Andrew Wetzel's Musings

March 25, 2019

How Sellers Sell Real Estate: Who is the Typical Seller?

Today I want to discuss the 2018 NAR or National Association of REALTORS Profile of Buyers and Sellers.  The report comes from a survey using 129 questions mailed to over 155,000 home buyers who purchased a primary residence between July 2017 and June 2018.  7191 were returned.  The focus of this podcast will be buyers who sold one home to buy another.  This was a national survey so your market may be quite different.  Real Estate is local:  there is no national Real Estate market so please contact me for information about your local market.

  • NAR has been collecting seller data since 1985 when the typical owner remained in their home for a median time of 5 years. In 2018 that number was 9 years which suggests that buyers may want to think long-term about their investment.  What appears to be a solid investment today may look different later.  Unfortunately, I still see sellers who paid more for their house than it is worth today and that can delay being able to sell it;
  • Sellers between the ages of 18-34 typically sold within 4 years while those over 75 sold after 17 years;
  • The median selling price was 99% of the final asking price. If you are an owner whose house is not attracting serious interest, meaning offers, this is important to know.  Many buyers think they are better at negotiating than they really are and are hesitant to start with their “best offer”.  In a very competitive situation they may not get a second chance.  On the other hand, a buyer may prefer to make an offer on a house closer to its market value to avoid having an appraisal issue or risk losing their second choice to another buyer when their offer on a house expires.  Whether a listing agent should disclose the existence of other offers is debatable but this should only be done when a seller allows it.  In some markets and with some buyers, competition may be welcome.  In others, not so much.  Sellers may also think themselves better at negotiation than they really are so they need good advice from a trusted and respected representative.  Ego can be a terrible thing to overcome.  Last point, showings are nice but they do not guarantee a sale;
  • 13% of houses purchased sold for more than asking price with 26% achieving the asking price and 24% selling for 95% or less than asking price;
  • The typical seller was 55 years old;
  • 68% were repeat sellers while 32% were selling for the first time;
  • 70% who purchased another home stayed in the same state; 16% moved to another region; 14% stayed in the same region but a different state;
  • 44% bought larger homes; 29% bought a similar size; 27% down-sized. The age of the seller strongly correlates with these statistics;
  • 50% bought a newer home than they sold; 28% bought one the same age; 22% bought an older home;
  • 47% spent more than their selling price; 27% spent less;
  • The most common reason for selling was that the house was too small (15%), followed by moving closer to friends and family (14%) and job relocation (13%);
  • 29% of first-time sellers cited size as being too small whereas repeat sellers cited moving closer to friends and family (17%). Selling is an expensive proposition so having to move in the short term because you outgrew a house or simply needed more space can be costly;
  • 91% of all sellers used a Real Estate agent with only 7% being a FSBO. 91% is the highest result recorded despite the presence of the Internet.  The % of FSBOs has steadily declined since 2000 even though the Internet was thought to have helped with exposure;
  • The median selling time for all sellers was 3 weeks. There is a correlation between the % of the final asking price achieved and the length of time it takes to sell.  While it can be a distracting obsession, many buyers look at the “days on the market” as an indicator of a home’s desirability and may avoid homes that are simply over-priced although they have no issues.  Houses that sold within 2 weeks or less achieved 100% of the final asking price whereas houses on the market for 17 weeks or more achieved only 94%.  Keep in mind that many houses are reduced in price to attract attention so looking at the final asking price as compared to the selling price is only one part of the story.  Sellers determine the asking price but buyers determine the value.  If nothing else, easy access to the Internet has allowed buyers to competitively shop meaning they at least know what is on the market although relying on valuation algorithms is risky.  Houses tend to get the most activity within a week or two of hitting the market.  Once the current supply of buyers knows a house is for sale and no one buys it, something has to energize and existing buyer or other buyers have to start their search;
  • 44% of sellers used buyer incentives to attract interest. The top two were home warranties and closing cost assistance.  These are not guaranteed to get the job done and should be discussed at the outset;
  • 64% of sellers were “very satisfied” with the process; 25% were “somewhat satisfied” and 12% were dissatisfied;
  • The overall median selling price was $259,900. Remember that this is a national number.  The median selling price for FSBOs was $200,000; for agent-assisted sales it was $264,900 and for FSBOs who eventually used an agent the median selling price was $227,900.  This clearly shows the advantage of hiring and paying a professional.

