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Why Selling Your House on Your Own in 2021 Is a Mistake

Author: Jeannine Lemmon
Categories: For Sellers,FSBOs,Pricing,Selling Myths

There are many benefits to working with a real estate professional when selling your house. During challenging times, like what we face today, it becomes even more important to have an expert you trust to help guide you through the process. If you’re considering selling on your own, known in the industry as a For Sale By Owner (FSBO), it’s critical to consider the following items.

1. Your Safety Is a Priority

Your safety should always come first, and that’s more crucial than ever given the current health situation in our country. When you FSBO, it is incredibly difficult to control entry into your home. A real estate professional will have the proper protocols in place to protect not only your belongings but your health and well-being too. From regulating the number of people in your home at one time to ensuring proper sanitization during and after a showing, and even facilitating virtual tours, real estate professionals are equipped to follow the latest industry standards recommended by the National Association of Realtors (NAR) to help protect you and your potential buyers.

2. A Powerful Online Strategy Is a Must to Attract a Buyer

Recent studies from NAR have shown that, even before COVID-19, the first step 43% of all buyers took when looking for a home was to search online. Throughout the process, that number jumps to 97%. Today, those numbers have grown exponentially. Most real estate agents have developed a strong Internet and social media strategy to promote the sale of your house.

3. There Are Too Many Negotiations

Here are just a few of the people you’ll need to negotiate with if you decide to FSBO:

  • The buyer, who wants the best deal possible
  • The buyer’s agent, who solely represents the best interest of the buyer
  • The inspection company, which works for the buyer and will almost always find challenges with the house
  • The appraiser, if there is a question of value

As part of their training, agents are taught how to negotiate every aspect of the real estate transaction and how to mediate the emotions felt by buyers looking to make what is probably the largest purchase of their lives.

4. You Won’t Know if Your Purchaser Is Qualified for a Mortgage

Having a buyer who wants to purchase your house is the first step. Making sure they can afford to buy it is just as important. As a FSBO, it’s almost impossible to be involved in the mortgage process of your buyer. A real estate professional is trained to ask the appropriate questions and, in most cases, will be intimately aware of the progress being made toward a purchaser’s mortgage commitment. You need someone who’s working with lenders every day to guarantee your buyer makes it to the closing table.

5. FSBOing Is Becoming More Difficult from a Legal Standpoint

The documentation involved in the selling process is growing dramatically as more and more disclosures and regulations become mandatory. In an increasingly litigious society, the agent acts as a third-party to help the seller avoid legal jeopardy. This is one of the major reasons why the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

6. You Net More Money When Using an Agent

Many homeowners think they’ll save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save on the commission.

A study by Collateral Analytics revealed that FSBOs don’t actually save anything by forgoing the help of an agent. In some cases, the seller may even net less money from the sale. The study found the difference in price between a FSBO and an agent-listed home was an average of 6%. One of the main reasons for the price difference is effective exposure:

“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

The more buyers that view a home, the greater the chance a bidding war will take place, potentially driving the price higher, too.

Bottom Line

Listing on your own leaves you to manage the entire transaction by yourself. Why do that when you can hire an agent and still net the same amount of money? Before you decide to take on the challenge of selling your house alone, let’s connect to discuss your options.

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Why It’s Important to Price Your House Right Today

Author: Jeannine Lemmon
Categories: For Sellers,Move-Up Buyers,Pricing,Selling Myths

Even in today’s sellers’ market, setting the right price for your house is one of the most valuable things you can do. According to the U.S. Economic Outlook by the National Association of Realtors (NAR), existing home prices nationwide are forecasted to increase by 4.5% in 2021. This means experts anticipate home values will continue climbing next year. Danielle Hale, Chief Economist for realtor.com, notes:

“We expect price gains to ease somewhat in 2021 and end 5.7% above 2020 levels, decelerating steadily through the spring and summer, and then gradually reaccelerating toward the end of the year.”

