buyers

Nov 18 2016

In the biggest transactions of your life, the price has to be right — get your head into the game with home sales data

If you’re a fan of HGTV’s Property Brothers, you may wonder how realtor Drew Scott can travel around Canada and the US confidently telling sellers and buyers what homes – theirs or others – will sell for. After all, real estate markets are highly localized, not only from city to city but from neighborhood to neighborhood. How does Scott wrap his head around so many of them?

The answer in three words is comparative market analysis (CMA).

Whether you’re considering putting your home up for sale or making an offer on someone else’s, a CMA enables you to estimate its fair market value. Using data and digital applications from the local multiple listing service, your realtor can make side-by-side comparisons with homes that:

Closely resemble the property in question in size, features and quality;
Are located in the same area; and
Have sold recently, are pending, or currently on the market.

Dollar adjustments up or down are made to comparable properties (or “comps”) depending on how they differ from the subject property. For example:

Do they have more or less square footage?
Are they older or newer?
Have they been updated or remodeled?

And so on. Then the adjusted values of comps are averaged to estimate the fair market value of the subject property.

A CMA is both science and art. On one hand, the math and some selection principles are objective. For example, recently sold homes take priority over other types of comps. Since their sale prices are unknown, pending and active listings play a limited or supporting role in the process. And distressed homes should not be included. Fair market value assumes that both buyer and seller are knowledgeable, willing and unpressured. In a short sale or the sale of a foreclosed property, the seller doesn’t match that description.

On the other hand, a realtor’s intuition and local market knowledge also influence the selection of comps and the adjustment of their prices. It’s impossible to assign an objective dollar value to a view, a fireplace or a pool, for example. A realtor can look to appraisers for help, but there’s always an element of by-guess-and-by-gosh in the process.

That said, CMAs are an indispensable tool in buying or selling a home. They not only help you to get or pay a fair price, but also save time and stress. If you list your home at a fair price, you’re almost guaranteed to sell it faster (and for more money!) than if you ask too much. And if you’re confident in the value of a home that you want to buy or sell, you can approach negotiations with greater strength and peace of mind.

Oct 28 2016

3 reasons to work with a realtor

cloak-of-invisibility I often wish Harry Potter’s cloak of invisibility would descend when I enter a store – giving me time to size up the merchandise myself before anyone offers their help. My kneejerk response is “Just looking, thanks.”

If you’re like me, you approach the biggest transaction of your life in the same way, taking virtual refuge in the likes of Zillow and Trulia. In fact, research shows that home buyers spend several months in the browsing stage.

And that’s all to the good. Learning about the market and reflecting on your needs and wishes will improve your decision making.

But when you get serious about buying a home, you have a lot to gain from working with a realtor you like and trust.

Realtors owe clients fiduciary responsibility, a legal term meaning that they must act in a client’s best interest at all times. This responsibility applies even if a buyer hasn’t signed an agency agreement with a realtor.
Full-service realtors escort buyers through every step of a complex process. They will help clients search for and view properties, estimate fair market value, write an offer, negotiate with the seller, oversee inspection and appraisal, coordinate any repairs, and see the transaction through escrow to closing – including a final walkthrough and delivery of the keys.
Spanning months or several weeks, a realtor’s many services are delivered without any financial obligation unless and until the sale closes. Even then, the seller pays the buyer’s agent as well as his or her own. Here in Oregon, compensation for the buyer’s rep is set in percentage terms in the seller’s agreement with the listing agent. Of course, sellers take these costs into account when setting prices for their homes.

The best brokerages hold realtors to high quality standards by soliciting anonymous client feedback. They also support brokers with training, services and oversight – so that clients benefit from the knowledge and experience of the entire team.

The bottom line: Browsing on your own is fine in the early stages, but there’s no substitute for a good realtor’s advice and services when you’re serious about buying a home.

Jul 25 2015

5 winning strategies for Portland homebuyers

In this posting, I offer an inside look at an open house I hosted recently. My aim? To draw lessons for buyers in Portland’s hot market.

A sweet, well-kept bungalow in the friendly Southwest neighborhood of Maplewood, the property was listed at $325,000. Built in 1910, it has a defined entry with coat closet; a window seat, fireplace and original hardwood floors in the sitting room; two bedrooms, one bath and over 1,400 square feet; and a large backyard perfect for entertaining – with a wooden deck and fence.

Though close to downtown, home to a highly rated elementary school, and criss-crossed by hills, creeks and green spaces, Maplewood is not known as a walkable neighborhood. But a house of the same vintage just across the street has been converted to a popular café with garden space. Among other things, it hosts monthly neighborhood association meetings.

Given so many desirable features and a friendly price point, I had expected lots of traffic when agreeing to do the open house a week earlier. And over 20 parties – mostly Millennials – visited in the space of two hours.

