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Handling Low Offers

I recently read this interesting article and found it enlightening.

TW


How to Handle Low Ball Offers
If your house has been on the market for quite a while, you may have already dropped your price and now you're waiting for the buyers to rush in and make wonderful offers on this now-priced right property. And then it happens.
The lone buyer does appear, like a bandit in the night and offers you even less than what you just agreed to. Quite a bit less -- about 10 percent less. So on your $350,000 house, that you just dropped to $324,000, you now have an offer for $299,000. With a seller subsidy request of $5,000. At this point, your net is $294,000.
So how do you handle such a low-ball offer. Well, first of all -- don't panic, get angry or lose sleep. Especially, don't reject the offer right off the bat and tell them to come back when they're serious. Remember, it's now a negotiation game and the buyer IS serious or he or she would not have made an offer.
Several things have happened before this offer came in. The buyer, with his agent, has researched the market, walked through as many as 30 or 50 properties, conducted a study on the value of the property and written an offer for your house. Remember, you just won the lottery. They could have written on any other house, but they selected yours. So let's get busy.
First of all, do an analysis of your own goals and needs. How much do you really need to come out of this house to meet your goals of moving to your next home? What could you really live with and what amount are you going to counter. Remember this last point -- what are you going to counter? This is assuming that you're not rolling over and that you're going to stay in the game.
Next, conduct a comparative market analysis of the house once again. What's happened in the market to get this buyer to offer such an offer (notice I didn't say 'low'). It might be that your house is now worth that amount. And if it is -- that's okay, because it probably means the house you wanted to buy up into is also worth less. At the worse, you're going to take away less money. The best thing to look at, however, is that now you're going to buy up with a smaller down payment because the buy-up property is also less.
Now, let's start the negotiation. Keep in mind, this is for the long haul. Keep it alive as long as the buyer will keep it alive. Give up a little bit at a time. If you reduced the house to $324,000, expecting an offer of $319,999 with closing costs of $10,000 -- then start there. You're already willing to accept a net of $309,999, so you're not really that far off. Understand you're not going to get top dollar with no seller subsidy. So come down to $320,000 and give them their closing costs. So now, your net has come up to $315,000.
Hey -- you're actually ahead of the game if they accept. Oops -- they don't. Now they've countered to $309,000 and still want the $5,000 in closing. (Now our net's at $304,000). Great. Just think. When you started, you were $324,000 apart (remember, you had NO offer at all). Now, you're only $5,999 away from the net you were willing to accept in the first place.
We're almost there. Now, before I go much further, here's a negotiation tip -- keep this civil. Use a lot of complements about the offer, the buyers and the agent. "What a great offer. Thanks so much for writing. We are very excited about selling this house to you."
You want the buyer agent and his/her clients to know you're wanting to work with them. You've been waiting six months for this day (negotiation day) and you want to keep everyone engaged in the process to get your goals met -- sold and on your way to your new home in the country.
Now offer your final counter (or maybe next to final). You definitely want to use the complements at this point: "We are so close." "I can't wait till we wrap this up, then we can all celebrate."
At this point, you know the buyers want to buy and your sellers are ready to start packing, so emphasize that you're very close. Use a dialogue like this: "We are so close. We have some goals to meet, just like you do. And I hope we can bring this together to get us both where we want to be."
This is when you make the final offer and stick with it. If you offer $314,000, they definitely get what they need and you get closer to your final net -- which at this point would be $309,000 -- just $999 off of your initial goal. Then you know if it goes forward or you're back on the market. However, don't be so stubborn that you lose the lone buyer because of $2,000 or so.
If the buyer is stretching and this won't work, this is when the honesty comes out. The agent may tell you, If we can't do $309,000, it's just not going to work. It goes too far beyond their qualification." Then you can decide whether to keep it on the market (hoping you don't have to drop the price again), or you cut the loss and move forward with settlement.
Be patient with the process. Don't get upset, remember, they're trying to meet goals just like you are. By working together, both can get what they want.

Written by M. Anthony Carr

Follow up on South Jersey Foreclosure info

From the Atlantic City Press:

Area foreclosures well below state and national figures By KEVIN POST Business Editor, 609-272-7250 (Published: November 3, 2007)

Atlantic and Cape May counties are trending better than the nation and rest of New Jersey on a key measure of real estate industry distress - household foreclosures.

