Back to my point how do you as a home owner not miss the best selling time with a bogus offer? We’ll you take a little piece of the short sale addendum allowing the property to stay on the market active because the offer is not binding. You can have multiple offers to buy the seller can accept all in order. The seller accepts an offer in first position and gives them a first offer the right to match the offer. Match what you say Price and ability to close. So there is no binding contract until the buyer shows the ability to close. Make the primary offers earnest money (at least 1% of sales price) non-refundable unless the inspection finds an undisclosed pertinent and substantial fact that affects the value of the home such that it will deter future home buyers, that he seller is unwilling to correct. So not the first offer ready to close force the primary offer to step up and match it or lose their earnest money if they back out. You may want to do 2% that how strongly I believe seller will be take advantage of in this crazy buyer purring in multiple offers. Some buyers will not disclose they have a home to sell. All listing agent should put a Q & A addendum do you own another home. Will you have to sell or rent the home to qualify? Then get a Pre Qualification letter stating the lender knows of this and they buyer qualifies without selling the home.

If you’re an agent or sell take this to heart it will be happening making offer on multiple property. It’s probably unethical if you don’t disclose it to the seller but agent think they can just put in contingency that will allow the buyer to back out. Like financing oh they can’t buy 2 home so they don’t qualify. Right we need to hold this kind of activity accountable but how?

Who is a first time home buyer? People that haven’t owned a home in the last 3 years. Married couples I’m sorry if you spouse has owned one but you have not you don’t qualify. Even if you got divorced and gave the spouse the home if your name was on a home as an owner you don’t qualify. If you co-signed for a home you’re on as an owner and you don’t qualify. If you don’t have the income and you need a non-occupying co-borrower that’s Ok you do qualify for the credit because the credit can be split or moved around to any qualifying buyer of a home. You can have a Mom, Dad or Grandparent co-sign on a FHA loan and as long as your not married to them it all good. You don’t even have to have a job to qualify for an FHA loan as long as your co-borrower is well qualified.

Can my down payment come for the Tax credit? No in Utah we don’t have a program to loan you the tax credit so you can use it for your down payment. You can borrow form a 401 K or get a gift form a blood relative and use the Tax credit to pay back the person. No gifts can be required to be paid back but nothing says you can pay them back. So how do you buy a home with no money down; we’ll if you qualify you can do a Utah Housing Loan. How do you qualify you don’t make more than the limit. Salt Lake is $64,000 family income up to 2 people in the family. Sure the rate is 5.7% but that’s not too bad.

How do you get the tax credit? We’ll you fine an amended tax return and have it in a few of weeks. Actually I have seen on line from 4 to 16 weeks. I don’t know way some take so long. It might ne shorter now that was for May and June of 2009.

So let’s get you out and shopping for a new home this month. For the month of august I will give you ½ of my commission back as a rebate if allowed by your lender

How do you get more of a Tax Credit we’ll we at Spotted Home have put our own stimulus Package together to give you a Rebate. We’ll give you 1/2 of our commission or on a 3% buyer agent commission you get 1.5% of the sales price as a gift. We won’t even make you qualify as a first time home buyer. So buy a $200,000 home with the 3% Buyer Agent Commission and you get $3,000 as a thank you. State administrative code 6.2.12 allows me to give you a gift for buying with me. As long as your lender says it is ok. The minimum commission the company can earn is 1.5% of the sale price so if the commission is 2.0% you would receive 1% of our commission as a gift. Wow now that a stimulus package.

6.2.12. Gifts and Inducements. A gift given by a principal broker to a buyer or seller, lessor or lessee, in a real estate transaction as an inducement to use the services of a real estate brokerage, or in appreciation for having used the services of a brokerage, is permissible and is not an illegal sharing of commission. If an inducement is to be offered to a buyer or seller, lessor or lessee, who will not be obligated to pay a real estate commission in a transaction, the principal broker must notify the party who will pay the commission that the inducement will be offered. This rule does not authorize a principal broker to give any type of inducement that would violate the underwriting guidelines that apply to the loan for which a borrower has applied.

First time home buyer don’t wait until the last month get out while the shopping is good and you may be able to get a short sale if you have a great agent like me.

More info on the First time home buyer Tax credit of 2009

• Active Short sale listing in salt Lake county 1400.
• Active listing not short sale 6333 in Salt Lake City.
• Under contracts non-short sales 1500
• Under contract Short sales 233
• Short sale Sold 60 days 204 or 102 a month
• Non–short sale Sold NON-Short sales  1,859 or 929 a month

In  evaluating the numbers I want to say that the # of short sale listing to close is very good 14.7% of short sale sell a month.  Only 6.8% of non-short sale sell every month.  That would be related to price see My pricing article to understand price.  1031 Home For Sale in Salt Lake sell a month and short sale are about 10.10% of the homes that sell.  Now if that is correct why is everyone talking about them as if they are the only homes that sell?

