Buyers & Sellers Real Estate Markets

Perhaps you’ve heard the terms Buyers Market, Sellers Market and Balanced Market. A general definition is that a buyer’s market has ample supply so that the buyer has the advantage. The Seller’s Market is where there is little supply giving Sellers an advantage.
When it comes to real estate, the supply is measured as either Months of Inventory (MOI) or Absorption Rate. Take the number of active listings at the end of the month and divide it by the number of sales during the month. That gives you the Months of Inventory which is simply the number of months it would take to sell the current inventory at the current rate of sales.
The Absorption Rate is the inverse. Divide the sales by the inventory and express it as a percentage. An Absorption Rate of 20% is the same as 5 months supply.
How many months of supply indicates a Buyers or Sellers market? Sources researched varied a little. That’s okay. It’s not a precise correlation, just a general indicator. A Buyer’s Market is anywhere above 5 to 7 months supply.  A Seller’s Market is less than 3 or 4 months supply. In the middle around 5 or 6 is referred to as a Balanced Market or a Stable Market. 
In Kingston, at the end of June, 2013, the Kingston Area Real Estate Association reports 6.3 Months of Inventory(MOI). At MOI of 6.3, we are hovering on the edge of the Buyer’s Market range. Most would say it’s balanced, but if your home is listed and it isn’t selling, you might be thinking otherwise.
Tactics for selling in a Buyer’s Market include pricing accurately and preparing the home so it is presented well. Getting the best bang for your buck on those preparations means starting with a professional Staging consultation. That way you will be sure your efforts create maximum buyer appeal.

 

Interviewing Real Estate Agents? Ask These Questions

Photo by Frits Ahlefeldt-Laurvig HikingArtist.com

Selling your home is a business transaction. Treat it that way. Don’t hire a real estate agent just because they are a relative or a friend of a friend. The relationship can get them on your short list, but don’t by-pass the interviewing process. I suggest interviewing three to five agents from different companies. Be upfront that you are talking to others when you set up the appointments. Ask each one the same questions; take notes. Get back to all of them the next day to let them know whether or not they were successful.

Here are the questions you should ask:

1. How many years have you been in business?
This is a warm-up question. The answers are interesting but not definitive. A less experienced agent may make up for lack of experience with enthusiasm and fresh ideas.

2. Are you a full time real estate agent?
Generally a full-time real estate agent would be a better choice because they are not just ‘dabbling.’

3. Do you have any client testimonials to show me?
Don’t omit checking references from recent customers. You need to know how other clients like yourself found their experience working with the agent.

4. Would you tell me about current market conditions?
This gives the candidate a chance to demonstrate their knowledge of the current market challenges and show how well he or she can communicate them to you in language you understand. There are both good and bad points to selling in almost any market and at any time of year. I would look for realistic, balanced answers.

5. What makes you different from your competitors? Why should I choose you to sell my home?
A real estate agent will sometimes offer special incentives, unique ways of marketing, extra touches to their service or have a great track record in selling your type of home.

6. What strategy will you use to market this home? What advertising media will you use and why?
The marketing strategy and the media used needs to be the best to reach your target market. For younger buyers, more emphasis would be on internet and social media. If your market is older seniors, print advertising might be what will reach them best. The main point is to see if the agent is in tune with the most likely buyers or using a ‘one size fits all’ strategy. By the way, one of the most effective ways of marketing is getting the word out to other agents. Look for a mention of how this will be accomplished.

7. How often will you update me?
If you and your real estate professional are not in agreement on this, it could be an indicator that you won’t be a good fit to work together.

8. How long do you think it will take to sell this house?
You are looking for some rational speculation but be skeptical if you get an absolute answer. It might signal over-confidence or perhaps a little to much spin on the truth.

9. What price would you list this house at? How much do you realistically think I can get? If the agent doesn’t back these answers up with data from comparable houses, both sold and currently on the market, ask how they came up with their answers. It is also good to compare which properties are included in the comparatives from one agent to the next. If the features of the selections are too different from your property they can skew the suggested price. It’s not all science.

