How Do I Price My Home for Sale?

How do I price my home for sale? The answer to that question takes a little more thought and creativity than it used to take in days gone by.  In the Montgomery County and Washington, DC markets, we watched prices explode and almost double over a period of a few years ending in the late to mid-2000’s.  Then, we watched in horror as home prices peaked and exploded, falling in a rush to levels equal to or below the pre-rise numbers.  It has been like reliving the explosion of the space shuttle… lofty dreams of uncharted areas being reached turning to fractured hopes and yesterdays ashes coating a new reality.

Practices used in the past have no relevance today.  The rise and subsequent crash and burn have occurred while other new paradigms were taking place.  The manner in which homes are sold has been completely revamped.  It used to be a simple matter of meeting with the most well known real estate broker in the area, evaluating the neighborhood sales, pricing your home, putting a sign out front, an ad in the Washington Post and waiting for offers.

Those days are gone.  The internet has changed everything.  Buyers begin looking for homes long before they know what they can afford.  Buyers begin looking for homes long before they choose a real estate agent.  Buyers sign in and begin searching for homes without any regard for the name of the broker.  Information is free, available and overwhelming.

How do I price my home for sale? Initially, the answer will include some of the old methods.  The clearest indication of market value is taking a look at market results.  Understanding market results and making sure that the actual market results are the ones you are using is the challenge.  The days of all homes being pretty much the same are long gone. While it is true that you need to narrow your market to somewhere in neighborhood of a two mile radius of your home, you need to cull the chafe from the grain within those parameters. Before the listing agreement is signed, you have to have an understanding of what the appraiser working for the lender being used by your potential buyer will be looking at when he appraises your home. This is a prime factor to be used in pricing your home for sale.  The amount of money you want to sell the home for has little relevance if no one can get a mortgage to pay you. The hidden secret is that the lending institution being used by your potential buyer will have the last say in the sale of the home.

How do I price my home for sale?  Bring in a real estate agent. Focus on one who knows your market.  Focus on one who has a good understanding of the internet who might buy your home.  Pricing the home for sale and the subsequent marketing of the home will be heavily influenced by information available on-line and the agent’s ability to use the internet to your advantage.

How do I price my home for sale? A broad overview indicates that you evaluate the actual market, come up with a reasonable range, visit homes for sale within your reasonable range and price the home accordingly.  It may appear biased for me to advise you to use a real estate agent. It really isn’t biased, it is an opinion based on years of experience and seeing the results of those that chose to go it alone.

If you have any other suggestions, share them with me. If you would like to talk about this or any other article, call me at 301-509-5111.

For more information, just send me your information

How do you pick an agent to represent you?

There has to be a better way !

All the experts say that you should have a real estate agent represent you when buying or selling a home.  That sure sounds like a good idea, but how do you pick an agent to represent you?  There seems to be a lot of agents to choose from.  You can go on line and just type in the name of any town and real estate agent and in a flash your google machine will spit out a gazillion choices.  You can call the agent that is listed as selling the home you like ( this opens a can of worms because in Maryland and DC they can’t really represent you).  There is always the option of asking a family friend whom they would recommend.

Maybe there is another option that will do the trick.

It might be wise to slow down and realize that whomever you choose is going to assist you in one of the largest purchases you will ever make.  It is more than just a purchase.  The agent chosen will have a big role in helping you find your home.  Money will come and go, home is every day.

Why not create a little checklist and then use the checklist when researching potential agents.  Try to avoid anyone that focuses on what they’ve done and hone in on those that are quiet and listen to what your dreams include.  Some agents will have more designations ( i.e. that long string of initials behind their name) than others.  Designations are like diplomas, they only indicate the agent passed the classes.  Those letters do not guarantee that the agent has a clue about the actual practice of real estate in your market.  A solid checklist should include :

  • Has the agent done successful transactions in your market.
  • Has the agent had clients that are similar in age and professional level as you.
  • Does the agent listen to you before making suggestions about how to proceed.
  • Does the agent communicate with clients in manner that you communicate (phone, email, text, etc).
  • Are you comfortable with the agent

Everyone has their own idiosyncrasies.  Some agents still really do use what appears to be a high school photo on their card and website.  There are some agents that want to put you in their car and drive you around. You have to find an agent that works well within your comfort level.  The process may take a little more time, but you will find the rest of the journey to your new home a much smoother ride.

