"Non-Buyer's Remorse"

Coaching 1st-Time Buyers

Everyone knows what Buyer's remorse is: the feeling you get, after you've bought something, that you just made a horrible mistake.

So, what is non-Buyer's remorse?

The feeling you get when you find out that the house you were furiously deliberating about buying, instead sold to someone else.

I counsel first-time Buyers weighing a purchase decision to imagine how they'd take such news.

If they think their reaction would be indifference (or similar) . . . it's not the right house.

(I suppose the appropriate name for that sentiment would be "non-Buyer's non-remorse").

P.S.: Buyers should trust their gut on this one only if they already have done their homework and know the market.

And, this test doesn't apply to investors.

P.P.S.: It's been awhile, but my advice to Buyers in multiple offers is similar: 'the right price to offer is the price you can live with if you get the house . . . . and the price you can live with if you don't.'

Realtor as Conduit -- and Filter

When Do You Tell the Seller?

The Buyer's Agent called you up after the first showing to say it went well, and to ask a few questions about the house's condition.

The second showing was yesterday.

Then, mid-afternoon today, the Buyer's Agent called to say that she is meeting with her client tonight to write an offer, and that she expects to have it to you tomorrow morning.

Question:

When do you tell your client, the Seller, that you're expecting an offer?

My answer (and most experienced Realtors'): never.

(Sorry, it was a trick question.)

Rather, the time to tell your client that you have an offer in hand for their home . . . is when you actually have an offer in hand for their home.

Managing Expectations

Which is not to say that my clients don't know what's going on -- they do.

Depending on their guidance and wishes, I'll typically relay showing feedback as I receive it, and give periodic reports about what's happening (or not) in the market around them.

But I've learned from experience that nothing's worse than calling an anxious, expectant client to alert them that an offer is imminent, then waiting.

And waiting.

A small percentage of the time, I suspect the other agent (or their client) of purposeful manipulation.

However, by far the more common scenario is that their clients cooled off on the home, warmed up on another, or simply got busy at work, home, etc. and couldn't find the 2-3 hours it takes to meet with their agent to formulate an intelligent offering price, then write a careful and thorough Purchase Agreement (add 50% for first-time Buyers).

As a Listing Agent, I'll certainly be in regular touch with the Buyer's Agent (and any other Buyer's agents who've expressed interest).

However, it 'ain't a real offer till I have it in hand.

P.S. As far as I'm concerned, it's not a done deal till my (Selling) client's proceeds check shows up on their bank statement!

New List in Fern Hill

Fern Hill for (Just Over) $200k!

Where: 2615 Monterey Ave. in Fern Hill
What: 2 BR/1 Bath stucco cottage just down the street from Cedar Lake
How (much): $209,900
When: on market 2 days (came on Monday)
Who: Ross Kaplan, agent; Edina Realty, broker

You won't find a more affordable single family home closer to Cedar Lake than this stucco cottage.

Highlights include a ton of charm and character (maple floors, custom moldings and mill work, clawfoot tub); all new windows; and an especially deep lot (140 feet) perfect for pets, gardening, or storing a kayak (or two!).

This home's perfect for a first-time Buyer, someone downsizing, or as a condo alternative.

I'll be there this Sunday from 2-4 p.m. for the first open house.

Or, please feel free to call me (612-925-7701) to set up a private showing.

"How Long Will My House Take to Sell?"

The Second Most Popular Question in Real Estate

What's the second most popular question in real estate? (the first being, "what's my home worth?")

"How long will it take to sell my home?"

Unless the Realtor is going to buy it, the honest answer is, "I don't know."

However, it is possible to give the owner an estimated range, based on the following four, inter-connected variables:

One. Price.

The higher, the longer.

Locally, for example, there is currently a two year supply of $1 million-plus homes for sale in Edina.

If you are contemplating selling one . . . that's how long you can expect to be on the market.

By contrast, smaller, more affordable homes in popular Twin Cities neighborhoods like Linden Hills and Fern Hill take an average of 3-4 months to sell now.

Lately, homes under $250k or so in particular tend to sell fastest because they appeal to first-time home Buyers, who by definition don't have to sell another home in order to buy.

Two. Condition and updating needs.

As I've blogged previously, homes that require major updating (over $100k) have been tough sells in today's market because Buyers have to have that money in reserve.

Cheap mortgages -- and they're now well under 5% -- don't make it any cheaper, or easier, to tackle a major remodel.

Three. Relative Value.

Homes that are well-priced, staged, and marketed relative to their peers sell faster.

Always have, always will.

Four. Broad or narrow appeal, or, "the quirky factor."

Yes, it's true that "all real estate is unique" -- but some real estate is more unique than others.

