“You are much grander than you think you are.” — Asara Lovejoy: Human potential author and coach
IS SHORT SALE OR FORECLOSURE MY BEST OPTION?
We get asked this question quite often. In a rapidly changing market, it is difficult to give absolute answers. Much depends on your family’s personal situation. However, if you realize that you can no longer make the payments, you may have to decide between doing a short sale or letting the home go to foreclosure. Here are three things you may wish to consider:
1.) Impact on Your Future Ability to Get a Mortgage
There are many different lending institutions, each with their own requirements when it comes to your ability to obtain a mortgage in the future. However, a common trend is to be much more lenient with someone working through a short sale rather than letting the house go to foreclosure. As an example, the Fannie Mae site, Know Your Options explains you:
May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (at least 7 years)
You can get further information here. However, in a rapidly changing environment, make sure you get the latest information available from the actual lending institutions mentioned.
2.) Impact on Your Credit Score
There has been much dialogue on this issue. The question is whether or not a foreclosure will have a more severe impact on your credit score than a short sale. A recent FICO study sheds needed light on this question. Here is a chart from that report.
The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.
We can see that there is very little difference in impact on your credit score whether you choose a short sale or a foreclosure.
3.) Impact on Your Family during the Move
Usually a family asking this question is already experiencing major financial difficulties. This may be putting immense pressure on both parents and the children. If you allow your home to go to foreclosure, you move and leave it vacant or you stay waiting for an official to knock on your door demanding you move. That added burden can cause even more stress for a family.
In the short sale process, you work with the bank and pre-determine the day you will move. The new purchasers usually move in the same day. Your family moves with a plan and you don’t leave the neighborhood with a vacant house to deal with. There is a level of dignity in this type of move that does not always take place in a foreclosure situation.
For several reasons, a short sale may be the better option for your family. It is best to get professional advice if faced with this decision.
4 KEYS TO SELLING IN TODAY’S MARKET
Home sales and prices are still dropping around the country as huge inventories of foreclosures and short sales continue to weigh on many markets. So how can traditional sellers stand out in a crowded real estate marketplace? CNNMoney.com recently highlighted several keys to getting a home sold in a tough real estate market.
1. Cut your price by a lot. Buyers nowadays want to feel they are getting a “steal,” real estate experts say. But some sellers may be tempted to list a property above fair market value just to test out the market and see if they can get a taker. In the past year, about 25 percent of sellers who initially listed their homes too high ended up having to reduce the price, according to Trulia.com.
“The first 30 days on the market are the most important,” says Elizabeth Kamar, a real estate professional in Norwalk, Conn. That crucial time is when the home gets the most attention and showings. For sellers who aren’t realistic about the price from the get-go, they often end up with less than they would have if they priced it right initially, Kamar says.
Experts also note that if after 30 days on the market there are still no buyers, sellers may need to make a big move.
“When a property sits, people start thinking it must be listed too high,” says Ellen Klein, a real estate professional in Rockaway, N.J. She suggests making a giant price cut–as much as 10 percent of the asking price–which may be extra motivation for buyers to take a second look or attract a new pool of potential buyers seeking a lower price range.
2. Play hardball in negotiations. Sellers shouldn’t feel they have to accept any lowball offer that comes their way. However, if a buyer is willing to negotiate, that’s when sellers need to try to set aside feelings of anger or insult and start to counteroffer, says Mabel Guzman, president of the Chicago Association of REALTORS®. Guzman says the ideal is that you’ll be able to negotiate within $10,000 to $20,000 of an acceptable offer. Using incentives–such as agreeing to leave the appliances–may get buyers to budge in agreeing to a higher price.
3. Stage it. Staging is becoming popular in trying to sell mid-range homes. Professional stagers will help home owners highlight key areas of a home and often rearranges furniture or bring new furniture in, repaint, and get the home looking like it’s ripped from a catalog. Real estate brokers say that proper staging can actually speed up a sale and increase the final sales price too.
