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Quick Home Sales Have Benefits and Pitfalls

Wed, 01 May 2013 10:33 GMT

Like many house hunters, Joe and Kerry Mutschelknaus had been scouring the area for a new home for several months without much luck.

So when they found a five-bedroom colonial-style home in Loudoun Valley Estates in Ashburn, they didn’t waste any time: They made an offer the day after it went on the market. As soon as that contract was negotiated, they listed their house in Arlington County, selling it the next day.

The Mutschelknauses’ purchase offer was contingent on the sale, so they had an incentive to accept a buyer’s offer quickly.

“We received a full-price offer for our home, so even though we were a little nervous that we might be leaving money on the table, we were confident that we were getting the upper end of what we could expect,” says Joe Mutschelknaus. “Even if we had gotten a higher price, we weren’t sure if it would appraise for that amount.”

You’ve heard of flash mobs and Flash Player: Now there are “flash sales” — a term the real estate brokerage Redfin coined to refer to homes that sell in a day or less.

When too few homes are available for sale and the homes are selling quickly, buyers and their agents are forced to move fast when a home comes on the market. Thus, some agents are pre-marketing their sellers’ homes to ramp up the possibility of a deal the day a home is entered into the multiple listing service.

The quick sale has advantages for buyers and sellers who want to get ahead of the competition and avoid dragging out the process. But some experts cite some pitfalls: In going for the early offers, sellers might miss out on some potentially higher bids later. And buyers in those quick deals often waive inspections, potentially harming themselves later when they wind up spending thousands of dollars to correct problems that could have been identified early and fixed by the seller.

“Flash sales are clearly an outgrowth of the imbalance of supply and demand in attractive areas,” says John L. Heithaus, chief marketing officer of MRIS, the Rockville-based multiple listing service for the Washington region. “Flash sales don’t do buyers any good, because rationality goes out the window when competition kicks in. Sellers in a flash sale are likely to wonder if they could have gotten a better price for their home.”

According to data firm RealEstate Business Intelligence (RBI), a subsidiary of MRIS, 350 homes sold in March within two days, up from 237 in March 2012. Also last month, 174 homes were sold with zero days on the market, up from 134 in March 2012.

Inventory is at near-historic lows. From March 2012 to March 2013, the number of listings, according to RBI, fell 40.12 percent.

Although data — including days on the market — can provide some information about fast home sales, statistics can’t tell you what’s happening behind the scenes.

“In some cases, buyers or their Realtors have advance notice that a home is coming on the market,” says Sitrin. “Buyers want to get into a house before it’s listed and to avoid the competitive market at all costs.”

Tonya Nelson, a realty agent at Redfin in Falls Church, who worked with the Mutschelknauses to sell their Arlington home, says sellers benefit from a flash sale because they don’t have to keep showing their property.

“Buyers are usually making good offers that appeal to sellers,” says Nelson. “In Joe and Kerry’s case, they not only got the full asking price, but they were also able to rent back the home so they had some extra time before they have to move.”

Other agents are more skeptical of the benefit of flash sales for sellers.

“When sellers accept an offer before their home is listed or on the first day, they haven’t tested the market,” says Robyn Burdett, an associate broker and vice president of Re/Max Allegiance in Fairfax City. “They didn’t allow the market to determine their price and terms but took what looked to be a good offer.”

Surprisingly, not all sellers are motivated solely by price, says Sitrin.

“Some homeowners would rather not have the hassle of people coming into their home, or they don’t want to fix it up and would rather sell ‘as is,’ ” says Sitrin. “If your mortgage is paid off, you bought your house for $40,000 decades ago and now it’s selling for $800,000, then you’re more concerned about selling your home and don’t care if you got $20,000 less for it than you could have. It’s different for a seller who’s moving up, because that seller needs every penny and should keep it on the market for at least a few days.”

Burdett says that some sellers have a valid reason for selling their home before it officially goes on the market, such as difficulty showing the house because of pets, young children or elderly parents.