The bottom line is that this can be a very confusing process.  This NOT a retail transaction!  It is typically costly enough without making expensive mistakes.  Unless you do this regularly, I respectfully suggest that you trust a trained, experienced professional.  Whether you want to trust your most valuable asset to someone with little experience or someone who has a long track record is up to you but any professional is likely to know more than an average seller looking to save a few dollars.  I understand that signing a formal contract with someone, even if recommended to you, is quite a leap of faith.  Most of us can offer options to increase your comfort level.  After all, we want to make sure that you “fit” with us as well.

Selling Real Estate is unique compared to most typical purchases:  not only is it much less frequent than other purchases, it typically involves multiple steps, each offering its own challenges.  If you would like to discuss selling or buying or if you have any thoughts about this, please contact me.

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

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Technology and Real Estate

Gordon Gecko might say “technology is good” but Dirty Harry Callahan would add (paraphrasing for effect) that humans have to understand its limitations!

In the 1970’s I was fascinated with Texas Instruments calculators.  They quickly went from very basic to very complicated.  Just look at a modern-day financial calculator!  Today many of us seem unable do simple math without a calculator.  In the 1980’s I was fascinated with dial-up modems and being able to send and receive email.  Then I was introduced to Lotus 1-2-3 and Symphony.  Wow!  In the 1990’s I got my first home computer.  It had a huge storage capacity of 8 megs (yes, I said megs!) and enabled me to set up a spreadsheet for a pool team I ran.  I could also word process a weekly newsletter for my team.

In 1996 I became a Real Estate agent.  The industry was evolving from what the more experienced agents call “the books” for distributing information about property listings to Internet-connected computers running on 3.5″ disks.  Until that change, property listings were collected and disseminated to offices and agents in books every couple of weeks and manually searching for listings and comparable sales was time consuming and inexact to say the least.  The data was beyond stale when received.  It was a major achievement to be able to access information about property listings online and then in our homes!  OOOH!

The Real Estate world shifted monumentally in the new century as the public was allowed to peer behind the curtain and get property listings in their homes and businesses, allowing them to bypass over a million trained agents who had controlled the data since the first cave dweller decided to relocate.  Over time, while the data was limited to active, coming soon and under contract listings, third-party web sites began using valuation models to help buyers and sellers “understand” the financial landscape better.  At least that was what they were told.  There is so much more to say about that but I want to focus on technology and how it has inserted itself into Real Estate.

Seth Godin recently blogged about the evolution of technology and he accurately describes the first three cycles, stating the we are now in the fourth.  However, at least as far as Real Estate is concerned, the fourth, while on the horizon, is far from settled.  Sure, we saw a computer beat a Grand Master in chess and win on Jeopardy BUT they have not come close to perfecting a self-driving car and the track record with predicting home values is pathetic.

So, while many of us will continue to love and embrace technology, with many being “early adopters”, I would respectfully encourage my fellow humans to engage with professionals when it comes to Real Estate.  Buying and selling is not so easily predictive as answering a question, creating a question when offered an answer or even moving chess pieces and predicting the outcome of a head-to-head chess match.  There is no doubt that computers can do a seemingly endless array of lengthy calculations faster than we can blink or access a history of information if entered and stored properly but, can computers act illogically or emotionally?  Buying and selling Real Estate are emotional decisions justified with logic.  It is one thing to provide quick access to property listings and then to try to display comparable sales history to evaluate but it is quite another to create and present a purchase offer and then negotiate what may be many steps to make sure that both parties remain committed to completing a sale.  This is not a retail transaction!

