Whoa! Things are crazy-busy in this real estate market! The past two weeks have given me many opportunities to work with both buyers and sellers and our listings have gotten lots of showings, lately. (I currently do not have any listings that are short sales nor foreclosures, so all of my listings are traditional sellers.)

With so much inventory on the market, traditional home sales are enjoying a boost of activity. Short sales and foreclosures are still very much a part of the picture, but buyers still want the convenience and “less strings” of a traditional sale.

As a buyer, you should keep in mind the level of activity and increased competition. If you find a property you really like, that information should be in the back of your mind as you draft your offer. Here are some other things to contemplate:

  • Representation — In Wisconsin, buyers have an opportunity to be represented by an agent, known as a Buyer’s Agent. There is a contract for this type of representation. Discuss this with the agent you are working with so that you know what is available. It’s best to have this conversation BEFORE you begin searching for homes. Ask which party the agent is representing in the transaction.
  • Strategy — Is there a lot of competition for this home? It’s ok to ask if there have been offers and showings, but it shouldn’t be the sole deciding factor that determines the strength of your offer.
  • Earnest money — Will you provide earnest money with your offer or after acceptance of your offer, and how much? Different markets have different expectations depending on price range. Ask your agent for guidance on this. There are some – albeit few – offers that don’t have earnest money at all.
  • Personal property — What items of personal property will be included in the sale? Do you want all of it? Do you want things that the seller didn’t mention would be included? It is common to see appliances left at the home but not all sellers want to leave them.
  • Pre-approval letter — This is almost a “must have” before you start looking at homes anymore but sometimes the process takes a different direction. If you are making an offer on a short sale or foreclosure home, you WILL need a letter of pre-approval before you make your offer. Other sellers are learning about this, and they want to see them, too – preferably at the submission of your offer. Ask your agent for direction on this topic.
  • Contingencies — Every offer has contingencies, and the most popular ones are for financing and inspection. However, what about other issues: zoning, rules and regulations, covenants and deed restrictions, surveys or maps, marking of lot boundaries, etc. Discuss your concerns with your agent before drafting your offer.
  • Closing costs — Many of the offers in my area will be financed through FHA or Rural Development. These programs are intended to help buyers who have less than 20% down to make their purchase. Consequently, these offers will often include a contingency for the seller to provide a credit at closing to cover some of the buyers’ closing costs and pre-paid expenses like appraisal, etc. Check with your lender before the offer is drafted so that you know if you will need a contingency for this in your offer.
  • Buyer’s use of the property — I always ask my buyers: “Will you use this property in the same way as the current owner is using it?” In other words, do you plan to purchase a single family home and then after closing run a business from your home? Do you plan to convert a duplex to a single family residence or vice versa? Do you plan to install a fence or shed or put up a new garage in place of an existing one? Your agent needs to know that so that contingencies can be put in place to check out those options. Sometimes people investigate these details prior to making an offer. Check the zoning of the property to be sure that it is in sync with how you will use the property.
  • Inspections and tests — Have any been done by the seller? In our market it is traditional for buyers to have a home inspection, but on a rural property they will also be doing a well and septic inspection, as well as water tests, at a minimum. Other types of tests can include lead based paint, radon, mold, or pest inspections. Ask your agent what is typical in your market. If one of the new occupants of the home has allergies, consider what contingencies you might need in your offer.

These are just some of the more common issues that I review with my buyers. Every offer is different: That’s one of the exciting things about working in real estate!  When possible, I recommend doing as much research as you can prior to making an offer, but don’t let indecision weigh you down and stop you from getting your dream home! Get as much information as you can in writing, from the source of the “decision:” In other words, if you want to put up a fence, get a copy of the covenants and deed restrictions (if any) and municipal ordinance, if applicable, to see if you can do what you want to do. Also note that detail is important: A subdivision may not allow a privacy fence, but they will allow a chain link fence.

A final word about contingencies: Contingencies, when agreed upon between the buyer and seller, give the buyer (or seller) the opportunity to do something or check on something and if it isn’t acceptable to them, this can be a reason why the offer may not go to closing (every situation is different and you may need legal advice). If you ask for a radon test and the seller approves that contingency in your offer, you don’t have to do the test: You can waive contingencies at your discretion but if I were your agent, I’d want to see that in writing to document that you changed your mind.

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I always make it a point to explain to my clients the importance of staging, not only for the photos of the property that will show up on the internet and on the MLS, but for showing appointments and open houses. It’s all part of that very critical “time on market.” In this area, if you are on the market much beyond 60-90 days, you need to make some changes because buyers will be more likely to pass you over for fresher inventory; at that point, your changes will need to include a serious price review. The home must be ready and staged by the time it is listed: no grace periods!
I’ll share an experience with you from a recent open house on one of my listings:  I was holding an open house at a vacant listing (if you think staging is important in your lived-in home, imagine a vacant home where EVERY flaw is glaring at you?!) I sat at the open house on Saturday and Sunday. Saturday I had a couple of guests and they didn’t look too impressed. The floors were dirty with the standard “walked on” appearance that you get in fall and winter. The windows had splatter on them. The bathrooms were dull. The owners had painted — not professionally — and there was paint splatter and streaks. There was a stale odor in the home. Some of the smoke alarms were chirping because of almost-dead batteries. I called the sellers who live far away and asked them if they could quickly get somebody to come in and spruce up the home for the next open house. I worked with them to make some minor changes: We staged the bathrooms, swept and vacuumed the floors, cleaned a few windows, changed some curtains that were very worn (front window) and purchased some room spray for a more pleasant odor. Sunday’s open house brought several groups of multiple people. Feedback on the condition of the home was more favorable and the visitors were more willing to discuss price and other issues with the home.
 