In the third quarter, Atlantic County foreclosure filings declined 7 percent from the prior quarter while those in Cape May County increased 13 percent, both below the statewide foreclosure filing rise of 16 percent and far below the nationwide increase of 30 percent, according to RealtyTrac Inc.

For the year ending in the third quarter, Cape May County's rise in foreclosure filings was 10 percent and Atlantic County's was 46 percent, compared to 53 percent for the state and 100 percent for the nation.

The three-month period saw 436 filings in Atlantic County; 162 in Cape May County; 13,655 in New Jersey; and 635,159 in the nation.
Trends aside, local figures also showed fewer households in foreclosure per 1,000 households in southern New Jersey than elsewhere.

For the third quarter, Cape May County had 1.6 foreclosures per 1,000 households; Atlantic County had 3.5 in foreclosure; New Jersey had four foreclosures per 1,000 households; and the United States had 5.1 in foreclosure for each 1,000 households.

RealtyTrac is a foreclosure tracking firm based in Irvine, Calif. (End)
************************************************************************************

Okay...so lets focus on the Atlantic County data...3.5 foreclosures per 1,000 households. This amounts to 1 foreclosure per 286 households or a whopping 0.35% (partial loss...see previous blog).

I wonder how many credit card, financial, auto, etc... lenders would like to have a 0.35% loan loss? I would bet all of them!

The folks who have elected foreclosure will be in a messy credit situation for a few years and I am sorry that their families will be disrupted. But many of these loans were fringe loans and probably should not have been made (100+% loan to value).

The increases in foreclosures make great hedlines and support the publisher's business. But the reality in the Atlantic County market is that there are very few homes in this position and we'll see where the trend heads over the next year.

By the way, thank goodness we don't live in Nevada, California, or Florida.

TW

Cool, autumn tips for selling your home

Lowes Home Improvement sends me information on various topics but I enjoyed this quick snippet on presenting your home in the fall or anytime for that matter. If you are thinking about a new home or your are ready to sell your "old" home, please call me @ 609-335-3222 and I'll generate a free market analysis for you.

Less than one week until the Ghosts knock at the front door...hopefully it will cool down a bit or we may be serving lemonade to the kids (and parents!). TW

Ten Tips for Selling Your Home in the Fall Season

1. Make a good first impression. Your entryway sets the tone, so clean the front
door and polish the brass door knocker. If your
welcome mat has lost its luster, replace it with a
new one.

2. Wash the windows. On sunny days, the strong southern light
can reveal dirt and grime you might not have
noticed. Sparkling clean windows suggest
to potential buyers that your home is well
maintained.


3. Warm it up. Give your home that “cozy” feel by keeping
the room temperature warm and comfortable
during showings. Build a fire or turn on the gas
logs – but only if you plan on returning home
right after the showing.


4. Add seasonal touches like warm throws and
fall floral arrangements. Update your planters
with fall favorites such as pansies and mums.

5. Give your home a nice aroma
with a cinnamon candle, freshly baked
chocolate chip cookies or a faint pine scent.
But don’t overdo it, as buyers might wonder
what you’re trying to cover up.

6. Turn on the music. Create a relaxed atmosphere by playing
classical music or soft jazz, but keep the
volume low.


7. See the light. Shorter days means less natural
light, so make the most of your indoor and
outdoor living spaces with well thought out lighting plans.

8. Clean gutters. After the leaves have fallen,
clean your gutters before snow and freezing
rain set in. Clogged drains can cause back ups,
resulting in visible water damage that could
scare buyers away.


9. Keep walkways clear. When the temperature
drops below freezing, make sure your home
is easy to show by keeping walkways and
driveways free of snow and ice. A treacherous
path to your front door can keep potential
buyers inside their cars!


10. Paint works wonders. If your walls need
a fresh coat, check out the latest fall color
trends. Remember that neutrals
work best when selling a home, but you can
use throw pillows and small area rugs to bring
the autumn colors to life.

Halloween time...

It's pumpkin picking time...get out those stencils and carve out the toothless faces!!! Remember, Terror in the Junkyard in "Skullville" runs all month...go get your scream on!

Whether you’re growing your own, visiting a local pumpkin patch or browsing at the store, there is a technique to finding just the right pumpkin. Carefully chosen pumpkins will last longer, look nicer, and taste better.

First, choose a design to carve before you go shopping for pumpkins. Think about which shape would best suit your design–tall and narrow? Flat and round? If you’re going to use stencils, look for a pumpkin with a shape similar to the pattern you’re going to carve.