Technology certainly has its place and there is no going back in time.  The critical factor is knowing its value, its limitations and where it fits into the process.  Information and data are not the same as knowledge and insight!

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

How Buyers Buy Real Estate, Part 2 of 2.

Filed under: Buying,Hiring an agent,Inspections and Contingencies — awetzel @ 4:28 PM

Today I want to discuss the 2018 NAR or National Association of REALTORS Profile of Buyers and Sellers.  The report comes from a survey using 129 questions mailed to over 155,000 home buyers who purchased a primary residence between July 2017 and June 2018.  7191 were returned.  This was a national survey so your market may be quite different.  Real Estate is local:  there is no national Real Estate market so please contact me for information about your local market.

This is Part 2 of 2.  In Part 1 I focused on buyer characteristics, meaning who is the typical buyer.  In Part 2 I will focus on the process the typical buyer used to find their home, the results they achieved and how they felt about the experience.  There will be some overlap between the parts.

As I learned years ago, buying a home is an emotional decision justified with logic.  This is what can make it fun or not.  The process can be interesting enough when there is only one buyer involved.  People have different ways of making decisions and we all handle challenges and stress differently.  Buying a home typically offers plenty of both.  When more than one buyer is involved, there can be quite a negotiation between the parties and they often seek my opinion.  Purchasing a home is typically the largest financial transaction anyone will ever make and it involves many lifestyle factors.  It is a serious process.  Here are some highlights:

  • 86% purchased existing homes; 14% bought new construction;
  • Nationally, buyers typically paid 99% of the asking price;
  • 56% of buyers said that finding the “right property” was the most difficult part of the process; 24% mentioned financing (including saving for a down payment (13%) and getting a loan (8%)), 20% cited the paperwork and 16% mentioned understanding the process. And yet, buyers often avoid or delay seeking professional assistance.  Given 24/7 access to the Internet, some may find this interesting.  I am not surprised as it supports my belief that Realtors bring value to the process of buying Real Estate above and beyond simply providing houses to look at.  While that is obviously important, buyers need to arrange financing and determine what they want and need in a house so that they can evaluate their options and make the best choice for themselves, keeping in mind that they may have serious competition.  Some houses sell quickly.  Buying a home takes time and effort.  For example, I have worked with many buyers during my career and have been able to identify houses for them to consider that they did not or could not find on their own.  My experience working with sellers, especially those whose properties other agents could not sell, has taught me a great deal about marketing homes to ensure that they appear in buyer’s search results.  Think “Google search”.  This knowledge helps me with buyers.  I will be happy to explain this in detail;
  • 88% financed their purchase, typically financing 87% of the price with first-timers financing 93% and repeat buyers financing 84%;
  • 9% found the mortgage application process to be much more difficult than expected with only a 1% difference between first-time and repeat buyers. This explains why so many wait to do this, perhaps to their detriment.  Sellers tend to focus on three parts of any agreement:  the amount of the offer, the buyer’s financing and the terms and conditions of the offer.  Sellers want to avoid or minimize the risk of a failed sale;
  • 13% reported that saving for a down payment was the most difficult step with 50% of those citing student loans. This is a problem that has been well reported.  It delays many aspects of life;
  • 50% of buyers found the home they purchased online; 28% through an agent; 7% from a “For Sale” or an open house sign. There is no doubt that the Internet has displaced agents as a valuable source of property listings.  No one can or should dispute that.  However, it has clearly NOT displaced the need for us to assist with the numerous tasks that are necessary to buying a house regardless of where or how it was identified.  One final point here is that it is important that a buyer provide accurate information as far as what is important for them.  Having a buyer search online for one set of criteria while their buyer-agent searches for something different can and will cause problems.  We should be finding the same possibilities!  Communication is critical;
  • 92% were “satisfied” with the process but only 62% reported being “very satisfied” and 8% were very dissatisfied. Buying a house or investment property can be very frustrating.  Trying to justify the emotion of a home purchase with logic can be a challenge.  I have met a number of owners who told me that they made a mistake when they bought their home; some realized that sooner than others.  While their situations may have varied, this often meant that they would have some difficulty selling or achieving what they wanted or needed to make a move.  I can share some stories;
  • 26% were given agency disclosures at the initial meeting. In PA you may know this as the Consumer Notice form that we are required to use.  The purpose of this disclosure is to offer a buyer choices as far as how we are to work together.  Historically many buyers assumed we were representing “their best interests” even though they had not formally committed to using our services.  Prior to buyer agency all agents worked for the seller’s best interests!  23% only received the required disclosure when their offer was being  written; 11% received it some other time.  The good news is that 60% received it, even if late.  23% say they never received it and 18% said they did not know.  In addition to being a REALTOR and Associate Broker, I am a Mediator and have spent years working on our Professional Standards Committee.  In those roles I have been involved in many situations where the consumer, meaning a buyer or seller, had quite a different perception of their relationship with an agent than their agent had.  Trust me when I tell you that this can cause problems;
  • Continuing with that thought, 40% said they had a written representation agreement with their agent; 16% said it was oral; 31% had no agreement and 14% did not know;
  • Buyers ranked a number of agent qualities: 97% want honesty and integrity; 94% want them to be knowledgeable; 92% want them to be responsive; 84% want them to be able to negotiate;
  • The top three benefits Real Estate agents provided were: 60% said helping buyers understand the process, 57% said pointing out features or faults with properties and others said negotiating better terms.