The listing agent and I had also expected the home to sell quickly, but we couldn’t know how fast. It sold the day after it went on the market and the open was announced. So I had to break the bad news to each of the visitors Sunday.

A few left without touring the house. Many more said they could understand why it had sold so quickly after having a look around.

Who was the lucky buyer? A Baby Boomer looking for compact, one-level living as she nears retirement. She turned up with her agent toward the end of the open to plan renovations. We talked about removing half the wall between the kitchen and sitting room to create a breakfast bar and open plan living.

I asked if it was her first offer. She laughed and shook her head. Her agent described her as battle-scarred.

The moral of this story?

Be persistent – You may make several offers on several houses before succeeding.
Know your needs and wants – If you clearly identify your “must-haves,” you can size up a home quickly and compromise on your wants. It’s normal for your priorities to shift over time as you see more properties. Just stay focused on your current needs.
Know the market – Home styles, prices and inventories in different neighborhoods are bedrock realities your needs and wants bump up against. The internet and your realtor can help you to understand these realities. Armed with the bulleted figures below, for example, a would-be buyer could have spotted a great opportunity to move into Maplewood at a low price point and predicted keen competition and a quick sale.
- The median price of a home in this close-in, close-knit neighborhood was $380,000 in 2014 (the most current data available)
- Whereas the median for Portland Metro including outlying areas was $300,000 last month
- So the bungalow list price of $325K was much closer to the Metro median than the Maplewood median
- The number of homes for sale in Maplewood decreased by over 31 percent between June 2014 and June 2015
- There were just 7 active listings in the neighborhood at the time the bungalow went on the market
Be prepared to pounce – Knowing your needs, wants and the market helps you to act quickly. Getting mortgage preapproval before starting your search is also key. And it’s important to view a property that speaks to you as soon as possible after it goes on the market. Waiting even two days may be too late for a good home in a good neighborhood.
Make your offer sweet – Your first offer should be your best. You may not get another chance. Be prepared to meet or exceed the list price if your realtor determines that it’s fair market value. In some cases, it can be a good idea to include an escalation clause, which commits you to beating the best offer by a certain dollar amount below a stated ceiling. While price is key, other factors can come into play. Your realtor should contact the listing agent to ask about other factors and tailor your offer accordingly. For example, you may win the seller over with:
- a slow or fast closing
- a rent back agreement allowing the seller to stay in the home for up to 90 days while trying to find a new one
- a “clean” offer that minimizes or waives contingencies and conditions
- proof of funds for the down payment and closing costs along with a mortgage preapproval letter
- a personal letter explaining what features of the home wow you

Jul 01 2015

On the outside looking in? 5 tips for breaking through financial barriers to home ownership

Commuting across Hawthorne Bridge (Jesse Millan)

Good job, millennials! More of you are achieving the American Dream of home ownership, historically the main path to building personal wealth. But there are still challenges ahead. This posting reviews common barriers first-time buyers face and offers tips for overcoming them – before you ever begin actively searching for a home.

The National Association of Realtors (NAR) announced last week that the rate of US home sales peaked to a 5+ year high last month, in part because the percentage of first-time buyers rose. They accounted for 32 percent of all sales – up from 30 percent in April and from 27 percent a year ago. In turn, millennials account for over two-thirds of all first-time buyers.

This is good news for all homeowners. First-time buyers are a bellwether of trends in the market, which is still recovering from the recession. In making the transition from renting to owning a home, they start a chain reaction that allows repeat buyers to move up the housing ladder.

Still, the proportion of first-time homebuyers is well below the norm of 40 percent. There has been plenty of analysis of this trend over the past year.

Hardest hit by the recession, young people have faced higher unemployment rates, more part-time work and lower incomes.
Many carry large student debts.
The cost of renting has risen along with home prices, making it more difficult to save money for ever-larger down payments.
Inventory of the lowest-priced homes has decreased.
Post-recession lending standards and terms have put mortgages out of reach for many millennials.

NAR attributes the May rise in first-time buyers to rising employment rates among young adults and a friendlier lending environment. Last December, for example, the housing finance giants Fannie Mae and Freddie Mac introduced a 3 percent down payment program for borrowers with a minimum FICO credit score of 620. NAR thinks the housing market will likely see more newcomers in the months ahead, but cautioned that further increases will depend on how much home prices and mortgage interest rates rise.

Finding a good house at the right price is especially challenging for Portland millennials. In May the Metro area had a home sales inventory of just 1.7 months compared to a national average of 5.1 months. As explained in my posting of May 14, low inventory has created a hot or lopsided seller’s market with multiple offers, quick sales and rising prices. Competition is especially fierce at lower price points, which are usually most attractive to first-timers.