Check for a smooth, uniformly colored skin. The flesh should be firm, not elastic in any way. Inspect the entire pumpkin. Stay away from pumpkins with bruises, cuts, scratches or any signs of mold. If you’ll be using stencils, steer clear of dents as well.

Keep an eye out for smaller, “sugar” pumpkins for eating. Not all pumpkins will taste good in a pie. Sugar pumpkins are 200-250mm (8-10″) in diameter and will have smoother, less stringy flesh than a decorative pumpkin.

Knock on the shell. Ripe pumpkins will make a “hollow” sound. If the pumpkin is the on the vine, the vine should be dry and the stem should be hard and brown. The ripeness of the pumpkin might not matter as much if you’re only interested in carving (in which case an unripened pumpkin might last longer).

Set the pumpkin up to make sure it sits level. You don’t want to choose a pumpkin for carving only to find that it won’t sit up straight for you. If the pumpkin grew on its side and has a flat spot there, you might be able to incorporate it into your design or turn that side against a wall so it isn’t seen.
Pick up the pumpkin from the bottom–never from the stem. It can break off easily. If it does break, save the stem because you can often patch it back on with toothpicks.

Handle it carefully on the way home. Don’t slam it down on the table or let it roll around in the trunk. Any bruises will shorten the pumpkin’s lifespan.
Store your pumpkins in a cool, dry place. Doing so will help cure the rind, making it less vulnerable to rot.

It’s always best to seek pumpkins straight from the vine, because you’ll have a better idea of how fresh and ripe it is, and they’ll have avoided the abuse of being transported. Some types of pumpkin ripen faster than others. If you’re dealing with an unusual pumpkin variety, research it and adapt these instructions accordingly.

Since a pumpkin is a member of the winter squash family, it’ll last quite a while in storage. It’s only when it’s carved that it’ll begin to deteriorate rapidly.

Happy Picking!

what do buyers want in a home?

I took the NAR quiz on features that home buyers most treasure...whew, thank goodness I scored a 10!


You really know what buyers like. While every home buyer has different preferences, you know that buyers also can be a lot alike. Keep up the good work! By staying on top of national trends in buyer preferences, you’ll be able to better assist your customers during their house hunt — and when they say they want a bigger garage, you’ll hardly be surprised. To learn more, check out NAR’s 2007 Profile of Buyers’ Home Feature Preferences.

1. What single home feature do buyers say they want most in a new home?

Your Answer Is Correct: Central air conditioning

Staying cool is important to buyers in all regions of the country. Nearly three-quarters of home buyers ranked central air conditioning as “very important” for their new home, and 83 percent of buyers purchased a home with central air. Other highly desired home features: a garage for two or more cars (57 percent), a walk-in closet in the master bedroom (53 percent), and a backyard or play area (50 percent).

2. What’s the median size of homes purchased between late 2005 and early 2007?

Your Answer Is Correct: 1,840 square feet

Home sizes are growing. The size of the typical home purchased by survey respondents increased by 100 square feet since 2004, according to the survey results. Meanwhile, the median age of recently purchased homes decreased to 12 years from 15 in that same time span.

3. Repeat buyers tend to be choosier than first-time buyers. In particular, repeat buyers place much more emphasis on these home features:

Your Answer Is Correct: Oversized garages and master bedroom walk-in closets

Sixty-five percent of repeat buyers said they wanted a garage with two or more spaces, compared with 41 percent of first-time buyers; 61 percent said they wanted a walk-in closet in the master bedroom, compared with 38 percent of first time buyers. Although repeat buyers placed more importance than first time buyers on nearly all home features surveyed — with the exception of a backyard or play area, and proximity to work — big garages and walk-in closets are two features that repeat buyers were much more likely to seek in their new home.

4. Within three months after buying their new home, nearly half of all buyers remodeled or made improvements to which part of the house?

Your Answer Is Correct: Kitchen

Six in ten buyers took on remodeling or home improvement projects soon after buying a home, according to the survey, and the kitchen was most often involved. Nearly half (47 percent) of home buyers remodeled or made improvements to their kitchen within the first three months. Other common projects include remodeling bathrooms and bedrooms, and adding new appliances and lighting. Overall, the typical buyer spent $4,350 on home improvement projects within the first three months.

5. Which home feature saw the biggest jump in buyer popularity since 2004, when NAR conducted its previous buyer preference survey?

