Realty Executives Midwest
Ah the love letter… in today’s raging hot market, with extremely low inventory and bidding wars becoming the new normal, it’s become almost a necessity for prospective buyers to include a love letter in their offer package to sellers. These love letters are written to essentially attract the sellers’ attention and explain the many reasons why they should pick you as the buyer.
However, as love letters become more popular there are also more warning signs being thrown up. The National Association of REALTORS® warns that sending love letters could open real estate professionals and their clients up to fair housing violations. In fact, last year, Oregon was the first state to ban buyer love letters.
There are, however, alternatives you can advise your clients to consider in order to get a leg up on the competition.
Money
Adding things to a love letter like photos of your clients and/or their pets is a novel approach, but that’ll likely have a negligible effect on the seller. At the end of the day, money talks. The best alternative to a love letter is cash. Be sure to always advise your buyers to make the highest offer that they are personally comfortable with, not the number that they think will be highest.
An alternative to this is the all-cash offer. Of course, making an all-cash offer is not possible for most buyers, and if another buyer can offer all cash, then they’ll likely be the buyers who end up purchasing that particular property. However, there are other avenues that you can advise your clients to take, including companies like Ribbon, Knock and FlyHomes that can lend them money to make an all–cash offer.
Waive Contingencies
In the current competitive market that's already full of contingencies, a great alternative to sending a love letter to the sellers is to waive one or two of these contingencies and reduce the burden on them.
Removing the financing contingency and/or the appraisal contingency can do a lot more to make your buyer’s offer more attractive compared to sending a love letter. During the height of the pandemic, many buyers even waived inspection contingencies, although this is never recommended and should only be considered by experienced homeowners.
Tighten the Terms
Another excellent way for your buyers to increase their chances of winning an offer is to tighten their terms. If it’s possible to reduce the timeline from when you submit their offer package to closing, your client's offer will be much more enticing to sellers. Some tactics for doing this is to shorten the length of the escrow period, as well as getting the loan pre-underwritten so that you can remove the financing contingency completely.
Use an Escalation Clause
Seller’s agents are usually tight-lipped when it comes to the exact number of offers and the highest offer their clients have received. An underused tactic that you can use to make your buyer's offer package more enticing to sellers is an escalation clause. This clause states the offer, but adds that they will beat any higher offers that are presented by the amount you specify.
This clause is incredibly useful because it gives your clients the opportunity to present the highest offer. However, be sure to advise your clients that they should cap their escalation clause at the highest sum they are willing and able to pay.
Build Rapport
Lastly, this step falls on you as the real estate professional. Building rapport with the seller’s agent is critical when it comes to increasing your client's chances of nailing that offer. Naturally, the longer you’re in the industry, the more connections and relationships you’ll make with other agents. But there are new agents entering the industry every day and you need to be able to build rapport with other professionals in a short period of time. This is a vital skill for any agent.
Although love letters are endearing and can have a very real impact on a seller’s decision when choosing an offer, the suggestions listed above are more actionable steps that you and your buyer can take to ease the stressful home-buying process.
Source: Rismedia's Housecall
Realty Executives Midwest
1310 Plainfield Rd. Ste 2 | Darien, IL 60561
Office: 630-969-8880
E-Mail: experts@realtyexecutives.com
In today’s housing market, there are far more buyers looking for homes than sellers listing their houses. Based on the concept of supply and demand, this means home prices will naturally rise. Why is that? When there are more people trying to buy an item than there are making that item available for sale, that drives prices up. And that’s exactly the case in today’s housing market. So, knowing what’s happening with the inventory of homes for sale and the demand for housing is crucial for today’s buyers and sellers.
The latest buyer and seller activity data from the National Association of Realtors (NAR) indicates buyer traffic heavily outweighs seller traffic today, as shown in the maps below. There are far darker blues (strong buyer activity) on the left and much lighter blues (weak seller activity) on the right. In other words, this shows how the demand for homes is significantly greater than what’s available to purchase.
Supply is struggling to keep pace with demand. In fact, the inventory of homes for sale recently hit an all-time low. That gives you an incredible advantage when you sell your house. With so few listings, it’s likely more potential buyers will view your house – especially if you work with an agent to price it right. That means there’s a high chance you’ll receive multiple offers or buyers will enter a bidding war for your house. And that dynamic can drive the sale price of your home up.