Beware of any agent who tells you a overly high price. They might do it just to get your listing, counting on a price drop later.

10. What is your track record with houses in similar price range?
Here you want to know how many they listed, how many of their listings sold, and what percentage of the initial asking price was achieved. You want to know about real estate agents who routinely have price cuts on all their listings. The best strategy is to price as accurately as possible. If that is done there will be fewer instances of price cuts.

11. What is your commission rate? Is it negotiable? The idea is not to find the person with the lowest commission. In fact if their commissions are too low, and they do not offer the standard amount to buyer’s agents, you may not get all the showings you should. Cut rate agents may not be motivated to give you the same level of service.

One reason for the question is to see if they might have a little flexibility if necessary to close a deal. Also, their answer shows whether they believe they are worth what they are asking. You want a good negotiator, so let them demonstrate by negotiating their commission with you.

Download Interview Questions for Real Estate Agents in pdf format. You can print off one for each interview and use them for note taking if desired.

 

How to Find a Good Real Estate Agent

When you are about to sell your home, possibly your largest single asset, you should be sure to find a good real estate agent. Before we get into how you should go about finding that good real estate agent, here are a few helpful definitions and links.

The term REALTOR® is a trademark identifying real estate licensees who, in Canada, are members of The Canadian Real Estate Association (CREA). In the United States they are members of National Association of Realtors (NAR). REALTORS® adhere to a strict Code of Ethics and Standards of Business Practice. CREA’s website is here http://www.crea.ca/. There is a tool on the left side of their site which will allow you to easily find the website for your local board.

The government body (provinces or states) which grants real estate licenses sets educational standards. In Ontario, Canada, the regulation covering much of this can be found online here: http://www.e-laws.gov.on.ca/html/source/regs/english/2005/elaws_src_regs_r05567_e.htm#BK5

Education for licensees in the province of Ontario is handled by Ontario Real Estate Association (OREA). http://www.orea.com/ You might be interested in the many inexpensive one hour courses provided for the general public at http://folder.orea.com/newpublicportfolio/NewHomePage.aspx

The Real Estate Council of Ontario (RECO) is a self-managed, not-for-profit corporation, responsible for administering the Real Estate and Business Brokers Act, 2002 (REBBA 2002) and associated regulations on behalf of the provincial government and protecting the public interest through a fair, safe and informed marketplace. If you have a complaint about a member you can file it with them. You may also wish to read the resource material they have on their website covering a variety of real estate related issues. http://www.reco.on.ca

Technically, only the company your real estate professional works for can be your ‘agent’. The real estate companies are called Brokerages. Each Brokerage must have a designated Broker of Record. This Broker of Record must be an active manager and supervisor.

A real estate agent’s title can be Salesperson or Broker depending on what licensing requirements they have met. Just because the have the title Broker doesn’t mean they have their own Brokerage or are a Broker of Record.

A Real Estate Board is a non profit organization representing local real estate agents, brokers and salespeople. It provides services to its members and maintains and operates the Multiple Listing Service (MLS) in the community. In Kingston, Ontario, the Board is Kingston Area Real Estate Association (KAREA). On their website at http://www.karea.ca/ you can find a complete listing of all members and offices in the Board. As well they have some good links to community resources including Kingston stats at http://creastats.crea.ca/king/. If you don’t know how to find your local board website try the CREA site at http://www.crea.ca/.

Multiple Listing Service is a marketing database set up by a group of cooperating real estate brokers. In Canada, you may be familiar with a portion of the MLS data which is presented to the public on www.realtor.ca.

A real estate agent can act for buyers or sellers, but here I am just going to discuss your requirements as a seller. A good real estate agent may refuse to act for both in the same transaction to avoid conflict of interest.