Buying Real Estate is a unique purchase:  not only is it much less frequent than other purchases, it typically involves multiple steps, each offering their own challenges.  If you would like to discuss buying or selling or if you have any thoughts about this, please contact me.

Please look for Part 1.

There is no time for inexperience, empty promises or false expectation!

 Remember:  HIRE WISELY!  We are not all the same.

How Buyers Buy Real Estate, Part 1 of 2. Who is the Typical Buyer?

Filed under: Buying,Hiring an agent,Inspections and Contingencies — awetzel @ 4:06 PM

Today I want to discuss the 2018 NAR or National Association of REALTORS Profile of Buyers and Sellers.  The report comes from a survey using 129 questions mailed to over 155,000 home buyers who purchased a primary residence between July 2017 and June 2018.  7191 were returned.  This was a national survey so your market may be quite different.  Real Estate is local:  there is no national Real Estate market so please contact me for information about your local market.

This is Part 1 of 2 and will focus on buyer characteristics, meaning who is the typical buyer.  In Part 2 I will focus on the process the typical buyer used to find their home, the results they achieved and how they felt about the experience.  There will be some overlap between the parts.

As I learned years ago, buying a home is an emotional decision justified with logic.  This is what can make it fun or not.  The process can be interesting enough when there is only one buyer involved.  People have different ways of making decisions and we all handle challenges and stress differently.  Buying a home typically offers plenty of both.  When more than one buyer is involved, there can be quite a negotiation between the parties and they often seek my opinion.  Purchasing a home is typically the largest financial transaction anyone will ever make and it involves many lifestyle factors.  It is a serious process.  Here are some highlights:

