Pricing your home for sale

real estate sold sign for newsletterIf you’re thinking about listing your house for sale, you have a pretty good idea what the home is worth. So after doing all your research and comparison shopping, why do sellers sometimes hear a realtor tell them the value of your house might be lower than you anticipated. Everyone always wants to hear their home is worth more. It’s human nature. We all want top dollar.

Sellers: even in a short inventory “sellers’ market”, it is important to price your home correctly for the market. The Internet has helped  most potential home buyers become very savvy. They have done their research and have a pretty good idea what the competition is going for, so if your home is over-priced, it could sit on the market a long time (unless there are some extraordinary features). Homes that sell quickly will almost always get more offers at better prices than those that have been on the market for more than a month or two.

Generally speaking, buyers tend to think that properties that have been sitting on the market for a while must have something wrong with them or that they must be over priced, so IF they make an offer it will usually be for less than the asking price.

Aside from all this, it’s miserable to have your home listed if you’re still living there. It’s hard to keep a home show ready, especially if you have children or pets. And, most of us worry about our possessions and lack of privacy. The solution is to get the home sold as quickly as possible.

In a very hot sellers market, some realtors believe that pricing your home lower than fair market value will bring in bidding wars. This has worked in many instances, but before you choose this option, think about how you will feel if you don’t receive multiple offers, or if all the offers you receive are lower than you anticipated. To use this strategy effectively, you should consider:

1. location – currently we are seeing the top selling neighborhoods those that are centered around walkable shopping and dining experiences.

2. amount and prices of competing inventory.

3. is your home in “move in ready” condition

4. holding offers for a week or so so more buyers have time to view the home and submit offers.

Many of these properties are listed on Fridays so an open house can be held over the weekend, and offers held until at least Monday evening.

It’s important to remember that no matter the condition of your property, if it is priced right for the location and condition, it will sell.

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How to write a winning offer in a Sellers’ market

In case you haven't noticed, 2015 has ushered in a full blown sellers’ market in Portland
  1. House hunters are out in huge numbers.
  2. Mortgage rates are hovering around the 4% range for best qualified buyers.
  3. Housing inventory is at an 8 year low.
  4. Employment is up.
  5. Lenders are accepting lower down payments.

In a sellers’ market when there isn’t enough inventory to meet the buyer demand, bidding wars for homes become the norm. Bidding wars often strike fear into the hearts and minds of buyers, but we do have tools to help you win a bidding war, if you are willing and able to compete.

Tactics for winning a bidding war in a seller’s market:

  1. bidding wars over homesBuyers need to accept that the list price on most homes is just the starting point for offers. Most homes are selling for considerably higher prices, sometimes even tens of thousands of dollars more than the list price.
  2. Buyers should work with their own agent. Your agent should be keeping an eye on the market for you and keeping you apprised of new listings and price reductions as they come up.
  3. Look at new listings as soon as possible. Homes often sell in just a few days.
  4. Your first offer should be at least asking price. With multiple offers, you may not even receive a counter if your offer is too low.
  5. Write a personal letter to the sellers telling them why you want this house. Be creative and personal.
  6. Make sure your pre-approval is recent (less than 60 days old). Offers submitted without up to date pre-approvals are often ignored.
  7. Offer a big earnest money deposit as a show of good faith and high interest.
  8. Keep your offer clean – NO contingencies except those that are already included in a standard contract.

The escalation clause

In a sellers’ market I suggest using an escalation clause to protect you in cases of multiple offer scenarios. An escalation clause is written into the contract to keep your offer competitive by automatically raising your offer to whatever your maximum price is

On a property with a list price of $300,000, for example, where there are competing offers, you need to assume that at least some of those offers are for more than $300,000. When writing up your offer, you should consider if you are willing and able to pay more, and if so, how much more.

Here’s how I write an escalation clause:

  1. If there is a bona fide competing offer, Buyer will purchase the property for $1,000 more than the NET purchase price of the competing offer, up to a maximum purchase price of $315,000.
  2. Seller is to prepare a counter offer to this real estate agreement with new purchase price based on the proposal outlined above in #1. 
  3. Seller must attach copy of the competing offer with counter offer to buyer. (personal information about competing buyer may be redacted but all terms of contract to be included in copy).

In this example, you are protected from paying more than $315,000, and you could potentially win the bidding war at a lower price. Of course, if there are other offers for more than $315,000, you are now very likely out of the game on this property.

Why use an escalation clause rather than wait for a counter offer?