I am always open to hearing from you. If you have found a method that works, let me know.

 

Hey short seller, that bird on your fence is a chicken come home to roost

Yep, that chicken has come home to roost!

I have to preface this with the statement that I do not work for the IRS. I am not a CPA.  I am just an average guy that reads the newspaper.  Recently, I came across an article about taxes.  Now the focus of the article related to the fact that the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which became law on December 17, 2010 has put the IRS in a jam.  The IRS has to create all new forms to comply with the law, so if you itemize your taxes, you probably won’t be able to file until mid-to-late February.

This news doesn’t change the fact that you have to have your paperwork ready by April 15 (this year you have until April 18th because the 15th falls on Emancipation Day).  Most home owners need to be on the lookout for their 1098 from their lenders. You will need this when you file (if you itemize).

If you were involved in a short sale of your house last year or if your house was foreclosed on last year, keep checking your mailbox for the 1099-C that is on it’s way to you. If $600 or more of debt was cancelled (or forgiven), your lender is required to send this form to you.

In many cases, a tax must be paid on the amount of debt cancelled!

Now, the other shoe falls

Now there are three important exceptions. If you filed for bankruptcy and the amount of the cancelled debt was authorized by the judge, the amount cancelled is not considered income and no additional tax is due.  If you were insolvent immediately before the cancellation ( a loose definition is the total of your liabilities exceeded your assets) no additional tax is due. Also, if the cancelled debt relates to your principal residence and the money borrowed was to buy, build or substantially improve the home, you will not have to pay any tax on the debt that was cancelled.

HOWEVER

If you refinanced and used that money to pay for your children’s education, to buy a new car, to buy a boat, to go on vacation, to pay off credit cards ( or any other purpose other than for the house) you will have to pay tax on that cancelled debt.

The price of that fancy car just went up.

If you receive Form 1099-C and you believe in your heart of hearts that you qualify under one of the three exclusions, you have to complete and file Form 982 with your final income tax return.  Once completed, it probably won’t hurt to drop by a local church and light a candle.


If you used your equity in your home like it was an ATM machine, well it is time to pay the piper.  You see, that bird on your fence is a chicken come home to roost.

For more information about this or any tax issue, please visit the IRS website irs.gov.

You DO need an agent… plain, cold real estate facts.

You think you found the house and the work is over.

Not so fast grasshopper. Who is going to assist you in the purchase? The nice agent that you met at the open house said they would help you? Really, do you want “help” or representation? You see, in the State of Maryland, that nice agent can not represent you and the seller. Maryland is one of the states where an agent (note agent, not broker) can only represent one side of the transaction. Please don’t get confused with Dual Agency, that is an entirely different matter.

What’s the big deal you say?

There is a very big difference between writing down terms that you dictate and explaining and guiding you through an offer. An agent representing the seller can not negotiate for you. An agent representing the seller can not legally suggest the terms of your offer. Those are the facts, period.

But that agent can take a cut in their commission you say. Sure they can, as a matter of fact, why not, they are not doing any work for you. They are not liable for any mistake you make. They weren’t going to get the buyer’s side anyway, so it is easy for them to smile and say no problem.

You weren’t going to pay the buyer’s agent commission either! It is offered through the terms set up by the MLS. It is part of the listing agreement, and the agent may offer to cut the price of the house and still keep the total commission. You will never know, they are not required to tell you and they certainly CAN NOT NEGOTIATE FOR YOU.

Seeing the world, collecting both sides now

The State of Maryland has a fund set up to cover the illegal behavior of agents. If they do not represent you, you will have little luck filing a complaint. The stack of paperwork you signed most likely included a document where you agreed to go forward on your own.  Everyone in the industry is well aware that by the time you start signing paperwork, you are more inclined to just sign where indicated rather than read every line. The comforting words, “oh this is a standard form” or “everyone signs this”, do not absolve you from responsibility for what the documents indicate. Within but a moment, you sign or initial and you have agreed that the agent sitting with you represents the other party.