What’s steps can you take now to lay the groundwork for breaking into Portland’s hot market?

Estimate how much mortgage you can afford. HouseLogic and Realtor.com explain how to go about it. Itemize your current monthly expenses. Include a monthly average for irregular items like car maintenance and vacations. Exclude what you’re paying for housing now, such as rent, utilities, and parking. Subtract the total of these expenses from your net monthly income. The balance is what you can afford for homeownership each month, including the mortgage payment, insurance, property taxes, utilities, maintenance and repair, and any homeowner association fees.
Save for a down payment. Having itemized your monthly expenses, you’re well on the way to creating a monthly budget. Put expenses into 2 categories: needs and wants. Brainstorm ways to reduce the cost of needs. For example, Portland rents have skyrocketed over the past year, rising nearly twice as fast as home values. Can you move in with family temporarily or find a roommate or cheaper housing? Try to eliminate as many wants as possible from your budget.
Review and strengthen your credit. Your credit score is a key factor in qualifying for a home loan and the rate of interest you’re charged for it. As part of Task 1, get a free credit report here. HouseLogic offers 7 tips for improving your score.
Track changes in your financial position over time and revisit your goals and plans. You’ll want to revise your estimate of what you can afford as you go through Steps 1-3. For example, the more money you save for a down payment, the less you’ll need to borrow and the lower your interest rate will be. Or the higher you boost your credit score, the lower your interest rate will be. In either case, you can reduce the total cost of buying a home and your monthly payment. Or you can buy a more expensive home (and take on a larger mortgage) without increasing your monthly payment. Try playing around with a mortgage calculator to see how this works.
Visit Homeownership Opportunities Website Northwest. I’ve saved one of the best tools for last. Sponsored by Portland’s realtors association, “HOWNW” aims to educate and empower consumers. One menu tab provides information about the homebuying process. A second connects visitors to homebuying workshops across the city. And a third offers customized searches for programs that help people with lower incomes, little or no down payment or lower credit scores get into a home of their own.

Jun 03 2015

Want to learn about Portland neighborhoods? Take an architectural history walking tour

Want to learn more about Portland and its neighborhoods in good company? Architectural historian, Eric Wheeler, leads Meetup walking tours of the city along all compass points. With a long career in historic preservation and heritage tourism, he relocated from the Midwest about 6 years ago after falling for – in his words – “this unique, world-class city.”

Q: What makes Portland unique and world-class in your view?

A. Simply, the natural and human landscape. It’s a West Coast city not bound by the traditions or “shoulds” that prevail in the East and Midwest. And in recent years, Portland’s inventive spirit has attracted cultural creatives in the fine and performing arts, architectural design and urban livability.

Q: What’s your favorite building or architectural style in the city?

A: I love the residential, commercial and public buildings influenced by the Arts and Crafts Movement of the early 20^th century. In America we call this the Craftsman Style and it had a major impact on architectural design here from the 1890s to the 1930s, the period when Portland experienced a building and population boom.

Q: How did you get into the walking tour business?

A: I’ve spent much of my career as an architectural historian researching and writing reports, surveys and National Register nominations. But I’ve found even more satisfaction in leading walking tours. They give people an immediate and personal connection with the built environment. It makes my day when people say something like “Oh, so that’s what an American Foursquare looks like! Now I’ll notice that style every time I walk in my neighborhood.”

Q: How many different tours have you created and how do you go about it?

A: I just reorganized my file cabinet the other day and realized that I have over 50 different local walking tours I can pull “off the shelf.” Most are in downtown and the historic inner eastside and westside neighborhoods, but they range from Forest Grove to Gresham and Vancouver to Oregon City. I often say that every neighborhood and town has some buildings of historic and architectural interest.

As a relative newcomer to the area, I usually start with my own curiosity about a neighborhood. I find a centrally located spot and go from there. I take my camera and shoot photos of buildings and sites I want to include on the tour. I make some notes in the field and then go back home to my computer. Though I like old-fashioned archival research, so much is available online nowadays.

Q: It’s easy to see why newcomers and visitors to Portland sign up for walking tours. What brings long-time residents out?

A: Some of my most faithful customers are natives or near-natives who enjoy seeing their hometown from the perspective of a trained architectural historian and recovering Midwesterner. Often they say that tours help them to see the city with “new eyes” – a huge compliment! And, of course, neighborhoods are changing in this early 21^st-century Portland boom.

Q: Do you have a top touring memory?

A: I would have to call them “serendipitous” moments – the homeowner who invites us in for an impromptu tour, or the participant who shares that their grandfather built the landmark we’re standing in front of. So it’s the personal connections between people and places that make this work fascinating and memorable.

To learn more about Eric’s walking tours, visit Positively Portland.