Have you been following the almost daily reports of continually rising home sales prices and near-record-high sales volume for both new and resale homes in the last few weeks? The 2004 spring and summer home sales season is proving to be stronger than most experts predicted.
The recent comments of David Lereah, chief economist for the National Association of Realtors were especially fascinating. Although he predicts 6.9 percent, fixed-interest home loan rates by 2004 year-end, he doesn’t expect new or resale home sales volume to be hurt unless mortgage interest rates get close to 8 percent (which he doesn’t think will happen any time soon).
Purchase Bob Bruss reports online.
The recent small rise in mortgage interest rates seems to have motivated first-time and move-up buyers to purchase now before rates go higher.
Another interesting trend, in most cities, is the greatly increased volume of houses and condos listed for sale, compared to a few months ago. As the U.S. economy strengthens, these new listings are selling extremely well in most communities.
Although mortgage interest rates are up from their all-time lows a few months ago, today’s fixed rate mortgages around 6 percent are still a bargain. Two years ago, they were about 7 percent. A year ago, they were approximately the same as today.
TODAY CAN BE AN EXCELLENT TIME TO SELL YOUR HOME. If you are thinking of selling your house or condo, it’s not too late to take advantage of the current very strong market for homes. To earn top dollar, it pays to get your residence into tip-top condition before listing it for sale.
The most profitable improvement of all is a fresh coat of interior and exterior paint. Other profitable improvements include new light fixtures, fresh landscaping, either new wall-to-wall carpets or hardwood floor refinishing, plus general cleaning and repairs.
Experienced real estate agents generally recommend major kitchen and bathroom remodels usually don’t return as much in additional sales price as they cost. But they can add to the marketability of an older home.
INTERVIEW AT LEAST THREE SUCCESSFUL REALTY AGENTS. Although statistics show most home sellers list their residences for sale with the first agent interviewed, the smartest home sellers interview at least three successful realty agents who sell homes in the vicinity.
Here’s why: By comparing the opinions of three savvy local agents, the home seller is likely to list with the best agent at an asking price which is neither too high nor too low.
Interviewing just one agent can be misleading if that agent estimates too high or too low a market value for the home. That’s why each of the three agents interviewed should prepare a written CMA (comparative market analysis) for the home seller.
Each CMA shows recent sales (not asking) prices of comparable homes, the asking prices of similar neighborhood homes (your competition), and the asking prices of recently expired listings (the most common reason a home doesn’t sell is it was overpriced).
Even if you plan to sell “for sale by owner,” interview at least three local agents. They won’t mind. The reason is you will get the benefits of their information and they know you are likely to list your home for sale within 30 to 60 days with one of the agents interviewed.
CONSIDER THE DIFFERENT TYPES OF LISTINGS. Even if you think you can sell your home without a professional agent, it pays to understand the different types of listings:
1–OPEN LISTING. An open listing is a “for sale by owner” listing with no specific realty agent. It is not eligible for placement in the local multiple listing service (MLS), the most powerful sales tool available to realty agents.
Most open listing sellers will pay a real estate buyer’s agent who obtains an acceptable purchase offer 50 percent of a customary sales commission, usually around 3 percent.
However, as most do-it-yourself home sellers discover within 30 to 60 days, without a professional agent marketing the home, it is unlikely to sell. That’s why most open listing home sellers eventually list their properties with a professional agent within a month or two.
2–EXCLUSIVE AGENCY LISTING. Although most realty agents won’t tell home sellers about this type of listing, when this listing type is used, if the home is sold by the seller without the involvement of any licensed agent, no sales commission is owed.
However, if the listing agent, or a cooperating buyer’s agent, produces an acceptable purchase offer, then the seller owes a full sales commission. Exclusive agency listings are eligible to be included in the local MLS.
A few so-called “discount agents” will take exclusive agency listings and place them in the local MLS for a flat fee, such as $500 or $1,000. But such agents usually charge additional fees for more services, such as marketing, preparing a purchase contract, holding open houses, arranging financing, and handling the sales closing.
3–EXCLUSIVE RIGHT TO SELL LISTING. This most popular listing type gives the listing agent maximum control over the listing and maximum financial incentive to produce a buyer. Even if the seller finds a buyer without the help of the listing agent, a full sales commission is owed to the exclusive right to sell listing agent.
This type of listing is also eligible for submission to the local MLS. In addition, most MLS listings are now available on the Internet at www.realtor.com.
Because over 70 percent of today’s home buyers begin their quest on the Internet, especially out-of-town buyers, the Internet has become an additional powerful sales tool for MLS home sales.
BE AWARE OF THE NET LISTING PITFALLS. A few naïve home sellers think a so-called “net listing” would be ideal for them. A net listing is really just a variation of an exclusive listing. But it should be avoided by sellers and realty agents.
Illegal in several states because it is so dangerous for property sellers, a net listing means the seller wants to net a specified price and any amount the listing agent can get a buyer to pay above the net price is the agent’s sales commission.
At first, that arrangement might seem attractive to home sellers.
For example, suppose you tell your listing agent you want to net $200,000 for your home and anything the agent can get a buyer to pay above $200,000 is the agent’s commission. If that agent obtains a $220,000 purchase offer, you probably will feel the agent misled you by not telling you how much your home is really worth. You probably won’t agree to pay the agent a very high 10 percent commission of $20,000.
Worse, suppose the agent obtains a legitimate all-cash purchase offer for $200,000 or even $205,000. Unless that agent is 100 percent honest and enjoys working for a zero or very low commission, he or she might be tempted to “lose” that purchase offer and never present it to you.
A better alternative to a net listing is an exclusive right to sell listing at the seller’s desired net sales price, plus a customary sales commission.
CONCLUSION. During this best season of the year to sell homes, it’s not too late to take advantage of the still-strong home sales market when the largest number of prospective buyers are in the market.
To earn top dollar, home sellers should get their houses and condos into tip-top condition, interview at least three realty agents before listing with the best one, and set the asking price correctly based on recent sales prices of comparable nearby homes.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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