Your Answer Is Correct: Oversized garage

The most significant change between the 2007 survey and the previous 2004 survey was in the number of buyers who said oversized garages were important in their home purchase decisions. In that time frame, oversized garages (for two or more cars) gained 16 percentage points to 57 percent. What’s more, 56 percent of buyers who purchased a home without an oversized garage said they would have paid extra for one, while in the 2004 survey only 6 percent said they’d be willing to pay extra. Other features growing in popularity: hardwood floors, granite countertops, and cable readiness.

6. What three features did buyers say they’d be most willing to pay extra for in a home?

Your Answer Is Correct: Central air conditioning, walk-in closets, and hardwood floors

Buyers aren’t afraid to spend money on the features they really want, according to the survey. Sixty-five percent said they’d be willing to pay extra for central air conditioning — in fact, they’d pay a median of $1,880 extra for a home with it. Sixty percent said they’d pay extra (a median of $870) for walk-in closets, and 57 percent said they’d pay more (a median of $1,900) for hardwood floors. Buyers were willing to pay the most for a waterfront property, an extra $4,760.

7. A home’s energy efficiency is most important to which segment of buyers?

Your Answer Is Correct: New-home buyers

Of all buyers, nearly half reported a home's energy efficiency was "very important", but new-home buyers were particularly concerned. Sixty-five percent of buyers of homes one year old or newer said energy efficiency was "very important" in their home search. On the other hand, 32 percent of those who purchased homes 51 years or older said energy efficiency was "very important".

8. Where do first-time home buyers tend to purchase a home?

Your Answer Is Correct: Suburb or subdivision

Suburbs are still the most popular place to live, even for first-time buyers. Slightly more than half of this buyer segment purchased a home in a suburb or subdivision, compared with 20 percent who purchased a home in an urban or central city area, and 20 percent in a small town. Only 10 percent of first-time buyers bought a home in a rural area.

9. What’s the most common type of home purchased?

Your Answer Is Correct: Single level

Overall, 47 percent of buyers purchased a single-level home, while 44 percent of buyers purchased a two-level home. Nine percent of buyers bought a home with three or more levels. In general, the older the home buyers, the more likely they are to buy a one-level home.

10. What did new-home buyers most wish their home had more of?

Your Answer Is Correct: Storage

Can a home ever have enough storage? Nearly half of new-home buyers said more storage space would make their residence ideal. Among all buyers — of homes both old and new — 40 percent would have preferred more closets and nearly 60 percent wish for a larger kitchen. Regardless, more than 90 percent of home buyers said they are satisfied with the home they purchased.

Randy Pausch has something to say...

If you haven't taken the time to see this lecture, do it this weekend. I saw excerpts on GMA this morning and I was really engaged in this man's journey and courage. Here is a summary:

"Randy Pausch is a pioneer in virtual reality, a computer science professor, a Disney Imagineer, an innovative teacher, and the co-founder of the best video game school in the world. One year ago he was diagnosed with pancreatic cancer, and after a long and difficult fight he's been given just a few more months to live. This week he gave his powerful, funny, and life-affirming last lecture to a packed auditorium at Carnegie Mellon University, entitled "How to Live Your Childhood Dreams". The WSJ's summary, and a direct link to the complete video of the lecture (2 hours, and unfortunately streaming WMV). Warning: hilarious jokes about dying."

If you do a search on youtube for "Pausch", you'll find some clips too.

foreclosure information??????

Okay, so here is an except of a report that I read over coffee this morning (yes, I realize that I am boring...informed, but boring):

"Nevada, California, Florida post top state foreclosure rates

Nevada continued to register the nation’s highest state foreclosure
rate, one foreclosure filing for every 165 households - more than three times
the national average. The state reported 6,197 foreclosure filings during the
month, a 21% increase from the previous month and more than triple the
number reported in August 2006.

California’s foreclosure rate jumped to second highest among the states
thanks to a 48% month-over-month spike in foreclosure activity. The state
reported 57,875 foreclosure filings during the month, a foreclosure rate of one
foreclosure filing for every 224 households - more than twice the national
average.

Florida foreclosure activity jumped 77% from the previous month,
boosting the state’s foreclosure rate from seventh highest to third highest
among the states. The state reported 33,932 foreclosure filings, a foreclosure
rate of one foreclosure filing for every 243 households.
Other states with foreclosure rates ranking among the nation’s 10 highest were Georgia, Ohio, Michigan, Arizona, Colorado, Texas and Indiana.