My man on the streets view, of how short sale relate to purchasers in Salt Lake, is they are prices way below the average price per square foot (PSQFT) the PSQFT for short sale range $55 to $75.  Where the median listed PSQFT in Salt Lake County in June was $97.  See why the buyer only sees those homes as the homes for sale.  They are the desirable good buy bang for the buck homes.  So buyers rule mentally out the $100 + PSQFT and look at the lower priced higher bang for the buck, short sales and they become the Real homes for sale in their mind.  Since buyers will only look at 20 or less homes before they make there mind up and make offers, the best homes become the homes for sale.   Since these are the short sale and bank owned that become the market.   Buyers see the really well priced short sale and they want to buy it because they wnt 20%  equity in this market.  What happens when they want to buy a short sale?  We’ll the reality of a short sale listing become very frustrating to the buyer because of the 1400 short sale on the active market over 70% are not really active!  What?The Majority are not really active because they have an offer the listing agent is exclusively working with the bank.  What shenanigans are going on? We’ll the WFRMLS has allow the listing agent to keep a listed  short sale home that is under contract as active on the MLS.  Even if they use the new Binding Contract Short Sale Addendum our Utah Association of Realtors have created.  It clearly states the offer will be binding pending bank approval and the seller can only market the home for back up offers.   I don’t know why they allow this.  I have had hour long conversation with the MLS Director and they say it’s the board of directors that allow it.  There is some progress in the last week,  an active offer pending bank approval status has been added, that the agents can see but not the public.  So on the public side of the MLS still sees these under contract property as active.  Misleading! Unethical! you say, I say You’re 100% right.  I’m working on that and will have a conversation with the director of the MLS tomorrow after meeting her in person yesterday and having a conversation with the UAR legal counsel on the interpretation of the form.  Actually The director is really a great person and wants the MLS to be legitimate and a the finest tool to find home in UTAH.  So why the mess?  We’ll there are some  that want it to be there marketing.  They price short sale low put them under contract for 50 to 60% of what they should be with an investor friend and keep them active.  Why because they will get sign and Internet calls form buyers wanting to buy that low priced home.     I learned that in a continuing education 5 hour Core Law course, approved by the Utah Division of Real Estate of  Real Estate.  After having a conversation with the director of education for the Utah Division of Real Estate, I was one of the agents that complained and the course was removed shortly after that.   My hope is in a couple of weeks it will not show this status of short sale pending approval to the public.  If we take away the incentive then we may see this stop.  We may see this stop but I wouldn’t count on it.  Until the MLS takes on having integrity with the short sales we will have the same frustration and unethical agent abusing the system to profit.    Oh yea I said it!

Short Sale Home

Why do agents do this?  One reason the allow the public to thinking they can buy the home at ridiculously below market price.  They want prospective buyers calling them from their listing on the public site and all the company sites that show the MLS active property.  As long as they can keep it active on the MLS buyer will look it up drive by and call the agents yard sign to look at the property.  The buyer loves it and wants t make an offer.  The agent will hopefully say the seller accepted and offer it is under contract and you can make a back up offer.  In the real world the y say thing like it a very low offer and I don’t think the bank will accept it.  You can make an offer if the bank likes your offer better you may get it, or the off is low and if they bank doesn’t accept it we will present the next highest offer.  Ok the buyer thinks let’s do it and let offer full price because the agent said it low.  The agent fills out the paperwork and uses an exclusive buyer brokerage agreement locking them into using them for 6 month if they want to buy a home.  It’s the only way he works and if they want to make the offer that is the agreement.  He uses an under contract property to get a buyer in an exclusive agreement.  The properly is under contract the bank is only going to see the one offer until they reject it.
Well that is the sad frustrating state of buying short sales homes for sale in Salt Lake .  Your best bet as a buyer and agent is to do leg works.   Mail to the homes that meet you criteria and are not listed on the Notice of Default list saying your a buyer .  Many of these homes are working on modification that wont work and denied after month of waiting and will need to sell to avoid foreclosure.  Call the agent on all short sale ask if they are under contract with the only approved short sale addendum the UAR form. report ones that aren’t using the contract pending when they have an offer in to the bank.  If you look at short sale the first week of a listing and make a reasonable offer.  You should be able to get one under contract.  I will set up a list of 2 week old short sale listing on my home search page.  I currently have short sale homes for sale in Salt Lake as East and West because there are too many for one search.  I will put a new short sale less then 2 week old.  Remember bank have a rule of 82%  so with a 6% commission you will need to offer 88% of the current market value of a short sale.  So don’t get frustrated just get good agents that will call the short sale listing before you go out and ask if they are under contract using the new UAR short sale addendum.