  1. A counter offer might not be offered if there are other offers higher than yours?
  2. Time to go back and forth on counter offers can work against you because until you have a mutually signed and accepted offer, another buyer can slip in with an offer higher than your counter offer and “steal” this house out from under you. You are never locked in as the buyer until both buyer and seller have signed all paperwork at mutually agreed upon terms.


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Portland housing inventory drops to 8 year low putting sellers in control again

According to statistics from RMLS (Regional MultipPortland housing inventory 12-2014le Listing Service), we saw housing inventories drop to an 8 year low in the Portland metro area. As of close of business in December 2014, there was just a 2.3 month supply of homes listed, way below the 4-6 month supply that produces a more balanced market favoring neither buyers nor sellers.

This dearth of inventory has buyers scrambling, and of course, will drive home values up yet again as multiple buyers will be bidding for the same few properties. The average sale price in the Portland metro area rose to $331,600, while the median sales price rose to $290,000. Just a year ago, the median sales price of homes sold was only $267,300.

The areas that saw the greatest value increases during the 4th quarter of 2014 included SE Portland, Milwaukie/Clackamas, Oregon City/Canby, and Hillsboro/Forest Grove neighborhoods. These statistics reflect that most of the hottest areas late last year were neighborhoods that have traditionally been somewhat under-priced. It’s important to note that NE Portland still remains one of the most coveted areas in the metro area, though pricing increases have slowed somewhat as compared to some of the more lower priced neighborhoods.

Buyers are out in huge numbers already this year, fueled by almost record setting low interest rates. And home flippers and investors seem to be re-appearing as well, though seem to be targeting fixer homes in higher priced neighborhoods.

According to United Van Lines, Oregon topped the list of states people were moving into, as opposed to out. According to a report released by CNN Money, the moving company found that 66% of all interstate moves in Oregon (128,000 in 2014), were from people moving into the state, rather than leaving it. This marks the second year in a row that Oregon topped the list.

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First time home buyers returning to housing market in 2015

First time home buyers have been conspicuously absent from the housing market during the last few years. Tightened lending standards plus huge down payment requirements kept them on the sidelines.

Last month (December 2014), both Fannie Mae and Freddie Mac announced that they are now offering mortgages with as little as 3% down payments, which will make it easier for first time buyers to save enough cash to purchase a home. Additionally, for those who are a little more credit challenged, FHA has reduced their up-front mortgage insurance by 50 basis points.

“It’s already begun that Millennials are going back into the market,” said Mark Zandi, chief economist for Moody’s Analytics.

According to the Mortgage Bankers Association, sales of new homes are expected to climb by more than 13% in 2015, while existing home sales are expected to increase by 5%. A spike in the number of first-time home buyers should spark a chain reaction by enabling existing homeowners to sell their homes and buy more expensive ones, said Zandi.”

As more buyers are able to enter the market and builders are finally getting into stride with new home production, we should see an increase in inventory. This should result in a slowdown in home price and value increases and result in a more stable housing market.

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Mortgage rates continue to drop as bears take over Wall Street

Wall Street bull and bearIf you’ve been following the stock market this year, you would have noticed that the DOW has been down triple digit numbers all but one day since the year began. That is not good news for investors, but it has produced good news for home owners and buyers.

The yield on 30 year treasury bonds dropped to all-time lows this morning, while the yield on 10 year treasury bonds have reached lows not seen since May 2013. Lenders I work with tell me that as of this morning, best mortgage rates are firmly below 4% for the best qualified buyers, and even for those with less than 20% down payments.

Why all the panic on Wall Street?
It’s earnings season again, and in addition to the oil and natural gas commodities dropping to lows no one could have predicted, retail stores are reporting much lower than expected sales for December 2014. Everyone expected December to be a great month for retailers. Consumer confidence was up, low fuel prices added more cash in consumers’ pockets, the unemployment numbers were down, but consumers still didn’t spend as expected.

According to pundits on CNBC, this could be a very rocky year on Wall Street. Even some of the big banks are reporting lower than expected earnings  (which was unexpected.) And, of course, we can’t discount all the turmoil around the world.

Going forward, everyone is watching the housing markets to see how property valuations hold up as the year progresses. In the meantime, at least here in Portland, the housing market is off to a strong start as buyers are anxious to lock in the very low mortgage rates.

Reuters pundits are now predicting that the Feds will very likely hold off on any interest rate increases until 2016.

