing the incentive to sell your home, not decrease it. It’s natural to want to save money, but if your house sits for months on the market because there’s little incentive to sell it, how much is that going to cost you?

3. Price it too high.

I don’t care what your reason is. If you overprice a home in this market, prepare for a long and expensive lesson. The only market you can possibly overprice a home and still get it sold is in a rapidly appreciating market. In any other market, it just won’t sell. With so many homes for sale in this market, you’re better off not listing it then overpricing it.

If you have to sell, you’re going to have to bite the bullet and price it right. And don’t buy into the common thinking that you price it high so that you have room to negotiate. That mentality will be your next costliest mistake.

4. Keep it in the family or Sell it yourself.

It’s nice of you to want to help your niece who just got into the business, but underestimating this market and the need for experience is one of the costliest mistakes you can make. Thinking that all agents are the same and don’t see the need to interview and find the best agent with the experience to get your home sell will cost you both time and money.

Trying to sell it yourself falls into this same costly mistake. Thinking you have the knowledge and experience to sell your home in this market will be an expensive lesson.

I can’t emphasize enough how different this market is from a few short years ago. Making any one of these common mistakes in this market will be magnified and when you consider the value of your home, these mistakes amount to thousands of dollars. You wouldn’t consider going to an inexperienced doctor to treat a life threatening illness, or hire your part time nephew who just passed the bar exam to defend you in a big lawsuit. Just like these professionals, experience is everything. Don’t trust your biggest asset you own to someone without that experience. There’s a reason why professionals are paid well. They are entrusted with your most important things in life.

Hope this helps. Until next time, happy home selling.

Elliot Lau

]]> http://www.CrystalClearMarket.com/2008/07/14/4-costliest-mistakes-sellers-make/feed/ 1 http://www.CrystalClearMarket.com/2008/05/02/blacklisting-hits-homesellers/ http://www.CrystalClearMarket.com/2008/05/02/blacklisting-hits-homesellers/#comments Sat, 03 May 2008 07:26:13 +0000 Elliot Lau http://www.CrystalClearMarket.com/?p=166 In the nation’s worst-hit real-estate markets, home sellers are suffering a new blow: They are being blacklisted by lenders. As property values decline and credit markets contract, home lenders nationwide are growing ever more unwilling to finance home purchases in sharply declining housing markets, driving prices down further. In some cases, lenders have ruled out entire geographic regions and property types altogether, most notably high-rise condominiums in South Florida and Las Vegas.

Lenders including BankUnited, a unit of BankUnited Financial Corp., and Vertice, a wholesale lending unit of Wachovia Corp., have elected not to lend to some areas or properties because of declining prices. Countrywide Financial Corp., the nation’s largest mortgage lender, considered a similar move last week before reversing course, and other lenders have tightened underwriting guidelines for slumping markets so as to make financing nearly unattainable.

There are "lists circulating" from banks, says Peter Zalewski, a broker with Condo Vultures Realty LLC, and those lists are pushing down prices when news of the black-marked properties spreads.

Moreover, the blacklisting isn’t always obvious. "We don’t call it blacklisting," said an official at a large bank. "We just don’t write the loan."

The banks are acting to protect themselves in a steep downturn. But the drying up of loans threatens to create a self-perpetuating cycle.

"If mortgage credit dries up, then prices are going to fall more," says Morris Davis, a professor of real estate and urban land economics at the University of Wisconsin-Madison’s School of Business and a former economist at the Federal Reserve Board.

Countrywide sent shudders through the ranks of mortgage brokers when it sent brokers an email recently under the heading "Urgent Product Elimination." The message announced the company would stop approving its Fast and Easy and Alt-A mortgages for all high-rise condominiums nationwide, effective almost immediately.

Countrywide’s Fast and Easy loans don’t require verification of income, brokers said. Alt-A loans are generally provided to buyers with good credit who lack full documentation.

Countrywide reversed its policy a day later without explanation, but the episode demonstrated lenders’ reluctance to underwrite mortgages in the country’s most uncertain real-estate markets. Countrywide didn’t respond to multiple requests for comment.

Florida’s largest bank, BankUnited Financial Corp.’s BankUnited FSB, drew up a "nonpermissible condominium project list" that identified addresses of 191 condominium developments in Florida and Las Vegas for which the bank won’t provide financing. The list was reported by the South Florida Business Journal.

For more than half the properties listed in the memo, the bank cited "declining market value" as the reason it wouldn’t provide financing. Melissa Gracey, a spokeswoman for BankUnited, confirmed that the list is still in force and said the bank’s "very conservative" lending guidelines rule out mortgages for such properties.

In some cases, lenders have blacklisted not specific properties, but entire geographical areas.

In December, Wachovia’s Vertice unit stopped writing mortgages for all condominiums in South Florida, says Kasey Emmel, a company spokeswoman.

Wachovia’s main lending operation "continues to offer condo products in all markets, including Florida markets," says spokesman Don Vecchiarello.