Here is where the Real Market Pricing Study differs from the CMA.   You do and analysis on Active and Under Contact homes in your area including like area that a buyers would look at.  What does that mean?  For Homes for sale in Salt Lake County let’s look at West Jordan.  A buyer would probably look at South Jordan and maybe, Salt Lake City unincorporated, Taylorsville, and part of Kerns.  Most buyers draw a mental box in the area here and say “all the home between this road and that road, this far south and that far west, that are x years old, with at least x bedroom, and x bath and of course a 2 car garage.   So you have to look at your competition form a buyer’s perspective as opposed to the appraiser’s perspective of 6 to 10 blocks.   Appraisers work in a very small box of rules the buyer doesn’t.  You price your home on the active homes justified by the under contract not the homes that have been sold.  They aren’t looking or comparing the active to the sold homes. They are comparing them to the home they have seen.  With sold homes they can’t look through them and make a comparison.  You pull all the homes that are for sale in your general area or like areas of the town that are 20% or $20.000 below and above that CMA sold price.  You pull a search with all the styles for sale.  A normal buyer for your home would look at all homes in a price range that are at least the minimum buyer’s criteria for your home.  You have to think buyer what do they want in your area, SQFT and average bedrooms for the area.   Most buyers want to look at 3 beds 2 bath or 4 beds 3 bath for higher priced homes and up. Yep, all want a 2 car garage.   Most buyers look about $15,000 to $20,000 higher then they qualify for.  You don’t just pull ramblers to ramblers or town homes to town homes.  Buyers look at Price ranges and Bang for the Buck, rather the just a style.  The average buyer  in this market want a great deal, not a ok deal, or even a good deal they want to get at least 20% off the market price of a home.  With those criteria you probably will have a pretty large amount of active homes in your search.  Using the same criteria pull a sold search for 60 days and take that # and divide by 2.  Why 60 days because most homes close at the end of a month and take 5 or so days to be updated so you do 60 to keep from missing a good time of the month. While still keeping the sampling close in days back.  You now have your 30 day sold average and you divide the active property by the “30 day sold average”.  It looks like this 100 active homes by 15 sold a month you have 6.66 month of inventory; Known as absorption rate.  Now use the same criteria less the 60 days and change to under contract.  How many do you have?  Probably only 50% will close.  Now use the list to sold price % to calculate, what the under contract should sell for on the spread sheet.    So if it’s 89% list to sold and you have a $335,000 list price under contract you get an estimated sales price of $289.150 after seller concessions.  So you can add 3% to that for seller concessions your sales price is about $307,094.  You can see if the # of closed will be higher than the # sold.  If it is that is a good trend.  If not it is a continuing market.  Less may decrease pricing.

In real estate we have a concept of “Absorption Rate”  easy stated as,  A markets ability to  sell off all of the houses that are for sale at a given time express in months.  An example of this is.

A market is selling 5 homes every month and there are 120 homes for sale, it will take 20 months to sell all of those homes currently on the market today. The absorption rate is  24 months or 2 years.  That is not good!

If you are a seller you should take the absorption rate into account when pricing your home!  It’s a good indicator of the trending of a market.  In the above scenario with 100 homes for sale, we know that only 1/2 of them will sell in the next 12 months. Honestly more home will come on the market so the homes that will sell are the most aggressive sellers.  But it dose tell you where the market is going!  It’s nto the beat all end all but it is a tool of pricing like many other tools.

More on The Absorption Rate see this link on a great real estate site Outer Banks Real Estate Sales

Well that all sound well and good but most people don’t have 12 months to sell their home because the market is not static it is either declining or increasing you can’t really price off that formula.