4. Get the home in front of as many buyers as possible. The real estate professional needs to get creative in the marketing to make sure the home gets a lot of attention from buyers. “The more eyeballs that get on the listing, the better,” says Katie Curnutte of the real estate information web site Zillow.com.
One key: Boosting the home’s online presence. Having 20 instead of five photos will nearly double the number of hits the property gets on the Web, according to Zillow.com. Incentives can also draw out buyers, such as with offers to cover a buyer’s closing costs, pay the first year’s property taxes, or even a $1,000 gift card (and maybe one for the buyer’s agent too). (Note: You must disclose any such gifts or payments when the offer is agreed on.)
BUYING BEATS RENTING IN 80 PRECENT OF U.S. CITIES
Thanks to falling home prices and rising rents, would-be home buyers have the upper hand this house-hunting season. In nearly 4 out of 5 major U.S. cities, it’s now cheaper to buy a home than to rent. That’s up from 72 percent of cities last quarter, based on the Rent vs. Buy Index released by online real estate resource Trulia.
“With home prices nearing a double-dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” said Ken Shuman, head of communications at Trulia, in a press release. “As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”
Areas with the most affordable housing market conditions tend to be cities hardest hit by the foreclosure crisis, including Las Vegas, Phoenix, and Miami. Meanwhile, those with more affordable rental markets included New York City, Los Angeles, and Seattle. Omaha, San Jose, and Detroit had some of the largest quarter-over-quarter jumps in favor of homeownership.
The time factor is one of many stumbling blocks preventing house hunters from making the jump from window shoppers to homeowners, Miller says. During the housing boom, homeowners were virtually guaranteed to make money or at least break even on their home sales, regardless of the period they owned the home. In today’s market, experts see home prices appreciating much slower, therefore home owners will have to make a longer commitment to their housing investments than in previous years. “The future upside is much farther down the road,” he says. “You’re looking at five, maybe 10 years out of this sort of rocky bottom.”
Until consumers regain confidence in the housing market and economy, Miller and others expect the rental market will continue to benefit from apprehensive house hunters. “There’s been some erosion in attitudes toward homeownership,” says Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University. “There’s two parts to the home buying decision: the will and the way.”
Despite the numerous obstacles for prospective home buyers, experts remain confident that improving employment and economic data will breathe life into the housing market this spring and summer. More Americans signed contracts to buy homes in March, according to the National Association of Realtors’ pending homes sales index–up 5.1 percent–a signal that could mean more house hunters are snapping up bargains. “We’re sort of in that in-between phase,” says Heather Fernandez, vice president of marketing at Trulia. “People aren’t running out to buy that dream house yet because they’re not that confident. But we’re starting to see consumer confidence shift, people are more interested in home buying, rental rates are still high, and therefore, just based on the numbers, increasingly homeownership is becoming more affordable across the U.S.”
SURVEY SHOWS POTENTIAL FOR GROWTH IN ONLINE AD SPENDING
One in four Realtors spent less than 10 percent of their advertising budget online last year, suggesting there’s still plenty of room for growth in 2011, according to a survey by ThinkEquity LLC.
The online survey of 162 Realtors found 47 percent spent more than half of their advertising budget online last year, and that 58 percent of agents were planning to increase their online ad spending in 2011. One in three said they spent 61 percent or more of their advertising budget online.
“Compared to print advertising, our survey results show respondents overwhelmingly believe Internet advertising is much more valuable,” ThinkEquity analysts said in a report on the survey.
Among those surveyed, 68 percent said print advertising is of little or no value for classified listings, and 60 percent said print was of little or no value for lead generation. A majority of agents said print ads are still useful for brand building, including 17 percent who said print ads were “high value” when used for that purpose.
In contrast, the percentage of agents who believed Internet advertising was of little or no value for classified listings, lead generation and brand building was below 20 percent.