 

Don’t try this alone

There is a reason that buyer’s agents will do searches, show you property and patiently explain the process. There is a reason that these agents assist you in the preparation of an offer and negotiate for you. Beyond the niceties of their passion for help others… that is what they are PAID to do.

I can not fathom why anyone attempting to accomplish one of life’s most expensive ventures would do it on their own. There is not room in the blog world to go over every challenge your agent must face. There is no way I can share the hurdles you must accomplish. I do know that I do this for a living and I read the same internet advice and I read the same books that claim to make it easy and I promise you….there is nothing as valuable as experience.

If you are in the buying mode and you would like to have your own personal representative, we would welcome the opportunity to assist you. We do this for a living and our success depends on your happiness.

The MacArthur Group

ReMax Realty Centre

301-509-5111

Short sales made easy… well, easier for some

Finally there is a glimmer of light at the end of the tunnel
In 2009, the Treasury Department introduced the HAFA program to provide a possible option for homeowners who do not qualify to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program took effect on April 5, 2010 and sunsets on December 31, 2012. At this time there is no indication whether or not the program will be extended. Insiders hope that by the time December 31, 2012 rolls around the housing market will have stabilized. The jury is still out on that optimistic view.

The Home Affordable Foreclosure Alternatives program may actually achieve some success where it’s predecessors have failed. It was created as a result of the SNAFU (situation is normal, all fouled up) that existed in the market when the once in a blue moon short sale became the norm in many markets.

HAFA will not keep homeowners in their homes. It’s designed to make the process for getting out of an unaffordable home, without going through foreclosure, more predictable and efficient for all parties involved in the deal. Prior to the announcement of this program, short sales were more hopeful thinking than reality. The market was glutted (and to a large degree today) with homes that were “for sale” in which the lender did not have a clue.

Members of the industry are optimistic that HAFA may succeed because the plan removes several impediments to the widespread use of prior programs and provides incentives to all of the players in the workout mess. To those of us (Tudela MacArthur included) that have been publicly stating that the old way does not work, there is hope.

Here are some examples of the program that will make a difference:

  • homeowners can receive $3,000 toward relocation costs,
  • mortgage investors and loan servicers can receive incentives of $1,500 per loan
  • real estate agents’ undiscounted commissions are honored
  • junior lien holders can receive up to $6,000 in exchange for releasing their liens and agreeing not to pursue borrowers for deficiency judgments.

These are major changes it what used to be considered business as normal when nothing was resolved for 9-12 months. The time lag, effectively removed homes in a “short sale” status from the possible purchase by any home owner that was under a time restraint for making a move. It finally dawned on someone that if a buyer could not be sure they could move into a home in a specific time frame, the home was not truly available. That was not just a short sale…it was short-sighted.

In reality, homeowners in trouble, attempting to move on, were forced to have strangers trek through their home on a regular basis with little if any hope for actually selling. Buyers were forced to view homes that were not really available to purchase in a timely fashion. Listing agents were forced to list and hope that if a contact were submitted, the sale could actually be consummated.

Under the old system, once an actual contract for purchase was submitted, then it would be forwarded to the lender(s) for approval. You see, the lender had no knowledge the property was for sale prior to receiving the offer. Plays scripted in the sand during a pick up football game had a better chance of success.

The lender could take whatever time it wanted to approve or deny the sale. In reality, the process often took many months and in the end, most sales were not approved. Lenders would ignore tort law and attempt to alter the terms of listing agreements as well as contracts of sale. Using the same attitudes that created the collapse of the system, lenders ignored law and showed disdain for those in need.

In most cases, buyers could not wait endlessly for approval. Real estate agents could not continue to service listings that were not going to sell. Homeowners lost hope and the market slowed to a standstill.