Now that we have the economics 101 out of the way let’s look at the Reality As Is way a market behaves, or in this case misbehaves.  Markets for housing are constantly in flux, having homes sell and new home come on the market and how that relates to pricing.  To price a property correctly in this type of market with an absorption rates less than 8 months but not less than 3 months, you would have to be an attractive home in the lower 30% of the price range for similar properties in order for it to sell in the next 12 months. To sell in the next 6 months it would have to be priced in the lower 20% of the competition. Why the lower # then 50% and 25%?  Because you have 15 buyers they will be looking at best priced homes not all 120 homes.  They probably won’t look at 30 homes more like 15 to 20 before they buy.  So many of the higher priced home will not be looked at as a viable buy.  They may look at the higher priced home but not to buy them.  They want to justify their favorite lower priced homes bang for the buck.  Example: If I do this and that to this home, I want the buy; it will be really good and worth as much as the most expensive homes in the market are.  I know it a crazy to think a home will be worth more than you are willing to buy one for.  Human beings tend to think their home is always the best home in the neighborhood and worth more than the others.  So if you’re priced in the middle well you sit and sit.  You get a few showing but no offer showings begin to taper off to almost none.  So you lower your price 5% and you’re still in the middle because the market has moved a full 5% lower over the 60 days you had it on the market.  You’re strolling behind a decreasing market not even chasing it.  Currently the Salt Lake market is moving between 1 to 3% downward a month depending on location.  I know there’re lots of you saying I’m one of the 80 in the middle to high range strolling along, in that scenario.  The good news for you is you can do something about it.

What you can do is price your home in the money based on Bang for the Buck!  Calculate your sales time.  I need my home sold in 4 months.  You subtract the month you will be under contract and you have to have the home under contact in 3 months you have 90 days to market.  Find the most similar active properties based on the market activity and its bang for the buck factor.  If you’re in a desirable neighborhood with above average quality pick the best quality homes and price to one of the best bang for the buck in that group.  Now if you find no one is buying that quality of home or zero high quality buyers are in your market, you’ll have to be the best priced of the group.  You should look at the middle of lesser quality home price. Remember that is the top of the seriously considers homes getting looked at by buyers.  Homes with less finished % in the basement, less bedroom and baths, or the best priced rambler need to be close to the price of tri-multi levels.  You have to also consider the Estimated Appraised value never be higher than that, try to be lower.  So if you are now saying that’s not fair my home is nicer and worth more.  Remember bang for the buck, you have to give them a reason to come up to your slightly higher price.  Buyers aren’t fair that is not a concern for them in this market.  They are on a foreclosure feeding frenzy ravenous feeding on the great deals. Ok it’s Dawn of the Dead Home but I have buyer don’t ask me what do you think is fair to the seller.  More realistic would be what do your think the lowers priced offer we can make without insulting the seller is.

The Reality of pricing most Sale Lake City homes for sale using my formula guidelines will fall into the feared Decreasing market 8 plus month inventory.

Get the numbers form the MLS or your agent or me of course. Do the spread sheet sort your price per sqft of active low to high and look at the distribution.  Look at what you consider the best comparables make them as green cell color.  The lowest 20% in price are yellow cells.  This is what you are really looking at.

In a decreasing market with absorption rate of under 8 months:

30 to 60 days price is the average of the lowest 10% of the lowest reasonable comps.  You have to be in a full tilt bogie to sell in that time frame. Remember you competing with short sale and bank owned.  Your only advantage is your not one of them.  Be the lowest of the best comparables for your home by at least by 5%. Why because you’re creating bang for the buck, you’ll get looked at and offers to work with.  You’ll get the attention of owner occupied shopping buyers that are tired of short sale and bank owned. Drop the price every 20 Days by 5%.

60 to 90 Days price at the lowest 15% of best comps.  Be close to slightly above the best comparables for your home evaluate and re-price every 20 days at least 3%.

90 or more days price in the lowest 30% of the market and evaluate every 25 days change to a different pricing lowing it 3 to 5%.  When you enter 90 day time frame change to a more aggressive pricing of the 30 to 60 model make sure you reevaluate at that time things have changed.  Pricing any higher with new comparable property coming in the market is futile if you can’t sell at this pricing strategies you probably won’t sell so don’t list.  If you can’t price so that the home can sell chasing the market won’t help.  Save a lot of frustration for you and look at renting to owner, owner financing.  Don’t rule out a short sale it may be the best alternative.

In a decreasing market with an absorption rate of over 9 months:

This is a very dangerous market teetering on the brink of a large plummet of home prices.  All experts say that a market with over 8 months of inventory is a market that will have to go down to sell the home.  Let’s be realistic if you have 8 month inventory most of the home will just not sell.  There are not enough buyers in the market.  The market will be set by the home that sell and will go down with each month’s sales.  Similar to a market with 1 or 2 months inventory Like 2006 going up with each month new sold comps.  .  The danger is chasing a downward trending market but never catching it or going ahead.   I saw a neighbor lose $60,000 chasing a downward trending market in 2008.   In salt lake homes for sale market the price point that is in jeopardy of seriously downward trending is homes that are 20% above the median home sales price of $236,000 anything over $289,200 will be in fear of a serious downward trend the higher you go.  The further you fall.  That is until we get more qualified buyers in that market who’s income justifies that price of the home.

