As this gets posted in early April of 2017, the metro Phoenix real estate market is remarkably stable.
In the words of Michael Orr of the Cromford Report, “Inventory in the higher sales ranges has fallen sharply over the last 3 months, as it tends to do every year. This means remaining sellers have much less competition. So far this has not resulted in much improvement in sales prices because it takes a very long time for lower inventory to feed through into pricing. In addition it is usual for inventory to rise just as strongly between October and March so we do not think the luxury market has escaped its problems just yet. If we end up with more luxury inventory in April 2017 than we had on April 2016, then luxury home pricing is likely to continue its current weak trend.”
However, although luxury homes get a lot of attention, the truth is that a bit more than 90% of the residential real estate sales in our market, metro Phoenix, occur at $500,000 or below.
Mr. Orr went on to say, “We are seeing a little more inventory at the affordable end of the market in certain areas. If it continues this should have a moderating impact on the high appreciation rates we have been seeing in houses valued at below $200,000. Buyers should also see a mild reduction in the number of competing offers for the homes they want. However the effect is currently only weak and could possibly peter out quickly. The mid-range continues to enjoy healthy supply and healthy demand plus volume increases far in excess of the low or high ends. I see little to concern us in the market between $200,000 and $500,000 at the moment and for the next few months.
… in the short term the vast majority of our local housing market is looking unusually positive and stable.”
In a stable market, you might think that it should be easy to properly sell a home. Unfortunately, the following traps seem to become more and more commonplace as the market improves.
These are a few major mistakes that Mr. Russell Shaw, Owner of the Russell Shaw Group, blogged about lately that we hope you will avoid (a link to his blog is below in the “Sources” section for further reading):
To accept a solicitation offer.
The latest trend in exploiting sellers comes from “direct to seller” investors. We’ve all received postcards and yellow letters from people who “Buy Houses.” Whether well-funded by Wall Street like Open Door or simply a local wholesaler, the basic formula is the same. They promise to make everything easy; “no commissions” “sell as-is” “we handle everything,” and the promises go on and on. But the truth can be painful. Prices offered are low (initial offers are sometimes as low at 65% of value minus repairs and upgrades) to enable the “buyer” to resell quickly at retail and at a profit. Commissions just get renamed “fees” which sometimes total over 11% and “as-is” just means swapping existing condition issues for large price deductions. More often then not, the contract price gets hammered by the buyer as inspections are done and the close date approaches. After all, in any negotiation the party who needs the deal loses. In this case, the losing party is the seller who, days from closing, suddenly finds themselves forced to choose between agreeing to last minute changes to terms or lose the sale.
These investors are using the fact that many sellers are unaware that they can sell a home “as-is” through a traditional brokerage sale. Competition from multiple buyers (even if only multiple investors) will best protect a seller’s price. The fact is, investors who solicit these kinds of deals can benefit by the lack of competition for a home and by using misleading terms at the expense of the seller.
To not list your home on MLS (i.e. believe that both you and buyer can “save the commission”).
The primary reason sellers attempt to sell their home “For Sale by Owner” or use a “Discount Broker” real estate company is to “save the commission.” Although we fully understand the impulse (who doesn’t want to “save” money?) the statistics tell a different story. The most recent study of this was posted in ARMLS Stat (see Source below): “When we test our model against MLS sales only, properties that were sold using a real estate agent via the MLS sell between 8.5% and 9.0% higher than properties not listed on the MLS.”
“How could that possibly be,” you might ask yourself. Is it better marketing? The honest answer, is “not really.” Competition for a home is what protects value. That is the purpose of the Multiple Listing Service (MLS) – to employ all 35,000 agents (approximately) in our area to compete for the home.
Secondarily, you might also ask yourself why a buyer would select a “By Owner” home in the first place. Since buyers don’t directly pay the commission when they work with an agent, why would they care if the home is sold by a broker or by owner? The answer is because they beleive that by buying directly from the owner, they can split the savings generated by not paying an agent a commission. They expect to pay less from the very beginning. And since a seller selling by themselves don’t have nearly the exposure they could get by working with the MLS pool of buyers, they don’t really know what a large pool of buyers would actually pay for the home, so they often settle for the first buyer they meet.
Thanks to the internet, sellers and buyers have more incorrect information available to them than ever before. And it’s almost instant. Bad information has led to both under-pricing and over-pricing of homes. Establishing pricing through an AVM (automated valuation model – for example Zestimates) is definitely fun and entertaining, but it is by no means is an accurate way to determine market value. Algorithms cannot take in all the factors that are relevant to proper pricing; things like lot size, property upgrades, presence of a pool or a 3rd car garage, one story vs. two story, condition, etc. Zillow’s Zestimate is a very simple formula. It will take all the property in the ¼ mile circumference from the address you are looking up, and it will divide the closing prices for the last 6 months by the square footage of the subject property. That is it. It will therefore compare duplexes to single family detached, houses of any age or construction, horse property to four plexes, homes with pools and lush yards to homes with dirt in the back, houses across busy intersections to each other, trashed houses to heavily upgraded houses, small lot sizes to huge lot sizes, and so forth; all without any adjustments. For this reason, Zillow itself will tell you that it’s AVM can be off by as much as 40% in some markets (although to be clear, it is generally more like 8% off on average, according to Zillow) . If the average home is worth $250,000 in a market (a made up number pulled out of the air to make this point) than Zestimates can be as far off as $100,000 either way. See http://www.zillow.com/zestimate/#acc for more information.
And if you really want to have fun, just check out our AVM at https://www.howcanisellmyhome.com and see how it compares to Zillow, Eppraisal, and Redfin.
You should ask yourself why after all these years, lenders still require an appraisal if all of this information is so readily available. The answer to that question is because no computer has any way to properly form a judgment about your property without actually accounting for all of the details and nuances. We have the experience and knowledge to help form that judgement, and are offering it to you.
If you are interested in selling, or simply would like a free market valuation of your property, please contact Vince Davis at the Agents with Options ™ at 480 720 4040 or at firstname.lastname@example.org. Call within 30 days and ask about a free home warranty to be placed on your home immediately if you list your home for sale with us!
http://www.myarizonahomelink.com/blog/ November 23 2016