If an approval was received from a lender, it usually was encumbered with unreasonably short deadlines. The buyers had contact their lenders obtain new loan approvals. If the loan terms had changed, new regulations required a waiting period for the buyers review before the buyer had to accept the terms. Title attorneys had to rush updated title searches, surveys or other lien searches in order to make sure the transaction closed before the approvals expired.

HAFA was created to provide a solution for homeowners who could not qualify for a permanent loan modification and could not afford to remain in their homes. HAFA provides a system for an orderly process for the short sale to be completed using standardized documents and enforceable deadlines. It should not be overlooked that it also provides a way for homeowners to use a deed-in-lieu of foreclosure solution if the short sale attempt is not successful.

To qualify for a HAFA short sale or deed-in-lieu:

  • the mortgage must be for a borrower’s principal residence;
  • the loan balance may not be more than $729,750;
  • the borrower must have incurred some hardship like a medical emergency or a drastic reduction in income;
  • the loan must have closed prior to Jan. 1, 2009;
  • first-mortgage payments (including property taxes, insurance and mandatory homeowners or condo fees) must be more than 31 percent of current gross household income.

For a deed-in-lieu arrangement, borrowers must also be able to deliver clear and marketable title to the home, free and clear of all liens or encumbrances and leave the home in “broom clean” condition. This may include resolving a home equity line or second mortgage.

Homeowners are given a minimum of 30 days to vacate the home from the date the short-sale agreement expires or the date of the deed-in-lieu agreement.

The lenders’ participation in HAFA is voluntary, not all loans will be eligible. All loans owned or guaranteed by Fannie Mae or Freddie Mac are eligible for HAFA. You can see if your loan is eligible by contacting your loan servicer (this is the company that receives your mortgage payment) or by going to http://makinghomeaffordable.gov, which also lists the required documents.

The often overlooked major change HAFA brings to the industry is that it mandates the use of standardized documents and strict time frames. In the past, lenders had to deal with standardized forms, documents created by real estate agents, hybrids of forms used in the past and paperwork that had not been reviewed or approved by real estate attorneys or state boards. These new documents are available on-line and anyone can download them to use from http://https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html.

In a simple overview, after a borrower has applied for a loan modification and not qualified, they can seek relief using the Request for Modification and Affidavit RMA form. The lender has 30 days to respond to the request. If the lender approves, it will offer the homeowner a standard short-sale agreement setting forth the minimum sales proceeds that the lender will accept, taking into account closing costs, real estate commissions and expenses common in the local market. Borrowers have 14 days to accept or reject the short-sale agreement. If a borrower accepts, the home can be listed with a real estate agent for a minimum of 120 days. The time frame can be extended to a full year if necessary.

HAFA sets clear time tables that enable the marketing and sale of the home in an orderly fashion. Sellers do not have to use a Ouija board to come up with a list price. Agents will actually be paid the amount stated in the listing agreement. Buyers have a distinct timetable that allows them to actually plan their move.

The timetable becomes clear:

  • Homeowners have three days from receiving a ratified contract to notify their lender and request short-sale approval.
  • The lender has 10 days to confirm that the offer meets the short-sale agreement terms and conditions.
  • If approved, the new buyer will have a minimum of 45 days to accomplish all the steps necessary to go to settlement.
  • The new buyer will also need to agree not to sell the home for 90 days after settlement.
Some other major HAFA improvements include participating lenders’ waiver of their right to pursue deficiency judgments against borrowers. This means that if a homeowner is able to obtain and comply with the agreement, one the sale is consummated they will be able to move on with their lives without waiting for the large debt to come calling. It will be forgiven, forgotten and wiped out… . Under the Mortgage Forgiveness Debt Relief Act, the IRS will not treat this forgiveness as taxable income to the homeowner.
The last thing to note is HAFA prohibits participating lenders from completing the foreclosure process when HAFA deadlines are pending. (They can proceed with the foreclosure process but cannot complete it. Lenders demanded that they be in position to act quickly if the process fails) Still homeowners can now enjoy the peace of mind that while the process is pending, they will not come home one night to find their belongings on the curb and new locks on the door as long as they are dealing with a participating HAFA lender.
It remains to be seen if this program will actually work, but finally there is a glimmer of light at the end of the tunnel. The very fact that it exists is an indication that someone somewhere is paying attention. If you would like to discuss your situation, we are familiar with the program and would welcome the opportunity to assist you. Give us a call at 301-509-5111.

