June 2009

Should I Buy or Sell First?

One of the fears people have when they decide to sell is not being able to find a new house to buy. Most buyers know they can write an offer on a house and make the offer contingent upon their ability to sell their existing house. If they’re unsuccessful selling their house, they aren’t bound to close on the new house. Sellers should be pleased to know they have the same opportunity to add a similar contingency.

The seller can accept a buyers offer and add a contingency which will give them a time period in which to find their home of choice.
An offer with a home sale contingency isn’t as attractive to a seller as a non-contingent offer so a contingent buyer usually will not be as aggressive in the negotiation. A seller with a “home of choice” contingency, in my view, has a little easier time of it and the contingency seems appropriate. A buyer can see the sellers side and the contingency is seen as a smaller risk. The sale of the buyers one home is an all or nothing condition, while the seller has potentially hundreds of homes from which to choose.

Good Relationships Gone Bad

No thanks… I have a _______ who’s a real estate agent. Every once in a great while, I hear these words after I offer to help someone with their real estate needs and all I can do is shake my head. Think about it, you’re going to buy or sell a house and your daughter-in-law, uncle or a best friend from high school is a real estate agent. On one hand you already know and trust the person but there could be several drawbacks.

The person you pick to represent you gets to know you very well. They learn just how much you make, how much and to whom you owe money, your credit score  and other intimate details of your life.

Another unlikely but possible drawback is the possibility that something might go wrong which could do irreparable damage to your relationship. If a detail is forgotten or something happens during the process that you perceive as being the REALTORS fault, things may never be the same.

Some time ago, I had a chance to represent a couple who were recently married and tied to me through family. They each wanted to sell a town house and then buy one big house together. Potentially a good chunk of income for me if I successfully participated in all three sales. It just wasn’t worth taking a chance, I put them in touch with another REALTOR who helped them sell their homes and buy a new one and everything was fine. If I had to do it again, I wouldn’t change a thing because of what could have happened. For some problems there is no price tag.

Tax Assessment Analysis

The tax assessment has nothing to do with the value of your home in todays market. A tax assessment is simply the value placed on a home for tax purposes. Your homes annual taxes are based on that assessment. A formula is used to arrive at the assessment and this is done every year in Northern Virginia. If someone improves a property and permits are pulled, that gets factored into the new assessment. An assessment could be wrong if someone finishes a basement themselves or builds an addition that permits weren’t pulled for.

I trust in and use the Tax Assessment Analysis to back up my “normal” CMA and it helps me with my price opinion of a home. I have years of experience with this type of analysis in Virginia and in Maryland. This approach has it’s skeptics and there are even experienced real estate agents that have a hard time understanding the value of this type of analysis. Some people focus on things like “that assessment is wrong because it has a deck” or “an assessment has nothing to do with value”. They don’t take into account the law of averages. Some are assessed high and some low. If you throw out 1 or 2 highs and the same amount of lows, the averages usually work out the same.

Tax assessments have nothing to do with value. That being said, a tax assessment IS relative to a home. In any given subdivision, one can compare the tax assessment to the list prices and sales prices to find out the difference as a ratio. When I started in real estate, older agents would say, “value is 120% of assessment” and they meant across the board. All subdivisions and areas are different and they will have different ratios but within the same subdivision, I find, the ratios are VERY similar. As an example, lets take a $630,000 home whose tax assessment is $592,560. By dividing the 630K by the assessment, you get 1.0631834750911300121506682867558 or 106%. If this was the average for several homes that went to settlement in the past 3 or 4 months, you could apply that average to your own homes tax assessment to come up with a likely sales price. For example, your homes assessment of $569,980 X 106% = $604,178.80

Another aspect to this analysis is your data source. For the traditional CMA one has to compare like properties. Since the assessment is relative to the home, you’re able to compare Ramblers, Split Levels, Split Foyers and Colonials. A Ramblers assessment and list price will be lower than a Colonials but the average ratios will be similar. I enjoy looking at the data from many angles. I compare:

• List price to the assessment
• Sales price to the assessment
• The lowest and highest ratios to develop a range
• The sales price ratio after seller concessions
• The ratio timeline increase or decrease

These are the minimum I consider when trying to find the “right price”. In my experience, the analysis fails when the home has either just a few unique or no comps or when the subject property has an incorrect tax assessment. It has always been one of my favorite tools as a real estate agent and works to back up my regular CMA in most subdivisions.

Should I Become a Real Estate Agent?

Many people try to picture themselves in a real estate career. People who go through the process of buying and selling a home as well as people in other industries. I love my career choice and I can’t imagine myself doing anything else for a living, except for maybe owning and operating a Martial Arts school  : )

Being a REALTOR can be very rewarding and not just financially. One also has a tremendous sense of accomplishment when you help someone reach the goal of home ownership or help someone transition from one house to another or successfully relocate into or out of the area. The job has so many things on the plus side and really, only a couple of things on the minus side, if you’re a pros and cons type of decision maker.

Pro’s

• Real Estate is a very professional occupation, primarily filled with intelligent, ethical, business people. I think of real estate as requiring the same level of knowledge and commitment as any other specialized field. We are sales people but not typical sales people. We are not selling a product, we are selling our skill set. We wear many hats.
  • That of an educator, walking our clients through the home buying/selling process.
  • That of a trusted adviser, using our knowledge and experience to protect the safety of our clients wishes
  • That of an experienced negotiator, to help secure the best price, terms and conditions for our client
    and of course…
  •  the hat of a marketing specialist for the promotion of property and self
  • Using this skill set helps differentiate us from what is normally thought of as a sales person. OK… THAT was alot of sub bullets  ; )
• Your work is always different and you’ll continuously meet and help new people
• You set your own schedule and you are completely autonomous if you wish to be. It’s nice being the boss with a completely trustworthy staff.
• There’s no salary cap, with effort and discipline, you can make as much as you want to.

Cons

• There’s no bi-weekly paycheck, you only get paid when you successfully go to settlement.
• You will spend lots of, both money and time, with no income, doing the things that hopefully, should lead up to the settlements you require.
• You have to be a pro-active person and prospect. Prospecting is doing things you’re supposed to do to meet people and help them buy or sell real estate.
• The hardest part of the job, in my opinion, is meeting new people who want to buy and sell real estate. Once I meet them, we tend to bond instantly and everything is very comfortable.

They say that teachers and nurses can do well in real estate but there are many great agents who came from other professions. To be a Realtor you have to be of good character without a record. You have to complete 60 hours of training to prepare you to pass a national test. You also have to take and pass a state test. You have to meet the minimum hours of continuing education to maintain your license, most of us do that and more anyway. You’ll have to join your States Real Estate board and the Multiple Listing Service. There are many other organizations you’ll need to join and dues you have to pay The office you join will walk you through the steps. You can go it alone or hook up with a larger team to get your feet wet. You can start part time or throw caution to the wind and go for it full time. The best way to learn more is to meet with a career counselor at a real estate office of your choosing. Meet with a couple of offices or Brokers and make sure you “feel” good about being there and that the office or Broker meets your needs and/or offers you what you think you’ll need. Everybody’s different and every situation is unique but for me, I feel VERY lucky to have made the decision in 1994 to become a real estate agent and if I could go back in time, I’d do the same thing again. What is the best motivation for success? The need to support your lifestyle and more importantly, your family. If you have to make it work, you will. You’ll do the things neccesary to become successful. Open houses, cold calling people, farming and investing in internet leads (my personal favorite).

If you’re considering a career in real estate, give me a call or contact me. I would be more than happy to answer your questions and even put you in touch with a career counselor that I know and trust.