How to Price Your House

When it comes to setting the right price for your house, the goal is to increase visibility and drive more buyers your way. Instead of trying to win the negotiation with one buyer, you should price your house so that demand is maximized and more buyers want to take a look.

As a seller in today’s market, you might be thinking about pricing your house on the high end while so many of today’s buyers are searching harder than ever just to find a home to purchase. But here’s the thing – a high price tag does not mean you’re going to cash in big on the sale. It’s actually more likely to deter buyers.

Right now, even when there are so few houses for sale, your house is more likely to sit on the market longer or require a price drop that can send buyers running if it isn’t priced just right from the very beginning.Why It’s Important to Price Your House Right Today | Simplifying The MarketIt’s important to make sure your house is priced correctly by working with a trusted real estate professional throughout the process. When you price it competitively from the start, you won’t be negotiating with one buyer. Instead, you’ll likely have multiple buyers competing for the house, potentially increasing the final sale price.

The key is to make sure your house is priced to sell immediately. This way, it will be seen by the greatest number of buyers. More than one of them may be interested, and it will be more likely to sell at a competitive price.

Bottom Line

Let’s connect to price your house correctly from the start so you can maximize your exposure and your return.

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Did You Outgrow Your Home in 2020?

Author: Jeannine Lemmon
Categories: For Sellers,Housing Market Updates,Move-Up Buyers,Pricing

It may seem hard to imagine that the home you’re in today – whether it’s your starter home or just one you’ve fallen in love with along the way – might not be your forever home.

Many needs have changed in 2020, and it’s okay to admit if your house no longer fits your lifestyle. If you’re now working remotely, facilitating virtual school, trying to exercise at home, or simply just spending more time in your own four walls, you may be bursting at the seams in your current house.

According to the latest Home Price Insights from CoreLogic, prices have appreciated 7.3% year-over-year. At the same time, the National Association of Realtors (NAR) reports that inventory has dropped 22% from one year ago.Did You Outgrow Your Home in 2020? | Simplifying The MarketThese two statistics are directly related to one another. As inventory has decreased and demand has increased, prices have been driven up.

This is great news if you own a home and you’re thinking about selling. The equity in your house has likely risen as prices have increased. Even better is the fact that there’s a large pool of buyers out there searching for the American dream, and your home may be high on their wish list.

Bottom Line

If you think you’ve outgrown your current home, let’s connect to discuss local market conditions and determine if now is the best time for you to sell.

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Homeowner Equity Increases an Astonishing $1 Trillion

Author: Jeannine Lemmon
Categories: Down Payments,For Buyers,For Sellers,Housing Market Updates,Move-Up Buyers,Pricing

In a year that was financially devastating for many Americans, some good news for most homeowners is the dramatic gain in home equity over the last twelve months. Last week, CoreLogic released its 2020 3rd Quarter Homeowner Equity Insights report, which reveals four major findings:

  1. S. homeowners with mortgages have seen their equity increase by a total of $1 trillion since the third quarter of 2019.
  2. The average homeowner gained approximately $17,000 in equity over the past year.
  3. This is a 10.8% increase in equity over last year.
  4. The average household with a mortgage now has $194,000 in home equity.

This has given many homeowners the ability to redesign their homes to meet their changing needs. Frank Martell, President and CEO of CoreLogic, explains in the report:

“The housing market has remained a strong pillar in an otherwise tumultuous economic year. A sharp rise in demand, spurred by record-low interest rates, continues to bolster homeowner equity. And with many people now spending more time than ever before at home, some homeowners have tapped into their strengthening equity to fund renovations.”

This build-up in equity also gives more options to homeowners who have been financially impacted by the pandemic. Today, homeowners with substantial equity are in a much better position to work out a deal with their lender if they cannot pay their mortgage. Alternatively, they also have the power to sell and walk away with their equity in the form of cash or as a down payment toward a more affordable house. Frank Nothaft, Chief Economist for CoreLogic, addresses the issue in the report:

“Over the past year, strong home price growth has created a record level of home equity for homeowners…This provides an important buffer to protect families if they experience financial difficulties and is one reason for the generational-low in foreclosure rates reported.”

