Suze Orman Changing Home Buying Advice and Listing Agents

The Monti Real Estate Monitor  Originally posted  September 17, 2013

Amended November 14, 2013

SO WHY SHOULD I LIST WITH YOU?

This is a great question for people selling their home when a Sales Associate comes a callin.  What considerations go into picking a Listing Broker?  In my second blog I discussed relationships.  The most important relationship for the seller is with their agent known as the “Seller’s Agent” who works only for the seller.  As a Seller’s Agent there are certain fiduciary obligations.  The main one is that YOUR interests NOT HIS/HERS comes FIRST!  Let’s talk about one criteria for choosing a listing broker.  That would be trust.  Do you trust the agent?  Are they well prepared, knowledgeable, approachable and give the impression that they are there to represent YOUR best interests?  If not cut the meeting short and get rid of the shlub.

In my opinion, a good listing agent is going to do their homework before coming to a preview of your house.  They are going to research the most recent sales (the last 6 months) and hopefully know market trends not only in the area but beyond.  Then they will get an idea of what houses sold for recently, how your house compares and where to price it.  They will present you with a FREE Comparative Market Analysis (CMA).  Of course they will ask you what you want to price it at and why, however, if they are really doing their job they will have recent sales and comps to show you and give you the most marketable price to list it at.  Remember, the agent wants you to get the highest price for your property.  The more you get the more they make.  The object is to price it right so it doesn’t sit on the market long.  Stale properties will not bring a premium price.  Buyers will know how long a property has been sitting.  If you are a serious seller you will price it right.  Price it too high and it will linger on the market.  Many sellers think that their home is the best in the development.  Maybe it is.  Remember that old game show “The Price Is right?”  Well that applies to anything for sale including homes.  Let’s take a look at a possible scenario:

The agent goes to preview a house described as:  Center Hall Colonial on a wooded lot with Custom updated kitchen, granite countertops, stainless steel appliances a fireplace, hardwood floors, 5 bedrooms, 3.5 baths and a 3 car garage.    

The agent inquires about how much the Seller wants to list it for.  The seller says “the house next door sold last year for $560,000.”  Well this smart listing agent has done his homework and found that similar houses in the area and one in the development recently sold for $599,500.  There are four similar houses in the area listed at $625,000, $599,999, $607,000 and $612,000.  The average list price is $610,999.  He explains that he is not like all the other listing agents and describes what sets him apart.  He shows you the comps, explains the scenario and prices your house not at the top, not at the middle but towards the lower end.  Here is why:  Now imagine you are a buyer and not a seller.  The average buyer is going to compare value and price.  All the listed houses have 5 bedrooms, 3.5 baths and three car garages.  The buyers don’t care that your lawn is the greenest, or that you just had a new slider put in or that the kitchen faucet is gold plated.  They are going to compare apples with apples.  They will think about each house in the same way - five bedrooms, 3.5 baths, a 3 car garage and a fireplace.  The buyers will most likely check out the lowest priced listing first.  The buyers are interested in value versus cost.  The advantage for the seller here is visibility and more prospective buyers looking at their property first.  Being first may give you an edge.  It will certainly attract more buyers.  If you were the Listing Broker how would you price your property?  Chances are that if it is priced below the highest priced listings there very well could be a bidding war between multiple buyers and the seller may wind up with more than the list price.  I have seen it happen in my development in the last few months.  I was amazed.  I knew then that the real estate market was starting an upward trend and would continue the momentum.

On September 10, 2013 Suze Orman made headlines on CNBC by CHANGING HER HOMEBUYING ADVICE!  I was stunned when I read it.  Here are excerpts and the link to her article:

"Financial advice needs to change according to what is happening in the economy,"

“Over the last three months, interest rates for a 30-year fixed mortgage have been hovering around 4.5 percent and the rates for a 15-year fixed mortgage around 3.6 percent.”

“Home prices are also expected to stabilize more so because investors, who have been driving up the home bidding, are expected to exit the market soon. According to a survey by ORC International, 48 percent of investors plan to curtail home purchases.”

http://www.cnbc.com/id/101023337?doc=101023337%7CSuze%20Orman%20changes%20homebu

What this means is that interest rates are still low, prices are still going up and as a result speculators (people who buy real estate to rent or flip i.e. re-sell at a higher price) are expected to be getting out of the market.  With investors leaving the market it is expected that more realistic prices will be stabilized, however, I disagree here with Suze.  There is still a shortage of available housing on the market because many sellers are still underwater and are patiently watching as prices rise.  Once prices reach near the levels we saw before the RE bubble burst in 2008 then I believe you will see a stabilizing in home prices.  The reason prices will stall then will be because the market will flip and become a buyer’s market.  The upward movement in prices will entice people whose homes were underwater to list them in the hopes of recouping their money resulting in more homes on the market at higher prices and not enough buyers.  I believe that there will be price entry points into the market for sellers based upon what they originally paid for the house, how much equity they pulled out of the house and how badly they want to make their money back as well as how far underwater their homes are.  We will also see baby boomers selling to take advantage of home price increases as they move out of state to avoid the high real estate taxes we endure in New Jersey for more tax friendly places like Delaware.  This will result in a five to seven year cycle of gradual price increases in new homes as well as re-sales.  It is not unlike the stock market.  People buy (or short sell) equities at certain price points and then wait until the stock reaches a certain price before they sell (or cover the short).  I predict these price points will result in the gradual appreciation of real estate in an orderly manner in the next five to seven years and then it will flip from a seller's market to a buyers market again.  Call me Carnack.

I recently  spoke with someone who is employed with a major Real Estate Law Firm in Manhattan and they tell me that business is picking up and banks are starting to loosen the reins on lending.

Words of Wisdom:  “I always felt very secure and very safe with real estate. Real estate always appreciates.” –Ivan Trump

The ideas expressed in this report reflect my own personal views and opinions and are for reflection and personal discernment only and should not be relied upon as legal or investment advice.  The foregoing report is for information only.  No warranties are made regarding the truth or accuracy of this information and I specifically disclaim any and all liability for any reliance placed upon the materials that are here published.  Always consult your lawyer for legal advice in matters of private or business importance.  Nothing published in the Monti Real Estate Monitor should be construed as investment advice or as a solicitation to buy or sell any kind of financial instruments or Real Estate.