What should you be looking for in a good real estate agent?
- licensed in your Board
- good track record
- trustworthy
- good references
- personality you can trust and work comfortably with
- access to Multiple Listing Service
- marketing capabilities
- works with your type of property and in your neighbourhood

How do you get names of possible candidates?
- referrals from friends, family and neighbours
- lawn signs in your neighbourhood
- print ads for homes like yours
- attending neighbourhood open houses
- internet listings for homes in your area
- internet searches
- yellow pages or other media

Some further considerations:

Don’t just judge agents by their website, although, if they don’t have one I would ask them how they manage to be competitive without it.
You can check with your local real estate board to find names and also to ensure they are licensed.
Attending open houses is a good way to find out what various agents are like without any commitment. However, you may find the top performing real estate agents do not do many open houses themselves.

How do you go about selecting a good real estate agent?
- assemble a short list of 3-5
- book interviews (let them know you will be interviewing them as well as others)
- conduct interviews using the same questions for each, and take notes
- check references
- make a selection
- give each interviewee a courtesy call to let them know your decision.

 

Are Canadian Homes Overpriced by 25%?

Since the high in 2006, US housing prices have fallen by 34% to a low earlier this year. In Ireland, they tumbled by 45% from a peak in 2007. However, in Canada and a few other countries, housing prices wobbled a bit and then continued to increase. This information comes from The Economist. In a Nov. 26, 2011 article they warned:

“As a result, many property markets are still looking uncomfortably overvalued.”

The Economist has tracked global housing prices since 1975. Two important indicators are the price-to-income ratio which measures affordability and the price-to-rent ratio which guages the benefits of home ownership. When these two are well above average, housing is considered to be overvalued. The Economist estimates this overvaluation currently at 25% in Canada and several other countries.
Opposing economists argue that lower interest rates and rising populations justify the higher prices. However these excuses were used in US and Ireland, but did not prevent the dramatic and devastating burst of their housing price bubbles.

A compounding concern is Canadians’ higher debt burdens in relation to our household income. It is even higher than the American ratio when their housing prices were at the 2006 peak. However, The Economist’s article offers one slim ray of hope.

“Prices do not necessarily need to drop sharply to return to fair value. Adjustment could come through higher rents and wages. With low inflation, however, it could take a decade or more before price ratios return to their long-run average in some countries.”

I think the current cautions to the Canadian public about our growing reliance on credit are good warnings. Are you taking any measures to restrict your personal debt? Or are you in good shape? Or do you feel like it is hopeless?

Read the full article in The Economist: http://www.economist.com/node/21540231.

 

On Defining Home Staging – Part 3; What skills does a good home stager need?

Staged Room with dog

A staging compromise – the dog stayed.

In Part 1, I talked about why it is good for the industry and consumers to have a commonly understood definition of the term home staging. I also mentioned that consumers, if they have any notion of home staging at all, have been foggy about what it entails and confused by multiple overlapping and conflicting terms. In Part 2, I spoke of the confusion between decorating and staging and the differences between those two practices.

Besides the differences, there are some similarities between decorating and staging. Both use the same decorating principles to create a mood and define function of spaces. With their aptitude and training, decorators and interior designers often successfully add home staging to their list of services. They just have to remember on the staging project to substitute the target buyers for the decorating client. While stagers will try to analyze preferences and lifestyles for their target buying group, they can never name one individual. The staged home has to be somewhat neutral and anonymous.

Decorating is not the only profession with transferable skills for the job of home stager. Stagers come from all walks of life. Having been an accountant myself, I can easily see how an preparing budgets and estimating return on investment is important when getting a home ready to sell. And, who would have more practical experience with viewers reactions to various homes that a real estate agent? However, there could hardly be a more perfect background for analyzing and reaching target buyers than a job as a marketing professional.

After all, staging is not just about making homes pretty. It’s about making them sell. The first skill out of the stagers repertoire must be marketing savvy. The home stager needs to first determine target market and learn as much as possible about what they will be looking for. Only then will they be able to use their decorating talents to create a vision that strikes a cord with potential buyers.