Here’s a map showing equity gains by state:Homeowner Equity Increases an Astonishing $1 Trillion | Simplifying The MarketThis gain in home equity is a blessing for homeowners in these trying times, and it seems that the next two years will continue to reward those who own a home.

Last week, the National Association of Realtors (NAR) held their 2020 Real Estate Forecast Summit. At the summit, they shared the results of a recent survey of 23 economic and housing market experts. The median forecast among the experts called for home values to increase further by 8% in 2021 and 5.5% in 2022.

Bottom Line

In a year that has many of us reevaluating what “home” really means, those who own their homes have been rewarded with a financial windfall that averages $17,000 individually and totals $1 trillion nationally.

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Why It Makes Sense to Sell Your House This Holiday Season

Author: Jeannine Lemmon
Categories: For Sellers,Housing Market Updates,Move-Up Buyers,Pricing,Selling Myths

If you’re one of the many homeowners thinking about taking your house off the market for the holidays, hang on. You definitely don’t want to miss the great selling opportunity you have right now. Here’s why this month is the optimal time to make sure your house is available for holiday buyers.

The latest Existing Home Sales Report from The National Association of Realtors (NAR) shows the inventory of houses for sale has dropped to an astonishing all-time low. It now sits at a 2.5-month supply at the current sales pace.

Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market, in which there are enough homes available for active buyers (See graph below):Why It Makes Sense to Sell Your House This Holiday Season | Simplifying The MarketWhen the supply of houses for sale is as low as it is today, it’s much harder for buyers to find homes to purchase. This means competition among purchasers rises and more bidding wars take place, making it essential for buyers to submit very attractive offers.

As this happens, prices rise and sellers are in the best position to negotiate deals that meet their ideal terms. So, if your neighbors decide to remove their listings this season, your house may quickly rise to the top of a holiday buyer’s wish list if you stay on the market.

Today, there are many buyers who are ready, willing, and able to purchase. Record-low mortgage rates and a year filled with unique changes have prompted buyers to think differently about where they live and to take action. The supply of homes for sale is not keeping up with this high demand, making now the optimal time to sell your house.

Bottom Line

Home prices are appreciating in today’s sellers’ market. Making your home available over the next few weeks will give you the most exposure to buyers who will be actively competing against each other to purchase it.

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Are Home Prices Headed Toward Bubble Territory?

Author: Jeannine Lemmon
Categories: For Buyers,For Sellers,Housing Market Updates,Pricing

Talk of a housing bubble is beginning to crop up as home prices have appreciated at a rapid pace this year. This is understandable since the appreciation of residential real estate is well above historic annual averages. According to the Federal Housing Finance Agency (FHFA), annual appreciation since 1991 has averaged 3.8%. Here are the latest 2020 appreciation numbers from three reliable sources:

It’s easy to jump to the conclusion that house appreciation is out of control in today’s market. However, we need to put these numbers into context first.

Inflation and the Comeback from the Housing Crash

Following the housing crash, home values depreciated dramatically from 2007-2011. Values are still recovering from that unusually long period of falling prices. We must also realize that normal inflation has had an impact.

Bill McBride, the founder of the well-respected Calculated Risk blog, recently summed it up this way:

“It has been over fourteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index, was reported as being 22.2% above the previous bubble peak. However, in real terms (adjusted for inflation), the National index is still about 2% below the bubble peak…As an example, if a house price was $200,000 in January 2000, the price would be close to $291,000 today adjusted for inflation.”

The COVID Impact on Home Prices

The pandemic caused many households to reconsider whether their current home still fulfills their lifestyle. Many homeowners now want larger yards that are both separate and private.