Blacklisting isn’t redlining — the illegal practice of restricting lending on a socioeconomic basis — so it doesn’t run afoul of fair-lending laws, says Alexander Bono, a partner at Schnader Harrison Segal & Lewis, a law firm in Philadelphia. Banks are allowed "to identify a county when it’s based upon something other than socioeconomic conditions" and then change its stipulations for lending there, Mr. Bono says.

Even when banks haven’t officially ruled out entire markets, the stipulations they use before lending in such areas are becoming very stringent, and can leave mortgage credit all but off-limits.

"Companies won’t lend" money for purchases in developments that aren’t at least 60% filled, says Paul Miller, an analyst at Friedman Billings Ramsey & Co., a unit of FBR Capital Markets Corp. When vacancy rates in a development are higher than 40%, Mr. Miller says, "your condo fees go through the roof," since a development’s minimum maintenance costs remain static, regardless of the number of residents. And if condo fees remain high — as underwriting logic follows — then homeowners may have a harder time making mortgage payments.

"We’re very cognizant of the risks involved" with "condominium developments in particular," says Terry Francisco, a spokesman for Bank of America Corp.

Other larger lenders have also tightened standards for mortgages they write in declining regions.

In December, Fannie Mae, the nation’s government-sponsored mortgage-lending behemoth, issued an announcement titled "Maximum Financing in Declining Markets."

"When a property is located in an area identified as declining," the announcement says, the lender originating the loan must reduce the maximum amount it could otherwise lend to that buyer by 5%.

In healthy markets, New York’s J.P. Morgan Chase & Co. will currently lend borrowers a mortgage equal to as much as 90% of a property’s value. For borrowers in states that have declining markets, however, the bank reduces that maximum, says Tom Kelly, a spokesman for the bank. J.P. Morgan then reduces that level even further for borrowers in the worst declining markets, Mr. Kelly says, though he declined to provide specifics.

CitiMortgage, a wholesale lending operation of another large Wall Street bank, Citigroup Inc., maintains a list of "declining market areas" that red-flags dozens of counties in more than 10 states. Citi reduces the amount it will lend for properties in those counties "by at least 5%," the document says.

"We routinely review our credit parameters, including maximum loan-to-value ratios, in declining markets," says Mark Rogers, a CitiMortgage spokesman.

One silver lining: For "all-cash buyers," Mr. Zalewski says, the lists are "heaven sent."

Buyers who have cash "can use that to negotiate," he says: "If you don’t sell to us, who are you going to sell to?"

Source:

Dawn Wotapka and Marshall Eckblad
From The Wall Street Journal Online
March 06, 2008

Here are eight quick fixes:

1. Buff up curb appeal. Don’t make the critical mistake of overlooking your home’s curb appeal. I can’t tell you how many times I’ve pulled up to a home with my buyers and they weren’t interested in looking inside just based on what they saw as we pulled up to the home. It’s critical to get buyers to want to look on the inside. You could have the nicest home in the neighborhood on the inside, but if the buyer doesn’t come in, it doesn’t matter. Be objective. Check the condition of the landscaping, paint, roof, shutters, front door, knocker, windows, house number, and even how window treatments look from the outside. Add something special to help buyers remember your home from the rest.

2. Add value with color. Paint’s cheap, but forget the adage that it must be white or neutral. Just don’t get too bold with jarring pinks, oranges, and purples. Soft colors that say “welcome,” lead the eye from room to room, and flatter skin tones. Think soft yellows and pale greens. Tint ceilings a lighter shade.

3. Upgrade the kitchen and bathroom. These are the make-or-break rooms that spur a sale. Make your kitchen and baths squeaky clean and clutter-free, update the pulls, sinks, and faucets. In a kitchen, add one cool appliance, such as an espresso maker. In the bathroom, hang a flat-screen TV to mimic a hotel.

4. Install crown molding. At least six to nine inches in depth, proportional to the room’s size, and architecturally compatible. For ceilings nine feet high or higher, add dentil detailing, small tooth-shaped blocks used as a repeating ornament.

5. Screen hardwood floors. Buyers favor wood over carpet, but refinishing is costly and time-consuming. Screening cuts dust, time, and expense. What it entails: a light sanding, not a full stripping of color or polyurethane, then a coat of finish.

6. De-clutter! Humans are packrats by nature, but cluttered homes take more time to sell and for less money. The look you want to go for is “Does anyone live in this home?” Clean out and organize closets. Get sorting – organize your piles into “don’t need,” “haven’t worn,” and “keep.” If you must keep it, consider renting storage and getting it out of your house. Closets must be only half-full so buyers can visualize fitting their stuff in.

7. Update window treatments. Buyers want light and views, not dated, fancy-schmancy drapes that darken. To diffuse light and add privacy, consider energy-efficient shades and blinds.

8. Hire a home inspector. Be proactive, since busy home owners seek maintenance-free living. Fix problems before you list the home and then display receipts and wait for buyers to offer kudos to sellers for being so responsible.

You’d be surprised at how much a difference these 8 quick fixes make. Do a little prep work before you list your home for sale. You’ll be glad you did.

Elliot Lau