Are Seller's incentives disguising market weakness?

Here's an interesting piece from the NYTimes regarding the various incentives that home sellers are providing to buyers amidst the slowing real estate market. The piece starts with a story about a Northern California family with a house on the market who is offering to give potential buyers 1 week at a timeshare for life as an incentive to purchase. I know a lot of the condo developers in the city here almost always give away a flat-screen television to buyers.

The interesting broader market question the piece begs is, how are these incentives disguising the real weakness of the real estate market? Because despite the various negative stories we're seeing in the real estate market, median home prices are still slightly higher year-to-year. But, are they "really" higher or did the listing price just remain high and the seller gave the buyer a $10,000 in-ground swimming pool??

U.S. Census bureau housing unit growth report

Here's the press release for the U.S. Census Bureau's housing unit growth study tracking from July 1, 2004 to July 1, 2005. The only IL county in the top 25 is far southwest suburban Kendall County. Flagler County, FL is number one for the second year running.

Housing market is healthy, says Chicago Fed.

Here's a good (dry) read from the Federal Reserve Bank of Chicago's Economic Perspectives quarterly journal regarding the current state of the housing market. It's a 16-page read that really is fairly bullish about the housing market.

If it's a bit too meaty for you to read, skip to the conclusions on it's last page. Bottom line, the study specifically dispels the idea of a "housing bubble" and points to sound economic fundamentals having driven the so-called housing boom of the last five years. They make specific mention of the various innovative mortgage products as key drivers of the market.

It's nice to hear the occasional positive plug about so-called non-traditional mortgage products. One hears so much negativity about the interest-only, no-money-down, no-credit check products that the exceptions tend to overshadow the great access which these products have provided to persons previously not eligible for home ownership.

Safety counts in open houses

I'm reading more and more about violence perpetrated on real estate sales people so look out and be smart. Some ideas:

1. Never let a stranger into your home alone and agents shouldn't show homes alone...if someone's insistent, have a neighbor come over.
   
2. Identify visitors. At a minimum use a guest registry or use a more stringent prequalification process including disclosure of a picture ID.
   
3. Don't make an appointment with potential buyers unless they give you their names and numbers and you have called them back to verify the number.
   
4. Before letting anyone in, turn on all the lights and open the blinds, shades, and curtains.
   
5. Before an open house, remove valuables, including jewelry, artwork, and electronic equipment.
   
6. Never go into a basement, storage area or closet with someone you don't know.

Crime free rental property design

I don't know a lot about this but I've been seeing a bunch of stories popping up in the mainstream media of late regarding crime prevention through design, with a focus on multi-family housing. The International Crime Free Association, Inc. seems to be leading the fight. The programs typically involve some partnerships between rental property owners and law enforcement. They also include some specific lease addendums/provisions to allow for easier eviction of criminals from rental units.

Housing inventory sitting longer

Take a look here at the Headrick & Wagner Appraisal Group's study of the Chicago area housing market over the last year or so. I don't think it contains any earth-shattering information, however, it does breakdown the Chicago area by community so you can really see the change in the market year-over-year. Clearly there's a slowing in the market and the housing inventory is on the market quite a bit longer than last year.

Professional inspections contingency in a real estate contract

I've had a deal recently where the inspection report that was completed was amazingly broad and the language of the inspector was just too far-reaching. In this particular case we were representing a Seller so the inspector's breadth was frustrating because it allowed the Buyer to cancel the contract under the inspection contingency. It sure seems like these reports almost always have the unwritten intent to provide for a Buyer to get out of a deal if they want too. Is this the best way to get a Buyer out of a deal (whether because of the inspection or another issue)?

As long as there's some language that's even the least bit doubtful about one of the major components in the home, Buyer's out of the deal right? You'd hope that these licensed inspectors are doing things properly or I imagine there is some mechanisim to complain to the State. But it just seems to me that almost every report I see is written in such a way that a Buyer could cancel the contract if he/she wanted too.

How can we represent our Sellers more effectively?

Second quarter existing home sales

Well, the National Association of Realtors released their second quarter existing home sales numbers yesterday. 20 states showed increased activity year-to-year...I thought the news was generally good although the mainstream press all led with the fact that 28 states showed decreased activity from last year. Illinois' activity was down 4.7% from last year. No suprises, all the states with the big runups over recent years were down. Of the big states, Texas showed particular strength, up more than 11% from last year.