Tudela MacArthur

ReMax Realty Centre

serving Maryland and the District of Columbia

Holy Cow… Where did all the inventory go?

This is as about elementary as it can get

supply goes down and prices go up

A funny thing happened while I was doing a search for a client tonight. I plugged in their price range, deleted all short sales and hit enter. My first thought was “That can’t be right”. I went back and re-checked the criteria. The client was looking for a town home or a single family home in Montgomery County priced somewhere between $300,000 and $325,000. There are only 69 listings that are active.

Chew on that fact for a minute

It may be that I am getting old and my memory is fuzzy, but I sure think we used to have one hell of a lot more inventory available. I thought hmmmm, maybe I should do a quick check of all price points. I did and the results are rather startling at every point.

$200,000 – $250,000 64 active listings

$250,000 – $300,000 109 active listings

$300,000 – $325,000 69 active listings

$325,000 – $350,000 99 active listings

$350,000 – $400,000 145 active listings

So, what does this mean? I am no genius. I do not have a crystal ball. I do know that time is passing and the federal first time buyer credit is just about gone. I know that the same supply and demand laws that govern property prices eventually control interest rates ( money supply down and interest rate goes up ).

Everyone is aware of the bank owned “shadow inventory”. You can wait for it to come on the market. I can only imagine the condition those homes will be in after sitting locked up for months on end (mold is the first word that springs to my mind). It does not take a rocket scientist to understand that homes sitting vacant for month after month might have some issues.

WE ARE RUNNING OUT OF INVENTORY FASTER

THAN THE NEWS MEDIA CARES TO REPORT.

The clock is ticking and I don’t think you really want to wait until the midnight hour.

If you are ready to take that step, don’t do it alone. Give me a call at 301-509-5111 or email me at macarthurgroup@gmail.com. My name is John MacArthur and I only ask that you

Experience the Difference.

Understanding Whom the Agent Represents (Maryland)

I don’t blame first time home buyers. The amount of information out there about buying a home has got to be over whelming.

Think about it, once a first time buyer has garnered the courage to actually speak with an agent, they are setting the stage for more confusion. You see, in Maryland, the law requires that you inform folks of certain information at your first scheduled meeting. You have to be told about whom the agent represents, you have to have dual agency explained and you have to decide whether you want the agent to represent you.

These are not my rules. These are not any brokers rules. These are not ReMax’s rules. Nope, this is the law in the State of Maryland.

In their infinite wisdom, the powers that be have provided agents with documents to be signed by their clients. As with all documents, they were designed by attorneys that have mastered the art of obfuscating the obvious while covering the rear end of the industry that hired them.

How quickly so many agents forget how “foreign” the documents sound. I have been told that some agents just don’t bother with the documents anyway. It seems they feel if they present forms at the first meeting, the prospect will shake their head and walk out the door.

They would rather “wing” it, violate the law and hope that no one notices.

Many of them have the documents signed while preparing an offer. It is much easier to just stick them in the large pile and have them signed at that point.

IT IS WRONG.

IF YOU DO NOT HAVE THE OPPORTUNITY TO SIGN THAT YOU UNDERSTAND WHAT IS TRANSPIRING, YOU ARE BEING DENIED YOUR RIGHTS AS A CONSUMER. DO YOU REALLY WANT TO WORK WITH SOMEONE THAT BEGINS THE RELATIONSHIP VIOLATING YOUR RIGHTS?

After initial introductions are accomplished and refreshments are offered………you must receive a document that resembles this:

LF1731LF1731

 

Now that is a lot of small print to absorb while sitting in a strange office with someone you just met. They just sit there smiling while your mind races, scanning legal terms and hoping that the door behind you is not locked. Usually, the agent will point out…this is information required by law and it is not a contract. They may even act as if signing it carries no weight.

