What Kind of Home Do You Want?

Some buyers set out to find a Complete and Total Disaster when they are shopping for a new home. Is that what you’re looking for? Because we come across them periodically and can point you in the right direction.

Houses that are for sale

Most buyers don’t want to do quite that much work on their new home, so they stick to the upper half of the quality chart shown above. The real challenge is knowing whether the home you like is actually move-in ready or if the seller has spiffed up the most visible areas to try to trick you.

My personal favorite home type is the Time Warp. These homes are often single-owner properties that have been loved for decades. The owners took extra good care of them – replacing the mechanical systems as needed and doing all the annual maintenance. But what they haven’t done is modernize. Everything is original, making it seem like you’re walking through the set of a TV show.

Most homes fall somewhere in the middle of the chart. Owners have done an okay job of maintaining the property, and maybe they updated the kitchen, or a bathroom, or whatever at some point along the way. Other parts of the home will need attention sooner rather than later. Buyers have to sort through the pros and cons to figure out if the place will work for them.

One of the first steps in a home search is figuring out what you hope to find. And for most, that involves trade-offs between size, price and the types of repairs you’re willing to take on.

The Missing Domino: First-Time Buyers

I really enjoy watching a creatively placed set of dominoes fall down piece by piece. There’s a rhythm and organization to it all that is very appealing … I find it calming. Mind you, I’m not the one to set them all up, but that’s a different story.

Red HouseReal estate can be like knocking over dominoes. When people want to move within a town, they often will have to sell their existing home in order to buy their next home. Most are moving up to a larger property, though there are some down-sizers out there too.

First-time buyers are important to the market because they can trigger chains of deals. When they buy my listing that’s an entry level home, that frees up my seller client to become a buyer and bid on a larger property, which in turn opens up possibilities for the seller of that home. You get the idea … one deal can lead to a series of deals.

The market has been slower this spring than in years past, and as we enter May a trend has become apparent. There are surprisingly few first time buyers in the market this spring. First time buyers still exist, but that group is smaller than it has been in recent memory.

What makes us think the first time buyers are missing?

The hypothesis began with a collection of observations and conversations. Parents at youth softball are lamenting their difficulty in selling. Other real estate agents are at a loss as to why homes aren’t moving. The distribution of our buyer clients is different than in past years, with many fewer first time buyers. The market’s feedback to our listings is different than we have received in past years. None of this proves anything, but low numbers of first time buyers seems to be a common theme.

Contract data also hints at differences between 2013 and 2014. At the County level, the number of contracts for single-family homes with asking prices of between $200,000 and $399,999 is lower this year than last year, down 15% and 13% respectively. These are very active price points in the County and frequent targets of first-time buyers.

2014-05-04 Hartford County Contracts by Price Band

In the West Hartford market, which is usually the most active in the region, the price points are slightly higher than in the overall County. West Hartford is seeing meaningfully less activity at price points between $200,000 and $500,000. The largest year-over-year drops are in the $300,000s and $400,000s, which are common price points for first-time buyers in town. Those two price bands are behind last year’s pace by 34% and 41%, respectively. Wow.

2014-05-04 WH Contracts by Price Band

Local real estate markets should be active this year. The economy has rebounded so that people are less worried about job security. Mortgage rates are still very attractive, though no longer at historical lows. And home prices have stabilized throughout the region. For a while we thought that the cold and snowy winter was to blame for the slow start to the spring real estate market. And I’m sure it did play a role. But now that the flowers are blooming, and the real estate market isn’t, we have to look for new and better explanations as to why we’re seeing less activity than we have in past years.

A lack of first time buyers seems like a good place to start. Does this match with your observations – are you seeing fewer friends, family and co-workers looking to buy than in past years?

How Long Does it Take to Close?

Days to Close

The amount of time between the contract date and the closing varies greatly – every situation is a little different. However, after looking at all of the single-family deals that closed in Hartford County in 2013 we can see some trends.

The peak of the curve is between 35 and 55 days. This is the range that we usually see with our clients. It allows the buyer enough time to secure a mortgage, and the seller enough time to move out. Mentally you should plan for a closing somewhere in this window as you consider a real estate transaction.

Closing dates are negotiable. Buyers usually begin the conversation by proposing a closing date in their initial offer for a home. From there, it may, or may not, get changed depending on how the negotiation proceeds.

Buyers need to be more aware of the time until closing than sellers. Mortgage lenders offer rate locks to buyers and perform other due diligence that has a shelf live. You need to find a lender and get pre-qualified before making an offer on a home, so make a note to ask if they have advice on a reasonable closing timeline.