This is a real-life lesson on the first and lasting impressions that one 10-minute visit to a home can make. You only get one chance to make a good impression! For more staging tips, view my post on Staging for Optimum Value http://wp.me/soTlC-19

I’ll let you in on a little secret: Some real estate agents think that real estate is weather-driven. As a manager, I frequently hear from agents that “this is a bad time of year” for real estate because of the cold, ice and snow. Then, in spring, they tell me “this is a bad time of year” for real estate because of the spring thaw, mud, no flowers or trees in full bloom yet, allergies, etc. Along comes summer and guess what: “This is a bad time of year” for real estate because of family vacations, allergies (again!), summer rec programs for the kids, and so on. By August, I’m told, buyers and sellers are focused on getting their kids back to school. Here comes fall and guess what: “This is a bad time of year” for real estate because of high school sports kicking off. And then, well, it’s the holidays.

So, here’s the even bigger secret: HOMES SELL ALL YEAR ‘ROUND!

Not every potential buyer or seller follows the same calendar. In fact, given the above excuses, I’m not sure I could even be convinced to make this my career! According to my calculations I might have a month or two out of 12 to make my living!

So, Buyers, when IS the best time to buy?

Answer: The best time to buy is when you’re ready. We live in Wisconsin. There will always be snow and ice in winter, rain and mud in the spring, heat in the summer, holidays, school activities, etc.

Be realistic: In the summer we want to know how well the home holds heat and how sound the foundation is come the spring thaw. Serious buyers ask serious questions: They want to see the heating and electric bills for the prior 12 months of the home’s occupancy (many utility companies now make some general information available on-line). Buyers want to see the property condition report provided by the sellers. Serious buyers hire a certified home inspector to review the property and assess it’s condition.

Here’s another tip: Ask your insurance agent for a CLUE report* on the property to see if there have been claims filed for water intrusion. This is a particularly good strategy when purchasing a foreclosure property. (There may be a fee for such a report.)

By the way, no matter how bad the economy was, there were always lenders approving buyers for home mortgages.

No more excuses! Get out there and get looking!

* C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a claims history database created by ChoicePoint that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. (information courtesy of http://oci.wi.gov/pub_list/pi-207.htm , from the Wisconsin Office of the Commissioner of Insurance).

When people find out what I do for a living, they always ask how things are going. I always tell them that it’s great! Real estate will continue to sell; people will continue to relocate, down-size, out-grow their homes and do all of the other things that have always caused people to want to sell a home and move.

As signs emerge that we are on our way out of the economic distress we’ve been in (for real estate, anyway), it’s worth noting what the changes are to this facet of our economy.

  • We will continue to see foreclosures, bank-owned properties or REO properties, and auctions of foreclosed properties – for a couple of more years, unfortunately.
  • Short sales: While it’s easier to get a lender or representative to return your call, if there is more than one mortgage on a property, or if there is a mortgage with mortgage insurance, then that means that there is more than one level of approval needed before the new buyer’s offer will be accepted. The primary lien-holder isn’t getting enough money to pay off their debt, let alone what will be available to anybody else in line waiting to be paid.
  • Buyers are worried they don’t or won’t qualify for financing. While foreclosure properties require a letter of pre-approval, buyers need to be more confident in approaching their banker or mortgage broker for approval.
  • Reeling from the tightened restrictions of loan approval underwriters and appraisers, there is still some reform coming; this could potentially get worse before it gets better.
  • The “traditional” real estate transaction: a home owner selling their home to a qualified owner-occupant home buyer, is making a come-back!
  • Buyers are recognizing the importance of having their own down-payment for a home, rather than relying on a bank to finance it for them. Many banks and loan programs require a minimum of 3-5% down payment. Some loan programs allow a seller to credit the buyer for this at closing. Essentially, the buyer is financing their down payment.
  • “Second Home” or “Luxury” home sales are on the rise. Buyers in this market generally have cash or a significant down payment, and they are not afraid to make an investment in real estate.
  • More than ever before, there is an emphasis on the importance of home and the security and nurturing feelings that go with it. “Family” is a message, a feeling. “Value” is also at the top of buyer’s lists!
  • Prices for homes will begin to level out, with some markets experiencing continued depreciation. There are glimmers of hope as we see some markets across the country begin to gently increase in average sale price, or at least stabilize.
  • Interest rates are expected to rise but not dramatically from one month to another. And, buyers are recognizing early on that the savings in the price during negotiations with a seller can be eaten up by a higher interest rate over time.

In the markets that I serve in Southwestern Wisconsin, I have noticed over the past year that if a home is priced well, staged well, and has no remarkable “flaws” – either in design, condition, or location – sales are occurring on average within 60-90 days. And, these homes are STILL selling for approx. 95% of the list price, in most cases.

Thinking of selling? Always interview more than one agent and don’t sign anything until you’ve had time to think about which agent will best represent your property. It’s critical to differentiate between what you WANT for your home, and what you CAN GET in this market.