HOLD ON GRASSHOPPER

It does matter. It is important. You are acknowledging that the information was presented to you. If you check the bottom area of the form, it tells you that you should understand everything that you sign. I think you should know what is going on as well. I believe the law is in place to protect consumers. I really hope that any buyer understands that skirting the law is never the best route to take.

In short, if you do not have a written agreement with an agent, they do not contractually represent you. Your relationship is “assumed”. They can show you properties (except those listed with their broker). They can not negotiate. They can not advise. They can not prepare an offer. Actually, a presumed agent is nothing more than a cab driver that has access to homes not listed with his/her broker.

The next level up the food chain is the cooperating agent. You will not have agreed to dual agency ( see post on dual agency). Oh, and they will represent the seller of the home. Yes, you read that right. The cooperating agent represents the seller. Now, that always perplexes me. Why would anyone that understood their legal right, use a cooperating agent. It would seem to me that if your options are explained to you, you would opt for the one that offers you the most protection and representation.

I have to mention the listing agent. You have no protection as a buyer when you ask the listing agent to write an offer for you. There is a misconception that you will be saving money. The amount you believe you are saving is actually minimal in most cases and in every case… you are making the biggest purchase of your life without the benefit of representation.

The only way to be completely represented is to sign an exclusive right to represent agreement. If signing a contract makes you feel uncomfortable, limit the terms of the agreement. The consumer has every right to limit his relationship with an agent to specific homes viewed or to all homes viewed on a specific day, etc. Rather than lose the benefit of representation, control the representation.

It is much more effective to hire the agent and be specific about the limits of that contract than it is to view homes without an agreement. It is also important to note that the agreement is binding on all parties. The agreement does state that the buyer is responsible the fees the agent will earn. Most agreements indicate that the buyer agent will reduce them amount that is due them by the amount of money that is offered as a co-op fee in the listing. The contract protects the buyer.

In Maryland, we allow dual agency. Most people get it very confused. The buyer’s factual relationship is with the broker their agent works under. The broker also has the ultimate relationship with the seller in homes listed with the broker. If a buyer wishes to purchase a home that is listed with the broker that is also the broker for their agent, the broker becomes what is called a dual agent. The broker will receive the commission proceeds from the sale and the broker will determine how those proceeds are shared with the agents.

Dual agency has nothing to do with an agent attempting to sell his own listing to a buyer. The agent CAN NOT represent both sides of the transaction.

This is a brief overview of Agency in Maryland. If you have any questions, I will be glad to answer. Feel free to call me at 301-509-5111

 

 

Fear and falling prices . . . (but I got it on Ebay for half that!)

 

Okay, so I open with an admonition, pay no attention to the man behind the curtain. That man may be me, but I will let you be the judge. I was just sitting back enjoying the brisk 35 degree morning, having a cup of coffee on my porch and a thought hit me.

O.K., maybe a question came to mind, but something made me put the coffee down and start typing.

It was only 6 months ago that I was having a chat with my son about golf equipment. He swore up and down that if I could go out and buy a new set of Mizuno clubs, my game would improve tremendously. I did to out and price the clubs. A brand new set would cost well over one thousand dollars. A used set would be close to eight hundred. I did the quick math and figured I could play over a years worth of golf with the clubs I owned and spend the same amount of money.

Then a friend mentioned some fancy on-line site where I could probably find the clubs at a much better price. I went on-line and was amazed at the prices.

$200

I bought the clubs. Last week, I was attending a golf products show and saw the same clubs and they still cost over $800. Hmmm, I checked this Ebay thing again and they still had some left at $200. Hmmmm. I suppose that was the genisis for this post.

Is the illusion of home values going down created soley by short sales and foreclosures? Should the pied piper of falling housing prices (local appraisers or media spin doctors…take your pick) be so focused on distressed properties or should someone stop the madness.

 

I realize the latest group on Capital Hill have their collective hands full. New programs are announced daily to jump start whichever segment of the industry is squeeking the loudest that day. I don’t have to mention that they seem to dance all around the biggest problem. Sure, they offer a $8,000 tax credit. Why yes, they have advocated that judges have the authority to jam prices during bankruptcy. Oh, I read where they are going to help those in distress re-finance their personal mess.