Most of those surveyed — 58 percent — said they plan to increase their online ad spending in 2011, while 39 percent said they plan to decrease print ad spending.
The vast majority of agents said their listings appear on their multiple listing service’s public-facing website (92 percent), Realtor.com (86 percent), their broker’s site (74 percent), their own website (72 percent) and Trulia (70 percent).
Just over half of Realtors say they or their broker pay for enhanced listings on Realtor.com, and the survey found that Realtor.com’s enhanced listings are considered to be of greater value than featured home and featured agent advertising.
While 70 percent said they saw at least some value in enhanced listings — including 18 percent who rated them as “high value” — 48 percent of agents found Realtor.com’s “Find a Realtor” search tool to be of little or no value. Featured homes and featured agent ads were rated of little or no value by 43 percent of those surveyed.
With 11 percent of agents saying they had previously paid for enhanced listings but no longer do — and only 2.6 percent saying they are considering paying for enhanced listings in the future — Realtor.com “may need to look to additional products to significantly expand revenues,” the report’s authors concluded.
According to Williamsburg, Va.-based research and consulting firm Borrell Associates, companies in the real estate industry spent an estimated $20.2 billion on advertising in 2010.
Borrell estimates that real estate agents and brokers accounted for 42 percent of that spending ($8.43 billion), followed by mortgage providers ($8.26 billion), rental property managers ($1.89 billion), and real estate developers ($1.6 billion).
Within the real estate category, agents and brokers spent the highest percentage of their ad budgets online (64 percent), followed by newspapers and other print (24.7 percent), direct mail (5.3 percent) and broadcast and cable TV (3.3 percent).
“The share of ad budgets that the real estate industry is spending on the Internet is obscene and may actually be a bit out of kilter,” said CEO Gordon Borrell. “Only one other advertising category that I know of — job recruiters — spends half its ad budget on one medium.”
Borrell said successful marketers employ “a more equitable mix of media” that includes print, broadcast, online and mail.
The biggest chunk of the $5.39 billion that Borrell estimates agents and brokers spent on online ads in 2010 was for email advertising ($2.16 billion), followed by paid search ($1.29 billion), targeted display ads ($1 billion) and so-called “run of site” display ads that rotate in less prominent spots ($783 million). Borrell estimates that agents and brokers spent an estimated $136 million on streaming video ads and $17 million on streaming audio.
“I suspect that real estate advertisers have just begun figuring out that they’ve put too much money into buying keywords and online banners,” Borrell said. Those advertisers are likely to “adjust the dials somewhat and may even shift a little ad spending toward broadcast, particularly TV.”
But Borrell said that because real estate is proximity-based and mobile devices can serve as home locators, it could also become “the biggest category of all for mobile marketing.”
BUYERS BYPASS ‘FIXER-UPPER’, WANT MOVE-IN READY
More buyers are shunning “as-is” properties in favor of homes that are in move-in condition, according to real estate professionals and recent surveys.
For example, a Coldwell Banker survey recently found that 87 percent of first-time buyers say they desire a “move-in” ready home.
“This is absolutely the story of this market. It seems buyers will pay a premium, engage in a bidding war, and even overpay just to avoid buying a “project” house,” says Beth Freed of Terrie O’Connor REALTORS® in Ridgewood, N.J.
As such, real estate pros are advising their sellers to fix up their homes for quicker sales. “There is no question homes that have been spruced up for the market sell quicker,” says Kate Conover with RE/MAX in Saddle River, N.J.
That doesn’t mean major, costly renovations that sellers won’t likely get back on the sale price either, she says. Instead of a major kitchen or bath renovation, just repainting the home or removing the clutter can go a long way in freshening up a home. Also, don’t forget about curb appeal: Freshen up the flowerpots, trim the bushes, and paint the front door, if it’s starting to show wear and tear.
Also with buyers wanting “move-in” ready homes, real estate pros say it’s crucial that sellers address any major maintenance and safety issues – such as leaky roofs – before the home even goes on the market.