It's also the case that there's "good unique" and "bad unique."

So, views of the Minneapolis skyline from the west side of Lake Calhoun would be an example of the former.

A home with an odd floor plan and a hodgepodge of architectural styles, the latter.

The common denominator in all four of the above variables is, how broad or narrow is the potential pool of Buyers for the home in question?

As a general rule, the broader and deeper the pool of prospective Buyers . . . the shorter the market time.

The Plight of the "Move-down Buyer"

Stuck in Place

A healthy housing market functions like a gigantic escalator.

The bottom rungs are occupied by first-time Buyers. As they purchase entry-level homes, the Sellers of those homes ("Move-up Buyers") typically buy larger homes, enabling Sellers of those homes to buy even bigger homes.

And so on, and so on.

One of the most remarked consequences of the housing bear market the last three(?) years is that falling real estate prices have clobbered the equity of move-up Buyers.

So, the money they need for a downpayment to buy a bigger home is either diminished -- or gone.

In the most distressed housing markets -- places like Florida and Las Vegas -- many people who bought at the peak are now "underwater" (they owe more than their home is worth) to the tune of tens (or hundreds) of thousands of dollars.

Voila! No more moving escalator.

Stranded at the "Top of the Food Chain"

All of the foregoing is now very-well documented.

Less remarked is the plight of the "move-down Buyer" -- the owner of a bigger home, typically close to retirement age, who is ready for a smaller dwelling, but is unable to sell (also known as a "down-sizer").

If move-down Buyers are lucky, they bought decades ago, and have so much equity that even a 30% drop in housing prices still leaves them able to sell (and they've been prudent enough -- and financially secure enough -- to leave that equity untapped through the years).

It's also true that financial products like reverse mortgages can help move-down Buyers (at least the ones over 62 years old) transition to a smaller home.

However, the flip side of buying a bigger home decades ago is that the same home today could easily require hundreds of thousands of dollars of updating and remodeling to appeal to today's (financially hamstrung) Buyers.

Even if those Buyers can still muster a six-figure downpayment and qualify for a jumbo mortgage, coming up with a couple hundred grand for remodeling, out-of-pocket is (often) the kiss of death.

So what happens?

Nothing.

Move-down Buyers can't sell, which means that the owners of homes at lower price rungs can't sell -- and so on, and so on.

Public Policy Implications

The foregoing dynamic suggests that the best way to unfreeze the housing market isn't to buttress first-time Buyers, as policymakers have done so far.

Rather, the smarter approach is to help move-down Buyers.

That could be done by making a pot of cheap money available to Buyers undertaking major remodeling (cheap purchase money, courtesy of the Fed, doesn't do it); by giving tax credits to Buyers who tackle such projects; or even by giving incentives to investors to buy and remodel such homes.

Such a strategy not only would unlock the housing market's frozen upper brackets, but it would have a huge ripple (multiplier) effect as billions of dollars spent on labor and materials coursed through the economy.

Which all makes eminent, common sense.

After all, as everyone knows, a working escalator needs to go down as well as up.

Plodding Pace of Year-End Deals

Hurry Up and Wait

If you're a prospective home Buyer who initiates a deal just before Christmas -- especially if it's a bank-owned property -- you're likely to get everything wrapped up a week into the New Year (if you're lucky -- I've got one in progress now).

If you're a Buyer who initiates a deal after the 1st, you're likely to get everything wrapped up . . . about a week into the New Year (if you're lucky).

Which is a pretty good case for just waiting until after the 1st.

That's especially true for first-time Buyers, who typically have the hardest time waiting to find out if their offer has been accepted, rejected, countered, etc.

Baseball Metaphors & the Housing Market

Willie Keeler & The "Asterisk '90's"

Surveying the real estate market from a Realtor's perspective the last year -- and the prospects for next year -- conjures up some parallels with baseball.

Namely, it's the era of the "singles" hitter.

Just as some periods in baseball seem to be dominated by sluggers (think, Mark McGuire and Sammy Sosa in the late, "asterisk" '90's) -- others seem to favor singles hitters like Pete Rose and Rod Carew.

This would be the latter era for Realtors.

Selling What's Selling

Instead of hitting "home runs" -- upper bracket homes fetching north of $1M -- by far the most active part of the housing market is the lower rungs (call it under $200k) where first-time Buyers predominate, and the government's tax incentives loom largest.

It's also the part of the market that can have the biggest deals: dramatically written-down bank foreclosures (often times in a condition to go with).

Think of it as the opposite of Willie Keeler's explanation for his hitting prowess: 'I hit 'em where they ain't.'

In today's housing market, the trick is to sell what people are buying . . .