The 10,000 lb Gorilla in the Room.

Meet…Negative Equity

There can be no resolution until the problem with negative equity is addressed across the board. Rather than continue to toss money into untraceable black holes, all the people that are upside down must be given some relief. People will not continue to re-finance and toss good money after bad. The first payment failure rate on upside down re-fi’s is going through the roof. The only people getting relief are the lenders. Short sales are not going smoothly. Properties are decaying in neighborhoods everywhere. There is no amount of money available that will maintain empty houses ad infinitum.

It is time the powers stop listening to pied pipers and begin addressing that large ape in the room.

Market Value…really?

I thought I knew what market value was. Back in the day, market value was pretty darn close to the price someone would pay. I went to the new dictionary on line – wicked pedia files and they had it defined in this fashion.

In the US, the most common definition of Market Value is the one promulgated for use in Federally regulated residential mortgage financing:

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.[3]

I have read and re-read and then read again this long paragraph. I am begining to understand “the devil is in the details.”  That definition sure looks impressive, but does it represent what we agents perceive to be a market value? The opening sentence reduces what follows to ambiguity. There is no definition of the all the conditions necessary for a fair sale, but it goes on to mention that the buyer and seller, each acting prudently, knowledgeably and assuming the pirce is not affected by undue stimulus.

There seems to be a disconnect between the definition here and what is being referred to as market value in the streets of our cities. I figured that I should go pull out the bible (Modern Real Estate Practice) and see what would be defined there.

Market Value – The most probable price property would bring in an arms-length transaction under normal    conditions on the open market.

Well the variety of prices I am seeing for similar homes in similar neighborhoods is beginning to make sense.

We are not working under normal conditions. Market value has morphed into the 21st century answer to the question – What would you like market value to be? or What do you think market value is?

Market value is not only what someone would pay, no, market value must include what someone will pay and what someone will accept. You see, we went from an extended family society to a nuclear family society and that is another chicken that has come home to roost. Our frenzied search for privacy has created an isolationist mentality that has led pricing to vary house to house, neighborhood to neighborhood, town to town, county to county and state to state.

There seems to be a false sense of entitlement (the people up the street got this much, we should too), combined with a false sense of value (I paid X and it should be worth Y% more today) with a dash of overstated upgrade-itis (well we put a new coat of paint in the rec room, took me three days and that had to double the value of the basement) that is now factored in pricing.

It becomes more difficult to advise a buyer, when there is little apparent rhyme or reason for the way homes are priced in any neighborhood. The differences were obscured in the sellers market that ended with Katrina. (Don’t you all just love that I slip those references to the ongoing plight of Katrina victims every chance I get?) Now that properties are sitting on the market longer, the aberations glare at you from the pages of the MLS. The stalemate continues because we don’t have the normal conditions required.

We live and work in “the market”. The market changed and we experienced that change as it occured. The average homeowner only read about it. They noticed the for sale signs lasting longer. They took in audio and visual cues and began to perceive “there is trouble in river city”. This change and the subsequent press releases created an air of uncertainty.

Interest rates remain historically low but the public perception is anything but that. Well, we can stop with the “interest rates remain historically low” routine. It is not the interest rate that has folks uneasy. People are not comfortable with the current monthly payment it will take to buy a home, that they may have been more comfortable with last year or the year before. Please don’t bore me with facts. I am talking perception and bottom line impact on buyers. We can bring “interest rates are only a point or so higher and they remain historically low” to the dance, but we are going home with “the payment is $200 or $300 more per month and that is too much”. Forget interest rates……..payments went up and that created a market out of reach which led to more uncertainty.

The new reality is the 2 year ownership cycle is a dog that won’t hunt and buying, rehabbing and selling in a few months…well, flipper don’t swim here anymore.

Market value has become something that is identified on a house to house basis. CMA’s will become more general until such time as the pendulum makes it’s way back to a sellers market. My hope is that the damn thing slows down, so we can adjust from one market to the next. This sudden change in market value from one to another would leave Clark Kent in his boxers. Really.