Their needs on the inside of the home have changed too. People now want home offices, gyms, and living rooms well-suited for video conferencing. Barbara Ballinger, a freelance writer and the author of several books on real estate, recently wrote:

“While homeowners continue to want their outdoor spaces that offer a safe retreat, that appeal has shifted into other parts of the home, coupling comfort with function. In other words, homeowners want amenities for work and leisure, and they plan to enjoy them long after the pandemic.”

At the same time, concerns about the pandemic have caused many homeowners to put their plans to sell on hold. Realtor.com just released their November Monthly Housing Market Trends Report. It explains:

“Nationally, the inventory of homes for sale decreased 39.2% over the past year in November…This amounted to 490,000 fewer homes for sale compared to November of last year.”

More people buying and fewer people selling has caused home prices to escalate. However, with a vaccine on the horizon, more homeowners will be putting their houses on the market. This will better balance supply with demand and slow down the rapid appreciation.

That’s why major organizations in the housing industry are calling for much more moderate home appreciation next year. Here are the most recent forecasts for 2021:

This Is Nothing Like 2006

Finally, let’s put to rest some of the concerns that today’s scenario is anything like what led up to the last housing crash. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains why this is nothing like 2006:

“Such a frenzy of activity, reminiscent of 2006, raises questions about a bubble and the potential for a painful crash. The answer: There’s no comparison. Back in 2006, dubious adjustable-rate mortgages taxed many buyers’ budgets. Some loans didn’t even require income documentation. Today, buyers are taking out 30-year fixed-rate mortgages. Fourteen years ago, there were 3.8 million homes listed for sale, and home builders were putting up about 2 million new units. Now, inventory is only about 1.5 million homes, and home builders are underproducing relative to historical averages.”

Bottom Line

Most aspects of life have been anything but normal in 2020. That includes buying and selling real estate. High demand coupled with restricted supply has caused home prices to appreciate above historic levels. With the end of the health crisis in sight, we will see price appreciation return to more normal levels next year.

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With Home Values Surging, Is it Still Affordable to Buy Right Now?

Author: Jeannine Lemmon
Categories: For Buyers,For Sellers,Housing Market Updates,Interest Rates,Pricing

Housing inventory is at an all-time low. Realtor.com just reported that there are 39% fewer homes for sale today than there were last year. At the same time, buyer demand remains strong. In a recent newsletter, research analyst Ivy Zelman explained:

“Although the headwind of severe supply constraints in most markets has contributed to slight moderation in seasonally-adjusted and year-over-year new pending contract growth for two consecutive months (albeit still growing strongly), the underlying strength of buyer demand, particularly for this time of year, remains apparent.”

Whenever there’s a shortage in the supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the real estate market right now. As a result, home values are surging.

This is great news if you’re planning to sell your house. On the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. Purchasers, however, should realize that the price of a house is not as important as the monthly cost. Here’s how it breaks down.

There are several factors that influence the cost of a home. Two of the major ones are:

  1. The price of the home
  2. The mortgage rate at which a buyer can borrow the funds necessary to purchase the home

How do these factors impact affordability?

The National Association of Realtors (NAR) produces a Housing Affordability Index which takes these factors into account and determines an overall affordability score for housing. According to NAR, the index:

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:With Home Values Surging, Is it Still Affordable to Buy Right Now? | Simplifying The MarketThe blue bar represents today’s affordability. We can see that homes are more affordable now than they were from:

  • 1990 to 2008
  • 2017 to 2018

Buying a home today is just a little less affordable than it was last year, but still very affordable compared to historical housing market trends.

Note: During the housing crash from 2009 to 2015, distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.

Why are homes still affordable today?

The number one factor impacting today’s homebuying affordability is record-low mortgage rates. There’s no doubt that prices are on the rise. However, mortgage rates have fallen dramatically. Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.72%. Last year at this time, the average rate was 3.68%.

If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

At this point, home purchase affordability is still in a historically good place. However, we need to watch price increases going forward. As Mark Fleming, Chief Economist at First American, noted in a recent post:

“Faster nominal house price appreciation can erode, or even eliminate, the boost in affordability from lower mortgage rates, especially if household income growth doesn’t keep up.”

