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My Castle is Worth What?

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This is a common phrase heard throughout the land from sellers to their Realtor. The “castle” is usually replaced with home, lifetime investment, retirement savings and a host of other words or phrases to describe where they live. It is often as if a homeowner is unaware of what is going on in the housing market or economy or that their investment has somewhat been insulated from the reality of the current market. My hope is to clear some things up regarding the sale of a home and how one should view the options. Below you will find how we Realtors come up with a “range of value” for a home.

As a practicing Realtor, I have my hand on the pulse of the market on a daily basis. I look at the national outlook… (bleak today with a forecast of bleak in the coming months) then look to what is happening in the Delaware, Southeastern Pennsylvania and Northeastern Maryland markets to see how they are doing in comparison. We are faring very well actually. That is not to say that we are out of the weeds just yet, but we are thankful not to be trying to sell in many of the markets around the Sun Belt or industrial areas of the north and Midwest. This daily ritual allows me to decide what to wear to work: work attire or the eve-present Grim Reaper outfit.

My job as a Realtor is to define the current market and help the seller understand his or her options. I don’t create the market; just interpret it based on a number of facts coupled with opinions of experts and predicted changes that may alter one’s ability to sell. For instance, a plant closing, company leaving, government facility relocating are examples of negative impact.

Job creation, being the recipient of a government facility relocating, interest rates and being part of a resort are positive motivators. The number one impact on housing is JOBS, and we all know that we are losing them at a level never seen before. Past sales are the basis for new sales. Banks are taking less and less risks and putting more and more pressure on purchasers to add to the already difficult process of procuring a loan. When a home comes on the market now days, it has to be sold four times:

1. The Realtor has to sell the price to the homeowner.
2. The Realtor has to sell it to other Realtors.
3. The home has to be sold to prospective purchasers.
4. The home must be sold to the appraiser who justifies the price to the bank.

Wow! That is very tiring. I am worn out by the marketing, follow-up, negotiations, inspections, renegotiations, qualifying and touring, and open houses to name a few services provided by Realtors.

There are only three things that sell a home no matter where you live or how much you are paid. Two can be controlled by the seller and one cannot: Price, Condition and Location.

Unless on wheels, you cannot move the home, but you can make sure it is conditioned (similar to homes in the area) and priced to sell. In today’s market we are in a price war and beauty contest at the same time. Couple that with the number of short sales and foreclosures currently on the market.
To assure a successful sale, Realtors can’t tell you what you want to hear, but what you NEED to hear.

In areas where foreclosures represent a good percentage of the sales, sellers have to lower expectations. Billboards, radio, TV, videos or newspaper ads will NOT sell a home. Condition and price will. The Internet, MLS and Realtor cooperation will expose your home to the WORLD instantaneously.

If you price it…they will come. Richard Smith, President and CEO of Realogy (C-21, Coldwell Banker, ERA and Sotheby’s) said, “People who price their homes to the market are selling them in a reasonable amount of time, but people who cling to 2004-2005 prices aren’t.”

He also says that you must, “take into account (bank-owned property) pressures, you’ll sell pretty quickly.”

It is completely understandable that sellers are frustrated and distraught about the value of their home. I personally spoke with two separate sellers who wanted to sell immediately and move on. Both were blending families, had their own home and wanted to start a new life together in a home they could call their own. It is remarkable how parallel their lives are as well as their circumstances.

After reviewing the data on their homes I concluded that the first couple would have to bring at least $15,000 to the settlement table on one home and a few thousand on the other. The second couple was “underwater” on their home by thousands, so the move would not be feasible at this time. What may have seemed like bad news at the time was actually just a reality of today’s market.

In both instances, flexibility was the solution. Plans had to be changed for the short term without losing sight of the goal. I did find a solution to help them achieve their goal and recommend all of you to do the same. Do an analysis of your loans every six months to see where you are currently.

Investigate whether you should pre-pay principal or refinance your loan. With refinancing comes a caution: Do not cash out and use the money for other things. Your home is not an ATM. This is one of the main causes for “underwater” mortgages. I advised the first couple in this scenario to refinance both loans. They dropped several hundred dollars off their monthly payment allowing them to plan to move forward quicker than they had anticipated.

The second couple will move into one, rent the other and stash cash for a few years. Compromise is a virtue today. Your short-term goals may have to change to midterm goals due to the economy that we are in now and may be in for years to come.

The last option I would touch on is to stay put. Wow! A Realtor talking people into not moving goes against the grain, right? Wrong! It is often the correct advice.

I personally cannot move without taking an enormous hit on my home. I purchased in 2006 at the height of the market and added money to make it “our home.” Since then, the properties dropped just like the rest of the market. The disposition costs would hover around 7 to 8 percent giving me a huge loss.

My solution is simple: Don’t sell…stay. My decision is to wait. Many others do not have the flexibility of riding it out due to something job-related, downsizing, relocating or financial difficulties. My hope is that I can ride it out and the value will go up. Either way, for now it is my home or that’s how I look at it.

Like the song says, “Should I stay or should I go!” Research first, find a good Realtor, explore your options because in the end…it’s the right direction.

 

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