Tom and Anna Kate Murphy worked with Burdett to sell their home in Burke, a single-family house that sold in one day for $525,000.

“The house went on the market on a Friday, and we got an offer on it that day,” says Anna Kate Murphy. “We had an open house scheduled for Sunday, but we decided to accept the first offer we received because it was a full-price offer, and we didn’t want to wait. Another home like ours had been listed at $485,000, and buyers got into a bidding war, but we felt like our house was priced competitively but not too high.”

Burdett says that other sellers she has worked with received an offer within two hours of going on the market but chose to wait two days to accept the first of the five offers they received.

Gretchen Koitz, principal of the Koitz Group with Keller Williams Capital Properties in Bethesda, says that although three to five days on the market is typical in our market today, homes listed as sold after zero days on the market are becoming more common.

“Zero days reflects the fact that agents are reaching out to other agents who do business in a certain neighborhood or building to find listings before they go on the market,” says Koitz. “It’s totally up to the homeowner whether to sell without exposing their property to such a hot market. On the other hand, the purchaser will usually make it worthwhile to accept a prelisting offer by offering a great price and eliminating contingencies.”

Koitz says that some sellers think a quick sale is worth the possibility of a lower price if they can avoid being “nickeled and dimed on everything by the buyers.”

Heithaus suggests that sellers get back-up offers by listing their home on MRIS as “under contract with a kick-out contingency” in case the offer they accepted falls through.

Burdett says she belongs to the Top Agent Network, a networking group of Realtors who are among the top 10 percent in their area in sales volume. The network sends out prelisting information to members so they know what’s coming on the market.

“Some Realtors call and ask, ‘What does my buyer have to do to get this house today?’ ” says Burdett. “The best way is an all-cash offer with no contingencies, including waiving an appraisal.”

Still, house hunters who enter these quick deals should go in with their eyes wide open, experts say.

“Buyers who remove contingencies are setting themselves up for potential problems,” says Heithaus. “They have to remediate any issues with the house themselves if they don’t make the sale contingent on a home inspection.”

Koitz says buyers must do their research and buy only when they are comfortable with the price.

“It’s the same rules as always for buyers, but it’s more important than ever to follow them,” she says.

Sitrin says that the downside for buyers is that they feel pressured to move fast.

“I tell buyers to take as long as you need to find the home you want, but once you find it, you should rush to make an offer,” says Sitrin.

Source: The Washington Post

U.S. Home Prices Jump the Most Since May 2006

Wed, 01 May 2013 10:12 GMT

Home prices are rising at the fastest pace since May 2006, making it difficult for the first-time buyer to close a deal.

U.S. home prices rose from a year ago in all 20 cities that the Standard & Poor’s/Case-Shiller index tracks.

NBC’s Diana Olick reports: http://www.nbcnews.com/video/nightly-news/51340582#51340582

The Northeast Florida real estate market continues to improve, with smaller inventory levels and strong demand pushing prices up. Sales were up 19.2 percent from the same period last year and median sales price was up 16.4 percent from previous year.

Another change is buyers are shifting demand from distressed properties to conventional homes, the Northeast Florida Association of Realtors (NEFAR) reports.

Here are some of the key stats:

Median sales price was up 16.4 percent year-over-year to $139,650
Closed sales were up 19.2 percent to 4,541
Inventory of homes for sales was 7,825, down 31.9 percent
Pending sales were up 37.7 percent, to 6,240

Read the full report from NEFAR.

Strong Buyer Demand Outpace Home Supply in March

Fri, 26 Apr 2013 08:43 GMT

Strong buyer demand for residential homes continued to outpace supply in March. The Buyer Traffic Index rose to 69 while the Seller Traffic Index inched up to 41. In many areas of the country Realtors reported low inventory levels of homes for sale. Tight inventory conditions have been cited as leading to higher prices and reduced time on market.

Inventory Homes Fell to a 13-Year Low

Fri, 22 Feb 2013 11:58 GMT

The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.