  • 33% were first-time buyers. The typical buyer was 46 years old, with those age 25 to 34  accounting for 24% of all sales;
  • Buyers moved a median distance of 15 miles while those who sold one primary residence to buy another moved a median distance of 20 miles;
  • There were several reasons mentioned for buying: 84% felt that a home purchase was a good investment; 66% of first-time buyers wanted to own their home as did most buyers under age 61; those over 61 mentioned being closer to family and friends or down-sizing;
  • Buyers expected to live in their homes for a median time of 15 years with 19% saying they did not plan on making another move;
  • As far as motivating factors: 58% prioritized the quality of the neighborhood, 41% the affordability of the house (owning can be cheaper than renting!) and 24% the quality of the school district.  When you buy a house, you are buying the neighborhood and a lifestyle:  this is more than simply buying a product;
  • 44% of buyers looked online before doing anything else with 95% using the Internet at some point during the process; 17% started by contacting an agent; 11% started by looking online for information about the process; only 7% started by contacting a lender or bank. This can be good or bad, depending on what a buyer really knows and understands about the process and their local market.  There is a wealth of information online but my experience suggests that much of it is wrong or does not apply to all markets.  Some buyers will spend valuable time “shopping”, which is admittedly the “fun part”, instead of doing other things that might make their search easier, especially if they find that they need to do some homework to get financing.  They might find a home they really like only to find themselves unprepared or unable to compete with other buyers who had a better game plan.  The process can make all the difference;
  • 93% of buyers relied on the Internet for information; 86% on an agent. Traditional methods are still used but to a much lesser extent than in the past.  For example, only 53% visited open houses, 46% looked for “For Sale” signs and 13% looked at newspapers.   Please keep in mind that these statistics refer to sources use to search for available properties, not necessarily what led to a sale;
  • 67% walked through homes they found online; 41% drove by and did not go inside.  You might be amazed to learn that, while driving through a neighborhood to see if it meets your needs is an excellent way to narrow your focus, many buyers eliminate houses simply because the exterior needs some attention;
  • Buyers typically searched for 10 weeks and looked at a median of 10 homes. They waited for 3 weeks before contacting an agent.  A lot can happen in 3 weeks!  On the other hand, buyers who did not use the Internet spent 4 weeks searching and viewed 4 homes.  I wonder which group was more satisfied with their purchase in the long run;
  • For internet “shoppers”, 87% found photos and 85% found detailed property information very useful. They enjoy the “online shopping experience” much more than actually looking at house after house.  What an agent uploads to their MLS typically feeds “as-is” to the Internet:  too often this is a case of “garbage in; garbage out”.  Sadly, many listing agents make looking at their property listings more challenging than it should be.  Many property listings offer few quality photos, some listings have none and many are not labeled making it difficult to know what you are looking at.  Many agents use their cell phone for taking pictures.  I often see photos that seem to have been uploaded randomly, bouncing from interior to exterior and even turned sideways or upside down.  I also see poorly written or missing descriptions as well as listings having minimal searchable features which can make it difficult for those listings to even appear in a buyer’s search results and, when they do, a buyer may not really know what they are looking at.  The result is that they click through to the next property listing.  The good news for buyers is that properties attracting little attention often get needlessly reduced in price which rewards a persistent buyer.  If you are a seller, have you been asked to reduce your price?  Have you seen your MLS printout and searched online for your own property?;
  • 87% used a Real Estate agent; 6% bought directly from a builder or their agent; 5% bought directly from the owner which would include FSBOs or “private sales” where one or both parties are not professionally represented. The number using a professional has actually trended higher since the Internet entered the picture.  This proves to me that we can coexist with the so-called third-party sites if we bring “value” to the process.  Our “value” extends well beyond searching for houses.  Once you identify a house that you like, there are a number of steps that must be taken to get it under contract and then to complete the purchase.  This is no time to cut corners!

Buying Real Estate is a unique purchase:  not only is it much less frequent than other purchases, it typically involves multiple steps, each offering their own challenges.  If you would like to discuss buying or selling or if you have any thoughts about this, please contact me.

Please look for Part 2.

There is no time for inexperience, empty promises or false expectations! 

Remember:  HIRE WISELY!  We are not all the same!