The closing date will need to be a mutual agreement between the buyer and seller. In most cases it’s within the 35 to 55 day window. Understand what the implications may be if you choose a closing date in less than 30 days or more than 60 days. Your agent should be able to provide more guidance.

Why Does Zillow Hate My House?

Zillow is a fairly popular website among buyers. They have an algorithm they use to provide a Zestimate for any house, whether it’s actively for sale or not. The Zestimate is Zillow’s estimate of what they think the house is worth. This Zestimate is derived from recent comparable sales and a little fairy dust, I think.

I spend a lot of time debunking Zillow Zestimates. I will admit, it kind of pisses me off. I have to provide a buyer with comparable sales for any house they’re interested in, which is perfectly fine and expected as part of my job. But then I also have to go through an additional analysis of why Zillow is wrong with their Zestimate and why the buyer shouldn’t put much stock in that value. It’s hard to do this because Zillow doesn’t really tell you how they get their numbers, and who knows how much fairy dust is worth and figures into the calculation.

My own house is a perfect example of just how wrong Zestimates can be. Zillow started hating on my house in August 2012 and hasn’t given me a break since. In the real world, my house is probably worth around $350,000 given the condition it’s in and updates that have been done. Let’s take a look at Zillow’s data and see what they say, shall we?


ZillowJuly2012

In July 2012, Zillow said my house was worth $314,000. Today it is worth $209,738. Well, they really give a range, so Zillow says it’s worth somewhere between $145,000 and $294,000.

Is this some kind of joke? They’re saying my house is worth less than what foreclosures sell for in my neighborhood. And how exactly do they even come up with the value they’re stating if it’s lower than the lowest of sales in my neighborhood? This makes no sense at all. When I look at the Nearby Similar Sales they tout, they are all within 200 square feet of the size of my house and the lowest sale price is $314,900.

So what exactly have we done to warrant a Zestimate of more than $100,000 less than the lowest comparable sale? I do not know.

Zillow also hates many other houses in my neighborhood, including a house I have listed right now for $395,000. Zillow thinks it’s worth $268,389. The house went under contract in a week and I can tell you that it’s not selling anywhere near $268,389. If it’s any consolation, Zillow does feel that the value of this house increased by $41,971 in the last 30 days. Maybe we should have had the owners list it even higher? How does a house value increase by 18% in just 30 days? The other bizarre thing about this house is that it is very similar to my home, but Zillow uses completely different Nearby Similar Sales for my house and this one, even though it is located only .35 miles (4 city blocks) from my house.

Do you see why I’m confused? Where do these garbage Zestimates come from? And why do I have to keep debunking them?

What has been your experience with Zillow? Do you think it grossly underprices or overprices your home in their Zestimate?

Amusing Internet Leads

FunkyCowboy1874@xyz.comWe advertise on the main national real estate websites that buyers use to look for homes. This results in a steady stream of “leads” … potential buyer clients. Although we’re happy to get clients from internet advertising, it is a small part of our business. Our goal in responding to these leads is to provide good service by answering questions, and pointing people in the right direction. We don’t give them the hard sell and try to convert them to clients.

Email addresses are usually the only contact information that we have to work with – no name and no phone number. You should see some of the strange addresses that people pick for their online presence! Here are a few of my favorites themes, with an example of each (sightly modified, and stripped of the domain).

The Nickname: This may be the most popular since it’s a true part of someone’s identity. Two of the best that I have seen come through my inbox are requests for information from izzythejoker@xyz.com and lilholla15@xyz.com. I’m comfortable addressing a reply to Izzy, but what do I do about Lil Holla?

The Description: Others pick an address that describes them, like Sara did with her address … beautifullsara8@xyz.com. I did not have an opportunity to confirm that the adjective is appropriate, but we’ll take her word for it. And I guess “beautifulsara” must have already been taken!

The Random: Finally, there are addresses that have no obvious context, like bubble1234@xyz.com. This one could be a nickname, but it’s not obvious. Others addresses seem like they could be references to a business. In some ways these are the most difficult of all because they create a puzzle that I want to try to solve – who are these people and why did they pick their email address?

Most of the time we never hear back from internet leads, so the mystery lives on forever. Perhaps the real conclusion here is that in today’s age of mobile technology the email address doesn’t matter all that much to some people. If you prefer text messaging, then maybe you don’t even need an email address. But on the rare occasion when you do, the name you choose to use can make a lasting impression on the recipient.

Have you come across any crazy email addresses that you can share? (Please modify them slightly and substitute the xyz.com domain before posting)