The number of existing homes listed for sale in January totaled 1.74 million, down 4.9% from December and at the lowest level since December 1999, accordingly to the National Association of Realtors.

Meanwhile, sales of previously owned homes were running at a seasonally adjusted annual rate of 4.92 million units in January, up 0.4% from December and 9.1% from January a year earlier. At the current pace of sales, it would take just 4.2 months to sell the existing supply of homes available.

Buyer interest is off to a strong start and the combination of rising demand and falling supply leave home shoppers with few choices to work with in the spring which traditionally the busiest season of the year.

“Sellers are calling the shots right now,” said Carolyn Williams, a real-estate agent in Dana Point, Calif. “What's out there is gobbled up with anywhere from five to 25 offers.”

More competition is good for homeowners, who are seeing prices rise after six straight years of decline. Thursday's report said the median price of an existing home stood at $173,600 in January, up 12.3% from a year earlier. Fewer options in the existing-home market also could spur traffic to newly built residences, benefiting home builders.

Homes are selling faster. The median number of days on the market for homes in January was 71, meaning half of all homes sold within that time, down from 73 days in December and 99 days one year ago.

Distressed sales—including foreclosures and short sales, in which banks allow borrowers to sell at a loss—accounted for 23% of sales in January, down from 35% a year earlier but still high by historical standards.

The Realtors' group says it expects distressed sales to fall to around 15% of the market by year-end, in part because there are fewer foreclosures.

A separate report Thursday showed that the number of American households behind on mortgage payments fell to the lowest level in four years at the end of 2012.

The number of loans in foreclosure also fell by the largest margin in the 34-year history of the survey, conducted by the Mortgage Bankers Association.

Delinquencies have been falling for three years, as the economy and job growth have improved. At the end of 2012 about 10.8% of mortgage loans on one-to-four-unit homes were either in foreclosure or at least 30 days past due. That was down from a peak of 14.7% in early 2010.

Many of those are a legacy of the recession and housing bust: Thursday's report showed that the level of loans that were newly delinquent—those 30 days late on payments—fell to their lowest level in 5½ years during the fourth quarter.

“We're well on our way back to what is perhaps a new normal,” said Jay Brinkmann, the MBA's chief economist.

Some housing analysts have warned of a second wave of foreclosures to hit markets, dragging down prices. But so far that hasn't happened, and the prospect looks increasingly remote for much of the U.S. The share of loans in foreclosure, though still above precrisis levels, was 3.7% in the fourth quarter, down from 4.4% a year earlier.

The drop in foreclosure rates has been more pronounced in states like Arizona and California where banks don't have to get foreclosure approval from a judge.

In so-called judicial states such as Florida and New Jersey, foreclosure rates have stayed much higher, leaving greater potential for “shadow” inventory that could hit the market down the road.

Source: Wall Street Journal

Housing Starts Up 23.6% from Previous Year

Wed, 20 Feb 2013 14:32 GMT

National Association of Realtors' Research Staff recently released economic indicators and market report showing an increase in housing starts in the report and its significant impact on the housing supply and job creation for the local economy.

In a mild disappointment, Census reported 890,000 starts in December, an increase of 23.6% from a year earlier, but an 8.5% decline from an upwardly revised December figure.
Starts are important as construction is highly correlated with job creation and directly impacts housing supply.
Single family construction, which has lagged for several years in the wake of the subprime crisis and subsequent bloat in inventory, managed to defy the headline decline in starts with a modest 0.8% increase from December figure and is 20% higher than a year ago.
Permits for construction of single family units rose 1.9% from December to January and are 29.2% higher than a year earlier.
While housing starts are strong, they remain well below the historic average and should not pose a threat to inventories as much of the building is done in niche markets and inventories have fallen sharply in recent quarters. Builder and lender confidence in local conditions is a positive indicator for inventories, sales volumes, and price trends in these markets.
Furthermore, new construction and the economic multiplier that it generates will help to spur further job creation and income growth.

Source: Economic Updates, by Ken Fears, Manager, Regional Economics – National Association of Realtors