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Is Buying a Home Today a Good Financial Move?

Author: Jeannine Lemmon
Categories: First Time Home Buyers,For Buyers,Interest Rates,Move-Up Buyers,Pricing

There’s no doubt 2020 has been a challenging year. A global pandemic coupled with an economic recession has caused heartache for many. However, it has also prompted more Americans to reconsider the meaning of “home.” This quest for a place better equipped to fulfill our needs, along with record-low mortgage rates, has skyrocketed the demand for home purchases.

This increase in demand, on top of the severe shortage of homes for sale, has also caused more bidding wars and thus has home prices appreciating rather dramatically. Some, therefore, have become cautious about buying a home right now.

The truth of the matter is, even though homes have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. This is largely due to mortgage rates falling by a full percentage point.

Let’s take a look at the monthly mortgage payment on a $300,000 house one year ago, and then compare it with that same home today, after it has appreciated by 6.7% to $320,100:Is Buying a Home Today a Good Financial Move? | Simplifying The MarketCompared to this time last year, you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year.

But isn’t the economy still in a recession?

Yes, it is. That, however, may make it the perfect time to buy your first home or move up to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:

“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”

That thought is substantiated by the fact that homeowners have 40 times the net worth of renters. Odeta Kushi, Deputy Chief Economist for First American Financial Corporation, recently said:

“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”

Bottom Line

With home prices still increasing and mortgage rates perhaps poised to begin rising as well, buying your first home, or moving up to a home that better fits your current needs, likely makes a ton of sense.

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Don’t Let Buyer Competition Keep You from Purchasing a Home

Author: Jeannine Lemmon
Categories: First Time Home Buyers,For Buyers,Interest Rates,Move-Up Buyers,Pricing

This year’s record-low mortgage rates sparked high demand among homebuyers. Current homeowners, however, haven’t put their houses on the market so quickly. This makes finding a home to buy today challenging for many potential buyers. With an obstacle like this, those searching for their dream homes may be pressing pause on their searches as we approach the end of the year, but that could be a big mistake for many hopeful house hunters. Here’s why.

According to the most recent Housing Trends Report from the National Association of Home Builders (NAHB):

“The length of time spent searching for a home continues to grow.”

The report indicates that 62% of buyers now spend 3 months or more looking for a home, an increase from 58% one year ago. A primary cause for the delay is the heavy competition today’s buyers face when making an offer on a home. Based on recent data from the National Association of Realtors (NAR), the average house in today’s market receives 3.4 offers before it’s sold. This means for every buyer who purchases a home, there are on average two or three buyers who have to begin their search all over again.

Compared to this time last year, the NAHB report shows that buyers are having more success finding homes in their price range. However, it also notes the percentage of buyers saying they’re getting outbid when they make an offer has jumped from 15% to 27%. Buyers are indicating that bidding wars are a major obstacle to finding their dream home (See graph below):Don’t Let Buyer Competition Keep You from Purchasing a Home | Simplifying The MarketIf this is a challenge you’re up against in your home search, you’re not alone. Feeling stuck in the process can be frustrating, but if there’s ever been a year to power through, this is the one. NAHB noted:

“Difficulties finding a home to buy will likely lead 20% of active buyers to give up until next year or later. That share is up from 15% a year earlier.”

Experts anticipate home prices will continue to rise into 2021, and the incredibly low interest rates we’ve seen this year are also forecasted to increase as the economy strengthens. Hopeful homebuyers who decide to hold off on their search until there’s less competition run the risk of finding a more expensive housing market when they start looking again. If affordability is a key motivator behind your decision to buy a home, this winter is still the best time to make it happen.

Bottom Line

Bidding wars may be one of the greatest challenges buyers face in today’s housing market, but they shouldn’t be a deal-breaker. Having the right expert on your side throughout the buying process will give you the advantage you need when it comes to finding the right home and making a competitive offer. If you’re ready to buy this winter, let’s connect to discuss how to position yourself for success.

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