Seven of the top 10 states in terms of total foreclosure filings in
August were located in the Sun Belt, and three of the top 10 states were in the
Rust Belt. After California and Florida, Ohio registered the third highest state
total, with 17,793 foreclosure filings during the month. The state documented a
foreclosure rate of one foreclosure filing for every 281 households, fifth
highest in the nation."

Still with me? Drink some more coffee! Lets guess who published this data? Yes, that's right...a company who specializes in selling foreclosure information to lenders, banks, real estate agents, etc... Obviously, their "twist & turn" on the data is that there is doom & gloom on the horizon (after all, the Halloween season is approaching) and we have the data to help you make money...just pay us some money.

The national average for foreclosures filed (not finalized through the courts but just filed because you have not been paying your loan timely) is approximately 1 in 400 homes. Seems like a relatively small percentage to me. I would guess that the expected loan loss on mortgage loans would be pretty low relative to the bank's assets, earnings, other credit portfolios, etc...

If a home goes into foreclosure, many banks take the home into inventory and attempt to sell the home on the open market. Unless the loan was 100% loan to value, the bank should be able to re-coop much of its loan value...not all, but not a complete loss either.

When a bank has a loss from a credit card portfolio, do you believe that they are coming for the Walmart stuff you bought a month ago? The bank will take the used Dodge Caravan that has depreciated 50% in two years but think of that loan to value differential. How about a boat loan (yes, that hole in the water that you pour money in)? Even worse.

So where are the problems? Lets begin with re-evaluating 100% loan to value lending. There are times when it is appropriate, but not as many occasions as it has been used to fund home purchases. I wonder how many loans that included a 20% down payment have defaulted?

Lets limit the rhetoric in the media...the media loves these "top ten" reports. But when the data is coming from the business that is promoting foreclosure services, what data do you think we will hear? While I am at it, lets also limit the real estate folks from saying that the housing market is robust while in "reality", the real estate market is relatively flat from a value perspective and declining from a # of units sold perspective.

Your home should be your primary investment and the one asset that you need to keep maintained at good marketability standards. Rip up the credit cards (you'll be surprised how good that feels!), drop the car payments (used Toyota's and Honda's run a very long time), and get financially healthy. There will be less to fret over and you can ignore the "doom & gloomers"!

News from Craig Alleva at Ivy League Mortgage!!

Just click on the image to enlarge...unless you have really good eyesight!

Tom.......

"STATISTICS," Thomas Carlyle, the Scottish writer and philosopher remarked, "are the greatest liars of them all." Carlyle was writing in the first half of the 19Th century, but his words carry weight for today's real estate market.

I will not bore anyone with the differences in statistical terms (sorry Dr. Kersnick!), but there is a great amount of misreported data in the media. Here is a piece I read this morning:

"Home Prices Weakest in Decade--Global Insight, a company for economic and financial analysis and forecasting, released the 2007 second-quarter update of House Prices in America, the U.S. housing-valuation analysis, which shows the incidence of overvaluation in the nation’s housing market continues to decline, the result of falling home prices. Nationally, home prices are up year-over-year just 2.6%, the weakest gain since 1995."

Wait a minute! Prices are weakest in decade yet the prices are up 2.6% year over year? Given the steeper increases during 2004-5, isn't the increase fairly reasonable? Of course, real estate prices are impacted on a regional basis so lets take a quick look at the recent southern NJ market stats (from the South Jersey MLS).

Comparing the first two quarters of 2007 vs. 2006, the number of units sold declined 18.6% but average (oh no, a statistical variable) home prices INCREASED 5.8% driven by 5+ bedroom homes which are up 19.6%! Days on market increased 23.8% consistent with units sold (86 days for three bedroom homes).

What conclusions can we draw from this data? I am not sure...that's correct, I am not sure because statistics are so misleading. But I wander a bit since this is my blog and offer a guess-estimate.

The flattening of the home prices may be caused by the interest rate environment (although higher than previous years, it is still reasonable given the historical perspective) and it's impact on affordability. I doubt we are experiencing the same number of homeowners upgrading their homes since the monthly mortgage payment is not flat when upgrading.

I have informed my clients (sellers & buyers) that the local market is stable...not robust but not as flat as many in the media have reported. Since there are many over-priced homes offered, you need to pick through the piles of data to unearth the fairly priced homes. I expect that the sold home prices will continue on a fairly flat curve/line, but we may see the listing prices come closer to where homes are actually selling.

I am sure someone will massage a stat or two that "proves" that I am a liar!