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Watch for fun new stencils on bike lanes in Portland

bike lane stencil in PDX

bike lane stencil in PDXOnce upon a time, bike lanes throughout Portland featured artwork of bike riders in all manner of garb and character. Most of these disappeared as roads were re-surfaced, but Portland street maintenance crews have again begun installing fun and creative bike-stencil characters on city streets throughout the metro area.

The ODOT crews are working up these stencils in their spare time with the assistance of local Portland artists Addie Boswell and Damon Eckhoff, according to Diane Dulkins, spokeswoman for the Portland Bureau of Transportation.

“This is what happens when you take pride in the city,” Dulken said.  “This creative spirit is what happens.”

In my humble opinion, this is just another example of what makes Portland so great for residents and visitors alike.

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Portland Housing market off to a running start in 2015

real estate sold sign for newsletterSince the housing market began its recovery in late 2012 here in Portland, we have seen buyers out in droves beginning New Year’s Day, and the markets have remained robust all year. Last year, we saw a slowdown at the end of the year, but there were still more houses sold in 2014 than in 2013, and home values continued to rise for the entire year.

It’s only January 8th, and again the buyers are back out in huge numbers. Homes are selling in a matter of days already this year, some even with multiple offers. Buyers are snapping up all kinds of properties including new construction, remodeled homes and even fixers. This is very likely due, in large part, to the very low mortgage rates that are predicted to rise later this year. (Wall Street pundits predict that we will begin to see rates rising by June or July 2015, though very likely not too quickly.) Still, if Wall Street goes back into bull market mode, rates will rise off the great rates we are seeing today.

It’s just the first full week of January 2015, but already it’s appearing that the Mortgage Bankers Association prediction for a very active housing market this year was right on target.

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FHA move over – Fannie offers a much better property renovation loan

Buyers often cringe at the thought of buying a “fixer home.”  Some people just see dollar signs flying away as soon as they take possession.Others can’t even imagine tackling all the work, or living in a construction zone for months on end.

But buyers need to keep in mind what home flippers have known for years. The actual cost of renovations is usually considerably less than the increase in property value once renovations are completed.

If you’re one of those people who loves a specific neighborhood but can’t quite afford the homes, or you need special features in a home, but those features are  hard to find or too expensive in your desired neighborhood, we have some great news for you.

Fannie Mae has recently introduced the Homestyle loan for those who qualify for conventional home financing. The Homestyle loan offers so much more than the more commonly offered FHA home renovation loan. It’s a  single-close loan that enables borrowers to purchase a home that needs repairs and include the necessary funds for renovation in the loan balance. The loan amount is based on the lesser of the “as-completed” value of the home or the home purchase price plus cost of renovations.

But here’s where the Homestyle loan beats FHA. You can also use this financing to add a room, tear down walls to open up spaces, purchase new appliances, put in landscaping or site improvements, add a garage,  finish decks, patios or basements, enhance accessibility for disabled persons, and so much more.

Any type of renovation or repair is eligible, as long as it is permanently affixed to the property and adds value. Renovations should be completed within a twelve-month period from the date the mortgage loan is delivered.
Property Eligibility
One-to four-unit principal residences, one-unit second homes, or one-unit investor properties including units in condos, co-ops, and PUDs. No manufactured housing.
Borrower Eligibility
Eligible borrowers include individual home buyers, investors, nonprofit organizations, or local government agencies. Borrowers must have satisfactory credit to qualify for a Fannie Mae loan (680 minimum credit score is a general guideline)
Down payment requirements
Fannie Mae currently requires a minimum of 5% down for owner occupied single unit residences but more on other types of properties and ownership. Read more about Fannie Mae guidelines regarding down payment requirements.
Most renovation work must be completed by a licensed contractor who must be approved by Fannie Mae prior to the close of the loan. The lender will “hold back” funds required for work and will disburse funds directly to the contractor when completed.
The final fantastic component of this type of mortgage is that, if you are an owner occupant, you can finance up to 6 months of your monthly mortgage payment to cover your the mortgage payments while the work is being done. This feature is available to everyone, but works best for renters since your rent payment is not added to your debt ratio when computing how much you are eligible to borrow.

While adding mortgage payments to your loan will increase your loan amount and your monthly payments, you are generally purchasing a lower priced home than it will be worth once renovations are completed. Remember you are very likely buying a “fixer” because of the lower price point than new or renovated homes usually sell for in any given neighborhood.

NOTE: Not all lenders offer this loan, or some may not offer all the features described above, so you may have to shop lenders to find the features you are looking for in your home renovation loan.

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