To me, home staging is something done only for the purpose of selling a home. That definition helps me maintain focus on the target buyers. It helps me explain my recommendations to reluctant home owners who struggle to let go of their home as they know it. If there were ever a difference between what target buyers would want and good decorating, I would have to go with the buyers preferences. In home staging, the buyer is king (or queen.)

That being said, there are still compromises. As I mentioned in Part 2, home staging always has budget and time constraints. Sometimes it’s not feasible to do everything to get all the way to the buyers ideal. We just give him a suggestion of potential. Another reason to compromise is the occupant’s ability to maintain the final product of staging – the precise placement, the white glove cleanliness, and the five-star hotel depersonalization. Homes are, more often than not, still lived in by busy families. There are often kids, pets or even thriving home businesses which still must function.

In Part 1, I proposed the following definition:

“Home staging is the art and science of preparing a home to be shown for sale within time and budget constraints by creating maximum appeal for the most likely buyers, and, thereby helping it sell quickly and for the highest possible price.”

What do you think of this definition? Does it express the marketing aspect clearly? Does it differentiate Home Staging from Decorating sufficiently? Do you think the term home staging should include the other things we do to open our homes to the public which don’t anticipate a sale such as ‘staging’ for holidays, parties, special occasions or public tours? Do you think there are grounds for including make-overs or re-designs for living under the staging terminology?

So You Are Thinking of Selling Your House

Back of downtown home


Here are three things you should ask yourself before you put your home on the market:

  1. Why are you selling?
  2. Will you be able to get what you want in the next home?
  3. Will you be able to let go and consider your present home as a product to be sold?

So what are your reasons for selling?

Perhaps you have no choice because of family changes, financial changes or forced transfers. In that case you may as well fast track to the third question.

But maybe you DO have a choice. Are you just wanting a nicer place? What is it about your present home that isn’t working for you? Are there lots of things you do like about it and about your neighbourhood too?

Could remodeling add the features you are longing for? If you’d be happy with a remodel, then decide whether it makes financial sense. Sometimes it could turn out to be cheaper than all the costs of purchasing another home like the closing costs, mortgage penalties, moving costs and any initial work needed on the new home. If you like your neighbourhood and your house isn’t the most expensive one on the street, then you need to compare costs of both options. However, if you already have one of the more expensive homes on the street you will have to realize that the costs of major remodeling probably won’t be recovered if you do sell in a few years.

Perhaps the reason you feel you have to sell is financial. In that case, talk frankly to your banker, accountant, credit counsellor or other professionals to check out your options. Maybe a restructuring of your finances could help without moving. If there’s “no way” and you must sell, then consider whether your house is in fairly good condition. Has your tight money situation caused a prevailing state of neglect? Perhaps you need to arrange a little financing to invest in bringing the house up to an acceptable standard, repayable from proceeds of the sale. This may help avoid selling at wholesale price because of a long to do list.

If you love your home, but, are unable to manage the work associated with it because of age or health, investigate hiring some help. For some, hiring a lawn service and a cleaning service and whatever help you need could be preferable to moving into a retirement home. If you are having trouble with stairs, you could have a lift installed. There are several options to help with getting in and out of the bathtub. Perhaps there is a solution that would allow you to continue to enjoy your home.

If you do decide to sell in the end, at least you will have fewer mixed feelings when the going gets tough in the selling/moving experience. If other family members are involved it would be best to make a group decision with everyone “on board.” They can pitch in and help make your home a showplace that will attract the new owner it deserves.

Will you be able to get the features you want in the next home?

There are a couple of reasons to consider this question. Having some clear criteria will help you start your search for the new place. More importantly, you need to estimate what your new home might cost and whether one with your desired features will be easy to find.

If you will need a mortgage, you should investigate whether you would indeed qualify for the amount you will need. I heard a story about an unfortunate couple who sold their house intending to make a move-up purchase. They didn’t realize that since they had taken their previous mortgage their credit situation had changed. The wife had quit work to raise their children. Interest rates and prices were escalating as they were shopping, and they ended up being forced to buy a more modest house than they started with. What a disappointment they must have felt.