As a buyer with fewer options available, you’re likely to see more competition, so you need to be strategic to win. First, make sure you have a trusted professional on your side. Your real estate agent will help you understand your local market and work with you to act quickly when the time is right. Even when it’s challenging to find a home, you can still succeed as a buyer today if you have a trusted advisor on your side every step of the way.
Whether you’re a homebuyer, seller, or both, knowledge truly is power. Connect with a trusted real estate professional so you can better understand what’s happening in your local market and achieve your homebuying and selling goals this year.
Source: Keeping Current Matters
Realty Executives Midwest
1310 Plainfield Rd. Ste 2 | Darien, IL 60561
Office: 630-969-8880
E-Mail: experts@realtyexecutives.com
A recent survey revealed that many consumers believe there’s a housing bubble beginning to form. That feeling is understandable, as year-over-year home price appreciation is still in the double digits. However, this market is very different than it was during the housing crash 15 years ago. Here are four key reasons why today is nothing like the last time.
The affordability formula has three components: the price of the home, wages earned by the purchaser, and the mortgage rate available at the time. Conventional lending standards say a purchaser should not spend more than 28% of their gross income on their mortgage payment.
Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate, even after the recent spike, is still well below 6%. That means the average purchaser today pays less of their monthly income toward their mortgage payment than they did back then.
In the latest Affordability Report by ATTOM Data, Chief Product Officer Todd Teta addresses that exact point:
“The average wage earner can still afford the typical home across the U.S., but the financial comfort zone continues shrinking as home prices keep soaring and mortgage rates tick upward.”
Affordability isn’t as strong as it was last year, but it’s much better than it was during the boom. Here’s a chart showing that difference:
If costs were so prohibitive, how did so many homes sell during the housing boom?
During the housing bubble, it was much easier to get a mortgage than it is today. As an example, let’s review the number of mortgages granted to purchasers with credit scores under 620. According to credit.org, a credit score between 550-619 is considered poor. In defining those with a score below 620, they explain:
“Credit agencies consider consumers with credit delinquencies, account rejections, and little credit history as subprime borrowers due to their high credit risk.”
Buyers can still qualify for a mortgage with a credit score that low, but they’re considered riskier borrowers. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the 14 years since.
Mortgage standards are nothing like they were the last time. Purchasers that acquired a mortgage over the last decade are much more qualified. Let’s take a look at what that means going forward.
The most obvious difference is the number of homeowners that were facing foreclosure after the housing bubble burst. The Federal Reserve issues a report showing the number of consumers with a new foreclosure notice. Here are the numbers during the crash compared to today:
There’s no doubt the 2020 and 2021 numbers are impacted by the forbearance program, which was created to help homeowners facing uncertainty during the pandemic. However, there are fewer than 800,000 homeowners left in the program today, and most of those will be able to work out a repayment plan with their banks.
Rick Sharga, Executive Vice President of RealtyTrac, explains:
“The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that the ‘forbearance equals foreclosure’ narrative was incorrect.”
Why are there so few foreclosures now? Today, homeowners are equity rich, not tapped out.
In the run-up to the housing bubble, some homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up. When home values began to fall, some homeowners found themselves in a negative equity situation where the amount they owed on their mortgage was greater than the value of their home. Some of those households decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area.
Homeowners, however, have learned their lessons. Prices have risen nicely over the last few years, leading to over 40% of homes in the country having more than 50% equity. But owners have not been tapping into it like the last time, as evidenced by the fact that national tappable equity has increased to a record $9.9 trillion. With the average home equity now standing at $300,000, what happened last time won’t happen today.
As the latest Homeowner Equity Insights report from CoreLogic explains:
“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth.”
There will be nowhere near the same number of foreclosures as we saw during the crash. So, what does that mean for the housing market?
The supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation. As the next graph shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing the acceleration in home values to continue.
Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a shortage of homes for sale.
If you’re worried that we’re making the same mistakes that led to the housing crash, the graphs above show data and insights to help alleviate your concerns.
Source: Keeping Current Matters
Realty Executives Midwest
1310 Plainfield Rd. Ste 2 | Darien, IL 60561
Office: 630-969-8880
E-Mail: experts@realtyexecutives.com
When you’re selling any item, you usually want to sell it for the greatest profit possible. That happens when there’s a strong demand and a limited supply for that item. In the real estate market, that time is right now. If you’re thinking of selling your house this year, here are two reasons why now’s the time to list.
A recent article in Inman News explains:
“Spring, the hottest time of year for homebuyers and sellers, has started early, according to economists. . . . ‘Home shopping season appears to already be in full swing!’”
