It wasn’t so long ago that I was having a conversation with my wife over dinner. We were talking about how quickly things had changed in the real estate market. I shared a few ideas and told her, “I think I will write a blog entry about it.”
She looked at me and said, “You have been writing about it. You sit down at the computer and decide what you want to focus on and thirty minutes later you hit the enter key and voila….another epistle from Dippy.”
“Instead of telling them what you think they need to hear, why don’t you ask them what they want to know?”
That night, I formulated a little questionaire and sent it out to about 500 people. I waited a day or so and questions began to trickle in. This will be the first of series of sharing the questions and offering an answer.
“I keep hearing that real estate is in the tank, yet, it seems there are more agents than ever in my area. I would have thought with the market collapsing, a lot of them would try something else. Why are there so many still in your business?”
That is an excellent question. At first, I thought the same thing would occur. After receiving your quetion, I did a little digging and asking around.
A lot of the agents in this area got into real estate in the last few years. Prices were going up and inventory could not keep pace with the buyers. If you were an agent and listed a house, it sold quickly and usually for more than the asking price. Listing agents were making a tidy income. Buyer’s agents were spending about a day or so with clients, writing offers and usually finding success quickly. They too were making a tidy income.
When sales were so fast and frenzied, new agents saw no need in learning the profession. They were making more money than they ever dreamed of because they were there.
Those days are behind us. The memory of the reward for making just one sale lingers on. Agents that are without business today hang around the office hoping that lightning in a bottle will strike one more time. They have researched other jobs. There is not one job like real estate. In this market, one deal will carry a lot of agents for two or three months. In this market, faced with no income and the prospects of a long cold winter, one deal is all you need to get to spring.
So they stay and wait. It is survival of the patient and long suffering. It is not survival of the fittest. The quality of an agent can not be measured by the fact that they have remained in the business. It is still very important to interview two or three agents and make sure you have aligned yourself with one that is here because it is their career and not because they have no other choice.
“I keep seeing offers to get a CMA. Just what is that?”
A CMA (short for comparitive market analysis) is generally regarded as a document that shows homes that have sold similar to yours and uses that information to give you a general estimate regarding your home’s value. It is not to be confused with an appraisal. It is not factual, it is a “best guess” about market value based on current market data.
Agents routinely offer these as a way to get into your living room in hopes of being the one that will list your home. If you are thinking about selling, you really should speak to more than one agent and I would recommend you spend the money on an appraisal before you put the home up for sale.
“If prices are falling, but the average sale is going up and total sales are going down….just what is market value?”
There are many opinions about market value. Some will tell you it can be determined by recent sales of similar homes. Some will tell you that it is the ultimate price someone will pay for your home. I fall somewhere between the two. I think you have to determine a reasonable starting point for pricing your home. The actual market value should be your final price. Your choice of an agent and how extensive their marketing plan it will either increase or decrease your market value.
Prices are falling and there are less sales, so determining a starting point is becoming much more difficult. The average sale is going up because there are fewer sales and the average price of what is selling is higher. Entry level homes (condo’s etc.) are remaining on the market longer. Statistics you see must be analyzed seperately. Each figure is only an indicator of that segment of the market.
“Is this a buyers market?”
No. It is not a sellers market either. This is the most unusual market we have ever experienced. It is the mirror image of the frenzied market of three and four years ago. If you remember, there were more buyers than there were homes for sale. Sellers were receiving multiple offers for much more than they were asking. Now we have more homes than buyers. Sellers are receiving no offers or they are receiving offers for much less than they are asking. The market did a flip. In days gone by, it was like a pendulum swinging back and forth. We now are seeing it flip. It changes quickly, but right now………….we have no market.
That being said, everyone understands it is a great time to buy. Interest rates remain historically low. (If you thought the Fed cutting the rate would get you down to 5.5% again….you were wrong. Right now the Fed rate is close to 5%. When mortgage rates were down around 5%, the Fed rate was 1%. Don’t expect those days to return for a long time.) There is a lot of inventory and there are many sellers that have to sell. Talk to your agent about the market. It may be time to buy for you.
Well, I think that is enough for now. Please continue to send me questions and I will answer them privately right away. I will put together another batch to share here as well.