I'd be a buyer in this market as prices have stagnated and it appears that the Fed has stopped the interest rate tightening. A great buyer's market!

Curb appeal

A nice review piece from today's Times regarding exterior tips for home sellers here. There are some good tips that we often see ignored. A good home staging company and minimal investments in landscaping are musts for a home on the market. Also, it brought up an interesting tidbit that more elderly people like more trees whereas younger buyers want more grass.

Another nice tidbit from the article noted a recent study from The Journal of Real Estate Research found that landscaped patios added 12.4 percent to the market value of a house, while hedges used as fences added just 3.6 percent.

If you're an agent, might a side business in home staging be part of your schtick or simply part of your agent's role?

Home inspections early and often?

I've been seeing a number of pieces encouraging homeowners to have professional home inspections more regularly than is commonly considered. Obviously, all potential home buyers MUST do a home inspection before their purchase (why do some 20% of people waive their inspection rights...my experience?). But should the average home owner be having inspections periodically to check-out the condition of their home regardless of its being on the market or not? Why?

Some of the reasons might be to find and repair items pre-listing so you're not opening the door for a potential buyer to get out of a deal under the inspection contingency or simply to protect your investment and see what's happening with your property. Though I see some of the self-interested inspectors talk about every 3-5 years (that might be a bit much), every 7-8 sure sounds viable to me. We're talking about most peoples most important investment and from my experience in the Chicago area we're talking about $300ish. And for people like me who can't fix anything or wouldn't know what to inspect, I think this information would be valuable.

Facts to know before you decide to own a condo

Did you see Mark Pearlstein's condominum column from Sunday's Trib.? One of his answers gave 10 facts to know before buying a condo. Here are the most critical:

1. Expect assessments to increase annually.

2. The association maintains everything outside your unit. Everything inside the drywall is your responsibility.

3. You are buying into a system where the rules can be changed by an amendment or board regulation. These changes include leasing and pets.

And my summary, be vigorous in getting your 22.1 disclosure pre-purchase so you know exactly what you're buying and the financial condition of the association!

FHA revamp moving through Congress

Keep an eye on the Expanding American Home Ownership Act of 2006 (HR 5121) which overwhelmingly passed the House before its recess at the end of July. The measure would allow the FHA to offer zero-down-payment loans, increase permissable mortgage amounts, and includes various consumer protections such as no prepayment penalties on mortgages and loss mitigation programs for borrowers who get behind. Here's HUD's press release.

Auctions...the rage?

I've been reading all these articles about Seller's going the auction route are our housing market cools. Is it something for you to consider?

Here's the process roughly/typically:

Oftentimes the auction firms will hold a few open houses before the scheduled auction. At this time, potential bidders can usually get a buyer information packet that will include a sales contract, seller disclosure form, an inspection report and appraisal. Many auction firms share sales commissions with real estate agents who bring buyers to auctions.

Before being allowed to bid, potential buyers must have a cashier's check for earnest money. Should you win a bid, the cashier's check goes into escrow and a % of the sales price will be due in a matter of days (usually 5-10%).

Sellers often pay a commission to the auction firm for its services and marketing...these fee is paid up front so the firm can advertise and conduct open houses.

There are typically three types of auctions:

*Minimum bid - where the Seller puts a floor under what they'll get.
*Absolute auction - which guarantees a sale.
*Reserve bidding - whereby Seller has the right to refuse.

Title agents (lawyers) beware

Take a look at a recent disciplinary decision here by the ARDC regarding an attorney's failure to disclose her agency to her clients. The attorney represented clients in three real estate closings and failed to disclose that she was an agent for Ticor title company. The attorney was censored.
Are you getting your disclosures signed? Should you be doing it earlier in the transaction process?

50 year mortages now available

I see that Statewide Bancorp, Inc. in CA has started offering 50-year mortgages. Supposedly there's not much activity on these in IL. I suppose it will eventually be a question of whether or not Fannie Mae and Freddie Mac start purchasing the product in the secondary mortgage market.