And they aren’t the only ones saying buyers are already out in full force. That claim is backed up with data released last week by ShowingTime. The ShowingTime Showing Index tracks the average number of monthly buyer showings on active residential properties, which is a highly reliable leading indicator of current and future trends for buyer demand. The latest index reveals this December was the most active December in five years (see graph below):
As the data indicates, buyers are very active this winter. Last December saw even more showings than December of 2020, which was already a stronger-than-usual winter. And remember – you want to sell something when there’s a strong demand for that item. That time is now.
Each month, realtor.com releases data on the number of active residential real estate listings (listings currently for sale). Their most recent report reveals the latest monthly number is the lowest we’ve seen in any January since 2017 (see graph below):
And don’t forget, the best time to sell an item is when there’s a limited supply of it available. This graph clearly shows how extremely low housing supply is today.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), existing-home sales totaled 6.12 million in 2021 – the highest annual level since 2006. This means the market is hot and homeowners are in a great place to sell now while sales are so strong.
NAR also reports available listings by calculating the current months’ supply of inventory. They explain:
“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.”
The current 1.8-months’ supply is the lowest ever reported. Here are the December numbers over the last five years (see graph below):
The ratio of buyers to sellers favors homeowners right now to a greater degree than at any other time in history. Buyer demand is high, and supply is low. That gives sellers like you an incredible opportunity.
If you agree the best time to sell anything is when demand is high and supply is low, contact a local real estate professional to discuss listing your house today.
source: Keeping Current Matters
Realty Executives Midwest
1310 Plainfield Rd. Ste 2 | Darien, IL 60561
Office: 630-969-8880
E-Mail: experts@realtyexecutives.com
When you're selling your home, you want to do all you can to ensure it sells as quickly as possible and for the highest possible price. While the home itself will be the main attraction, it's still important to consider the small details that buyers will inevitably notice.
Related: Winter Home Staging Tips That Promote Safety and Sales
Some people choose to forego the staging process, thinking it's a waste of time, but it can greatly increase the number of offers you receive. Here are four approaches to take that'll make your home look great when potential buyers come through:
The first thing you want to focus on when staging your home is to make sure to remove any personal affects. Pictures, kids' drawings, certificates or anything else that might identify you needs to be taken down. While there are safety benefits to taking this step, the main reason you want to depersonalize your home is so that any potential buyers can visualize themselves living in your home. If you can capture their imagination, you've already won half the battle.
Although you may have a very bold decorating personality, it might be best to mute that somewhat when you're trying to sell your home. Again, buyers want to be able to visualize themselves living in your home, but if your decor is too far from what they enjoy, you might cause them to miss the underlying beauty of your home. This isn't to say, of course, that you can't have a few fun pops of color throughout your home. Instead, just make sure that everything matches and isn't too distracting.
When REALTORS® show a home, it makes a world of difference if they can easily explain what a room can be used for. That's why it's important to simplify your decor as much as possible. Try to have only a few main pieces of furniture in each room, and make sure to remove any clutter that makes your home look smaller. This will help potential buyers "catch the vision" of how they can use certain rooms as they tour your home.
Staging a home starts with the exterior. An attractive exterior will create a strong first impression, making it easier for buyers to overlook other small flaws in your home. Try to coordinate your landscaping with the season, having mums in the fall, flowering plants in the spring and summer, as well as simple, tidy landscaping in the winter.
If you're having trouble figuring out how best to stage your home, it's worth it to ask an expert. Even a few simple tips can help you significantly increase the perceived value of your home. Selling a home is a major financial transaction, so make sure that you don't leave this transaction to chance!
Source: RisMedia's Housecall
Realty Executives Midwest
1310 Plainfield Rd. Ste 2 | Darien, IL 60561
Office: 630-969-8880
E-Mail: experts@realtyexecutives.com
Realty Executives agents are real estate experts. They have the education and expertise you need to navigate through the process of buying or selling a home. From listing at the right price to making the best offer, our Executives have witnessed the best - and most regrettable - decisions homeowners and homebuyers can make. Every day, they are immersed in every aspect of real estate that includes comparable home price analysis, property surveys, credit reports, open houses, HOA agreements, lenders, title companies, homeowners’ insurance, walk-throughs, terms of sale or purchase, repairs, concessions and closing documents. Let our accomplished Executives help navigate you through the process of buying or selling a home.