Will you be able to see your old home as a product to be sold?

An additional reason to think about your new home is to help yourself begin the mental process of letting go of the old one. For the best outcome from your sale one of the things you need to do is to depersonalize your space. You need to pre-pack your personal touches, the collections and the family pictures. Your buyer needs to be able to imagine himself living in the space before he will make an offer. In other words, he must mentally move in. So you need to let go and mentally move out. Even though you’ve loved the place for years and have many happy memories, you have to start preparing to say good bye if you are serious about selling.

On the other hand, perhaps you hate the place and that’s why you are selling. Maybe you can’t wait to slam the door behind you. It happens. But, unfortunately your lack of love for your house may also jeopardize your sale. It will be really hard work for you to prepare your house with the loving attention to details needed to get the best price. And your negativity will likely be contagious. Even if you only see your agent and never let any viewer lay eyes on you, that negativity can kill your agent’s enthusiasm for your house. What happens when your agent is having a hard time keeping positive? You’re right, it isn’t a great promotion of your house.

You need to brain storm and come up with something good about the old place. You must have found something passable about it at one time. Recapture those old positive feelings. Put some positive spins on the features you’re now seeing as negatives. Send out some good vibes to create a great sale.

Better yet, call a home stager for professional advice on how to maximize your profits and minimize your time on the market.

Author, Martha Stanton-Smith, owner of Rearrangements, is a Certified Canadian Staging Professional who helps serious home sellers in Kingston, Ontario get full worth for their homes. She completed her staging training in 2006. Visit her profile here:

Cut the B.S. How Much Does Staging Cost?

At the Kingston Home Builders Association Home & Trade Show this weekend, I gave three presentations on home staging.  At the beginning of each session, I questioned the audience to find out what they most wanted to hear.  One fellow surprised me a little when he stated flatly that he wanted to cut through all the b.s. and find out how much it cost.

Since I read a lot of what is written about staging, I too am tired and frustratd by hearing the same statistics and trite sayings.  But, since every property and every staging  job is a little different, stagers do have to rely on statistics to prove their worth.  And, for the same reason, it’s risky to toss out a set number for cost because what you get for that amount will vary too.

Research, surveys and volumes of anecdotal evidence repeatedly show that staging increases selling prices and cuts selling time..  Higher selling prices bring return on investment for both seller and their agent by way of increased commissions.  Faster sales save holding costs for the homeowner and marketing costs for the agent.

The bottom line is if you don’t anticipate savings or a return on investment from staging a property for sale, then you shouldn’t be doing it.  At the end of the transaction, staging should cost you nothing; it should pay you to do it. 

As in making any other investment, your first steps should be to know your goals and research the market; in this case specifically your goals for selling and the real estate market in your area. Then you’ll have to choose from an array of things you could do to help your home sale based on which ones have the best potential.  Here’s a link to the results of the latest Home Gain survey which spells out the things you can do for the highest returns.
http://blog.homegain.com/home-improvement/homegain-2009-top-12-home-improvements-survey-results/

Brain Research Offers Insight Into Human Behaviour

Feb. 10, 2010. Business Week reported on research by neuroscientist, Benedetto de Martino of University College London (UCL), a visiting researcher at Caltech. The recently completed study shows that an almond shaped part of the brain called the amygdala is the source of human aversion to money loss. This function seems similar to the amygdala’s role in fear and anxiety. This part of the brain registers rapid emotional reactions. Previous studies at UCL had shown that decision making triggered both the amygdala and the prefontal cortex which is known to be involved in higher order reasoning.

If we thought our decision making was totally rational and logical, perhaps not. It seems that emotional responses play a part in our decisions before we even start the rational thought process.

As a real estate agent, a home seller or a home stager we shouldn’t ignore the scientific evidence on the role of emotion in human decision making. When a buyer is home shopping, we certainly don’t want to trigger his sense of caution with the “red flags” that hint of deferred home maintenance. We would be better off to use the impact of emotions to provide positive first impressions.