Municipal Inspections

Filed under: Buying,Inspections and Contingencies,Marketing,Selling — awetzel @ 3:59 PM

A Real Estate sale is a negotiation between a buyer and a seller.  While either may be more knowledgeable or have better representation than the other, it is a “one-to-one” exchange and most are what we call “arm’s length” meaning that neither party is under duress or pressure.  A seller puts their property on the market and prices it however they see fit.  A buyer can make an offer based on how much they like it and want to own it.  If the sale is financed, an appraiser will compare the selling price and terms to the market.

There are various steps that may occur between executing a purchase agreement and getting to settlement.  One of them is a resale or “use and occupancy” inspection that is required by many municipalities regardless of the details of the agreement.  Who pays for the inspection and any subsequent repairs, if any, is subject to negotiation but a clear certification or a “conditional” one may be required to settle.

The municipal inspection allows the municipality to collect a fee for inspecting the property.  Many require an additional fee should a reinspection be needed.  These inspections generate revenue.  Beyond that, what is the point of their poking their nose into an otherwise private transaction?  They will tell you that it is to make sure that there are no safety issues which would be understandable if they only inspected “public” areas like sidewalks, curbs and anything that could cause harm to the general public.  I think that reasonable although the obvious flaw in that logic is that this intrusive process only encompasses those properties being sold, whether they settle or not, ignoring the majority of properties that do not change ownership.  What happens if they have broken sidewalks or curbs?  People who sell their property are essentially being penalized.

My concern is that many municipalities go beyond what seems appropriate, choosing to enter the structure and dictate what has to be done in order for the transfer of ownership to be allowed.  I had one inspector require a Living Room wall to be completely re-painted because someone had drawn a line on the wall with a magic marker.  Regardless of whether the purchase agreement has any inspection contingencies or not, regardless of how much the buyer is paying the seller to complete the sale and regardless of the competence of the principals and anyone else involved, many municipalities think it their business to inject themselves into a private transaction, some to the point of being as onerous as an actual property inspection.  I consider this meddling and an example of over-reach.  It also fails to achieve a realistic goal as many houses do not change hands for many years so they are not inspected regardless of their condition.  Look at how many people perish annually because properties lack working smoke detectors?  I am not saying that this is the fault of the municipality but wonder why they don’t visit every property regularly if safety is their priority?

I do believe that rental inspections make sense as, unfortunately, there are many landlords who do not properly maintain their properties and many rentals occur without the benefit of a licensed Real Estate professional.  I do find it interesting that many sale inspections are more intrusive than rental inspections which makes no sense to me.  I think that tenants deserve more protection than many of these inspections afford them.  At the very least, both inspections should be similar.

Over the course of my career, I have heard many horror stories about municipalities requiring repairs that were costly, made no sense and were in fact not wanted by the buyer or seller.  They have even caused consenting adults to delay settlement.  Fortunately, the Real Estate community in PA pushed back and was able to have the law changed so that people could complete a Real Estate sale even if repairs were not completed.

Houses should be priced and are typically sold based on their condition.  The PA agreement of sale has a section devoted to the municipal inspection.  The seller does have the option to require that the buyer be responsible for ordering the certification and/ or paying for repairs.  Unfortunately, many houses are marketed with that stipulation without providing an actual list of what the buyer is expected to do which makes no sense.  Have the inspection and provide the list so buyers are not surprised later.  Many buyers simply cannot tackle the cost of these repairs as they have enough trouble saving for paying their closing costs.

It does seem that lower income areas are more heavily burdened by municipal inspection requirements which makes some sense as some of those owners may not be financially able to maintain their properties over time.  In that case, a sale offers an opportunity to make changes which could benefit buyers.  However, an owner who has completed municipal repairs only to learn that a buyer could not get financing has two problems:  they owe contractors money and they have no sale.

The ideal situation as far as I see it would be to hold all property owners to some standard in order to protect the public.  If this could work, there would be no municipal surprise when a property is sold.

There is no time for inexperience, empty promises or false expectations!

 Remember:  HIRE WISELY!  We are not all the same!

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