Your best target is those buyers tired of making offer on bank owned only to be beat out and disgusted with the state of buying short sales.  These are people that need to move are relocating or have sold their home.  Make sure your sign and all advertising says not a short sale on it, in Big Bold Red Lettering.  The reality of pricing is you have to be willing to be at that price point of what is selling.  You won’t be able to appraise for more than the comparables will allow anyway.   You won’t be able to sell for more, so why kid yourself and price your home higher to have bargaining room.  Those “Reindeer Games” just don’t make a difference.  Buyers will make an offer and you work from that point.  They know value and don’t want to lose a good deal.  Remember you have to be a good deal.  Don’t price your home out of the range buyers are seriously looking at, because you want bargaining room.  Now the # for a decreasing market.

30 to 60 days.  Price in the lowest 5% it will take an effort to sell. Fast because you will see a drop of pricing cause by bank owned property.  Drop the price in 30 Days by 5%.  Will you be the one lowering the market?  No you will be keeping up with a market in free fall.

60 to 90 Days price at the average of the best priced 10% re-price every 20 days.  Suggested re-pricing is 5%.

90 or more day’s price:  Be priced in the lowest 20% of the market and evaluate every 25days. If you don’t sell you will need to drop 5% every 30 days.  Chasing a market is futile if you can’t reduce the price enough to catch up with this pricing strategy you probably won’t sell.

You now have the knowledge to make a Real Market Price Analysis.  Most real estate agent don’t have that knowledge.  Oops now they do!  You should be able to price your home for sale in Salt Lake County such that it will sell.  One last thing unfortunately For Sal By Owner is just not effective in this market because buyer want bank owned and short sale great pricing on a home and have to work with an agent to get it.  Buyers are working with agents to look at those listed homes.  If your for Sale By Owner your not in that game.  I feel your pain after getting this dose of reality so to help you all I have a new way to list homes.  Go to my site http://saltlakecity.helpmesell.com/ and sign up for one of the 3 flat fee listing the Silver, Gold or Platinum  packages which will get you to the mls for an affordable $299 to $999.  If you sign up for silver and email me saying my market is may market because that is what is selling I will do a market pricing analysis with you, for reading this far.  If you go for the Gold or Platinum I will take $150 of the price.  But you have to email me!

What the near future will bring in homes for sale in Salt Lake!

I do think the Tax Credit expiring will drive more buyers in the market over the next 4 months.  We will see most of them at or below the medium price point.  We may see the lower priced homes go up.  What we won’t see in Salt Lake homes for sale is a lot of buyers in the $400,000 range, because first time home buyers don’t usually have that kind of qualifying income.   But it would be a prime time to move up and sell your home quick if it’s in the $230,000 range and you can get a killer deal on a $400,000 home that use to sell for $800,000 from a bank?  Now you’re thinking like a buyer!!!!!

If you’re looking to move up and sell your home and steel a bank owned or short sale we’ll do I have an offer for you.  The Buy Form ME Sell Free program is a full service Platinum package for free you keep the listing commission to put into your new home. All you do is use my expert service to buy a new home within 6 months.  So the seller of your new home pays your selling commission I love it!!!!  Give me a call it’s a great time to be a buyer

Is this the market

If you’re one of the sellers in today crazy Salt Lake County real estate markets you may be frustrated because your home is not selling. This is especially true if you are not selling as a short sale. I’m not going to explain all the rules of selling and the situations that have caused this: just most important ones in this and my next post on pricing. The first post will look at the state of affairs in selling your home in Salt Lake and how to do a CMA based on the sold homes. The 2nd post will be the Market pricing Analysis Study on what it takes and why, to sell a home in the Salt Lake market.

You have heard the 3 rules of selling a home, Location Condition and Price. Let’s face it in today’s market is dominated by Short Sales and Bank Owner property it’s all about the price. Buyers are at foreclosure frenzy, crazy with getting a great price. I’m a nice guy but I’m not going to help you pick up and move your home to a better location. Try as you might to update your home the best you’ll get out of the updates is 50 cents on the dollar. So why throw away more money on a home that is not selling. If it were about quality new homes would be selling at top $ not 30% + off that. No I’m going to educate you about, the state of affairs in lending and qualifying buyers, how average income of home buyers affects the sweet spot of price point, absorption rate, Buyers in the market, price point, and buyer mentality.

In any market it’s about price. This is not totally based on the sold price of comps in your neighborhood. It’s about the way your home stacks up against the other active listed homes. This stacking up is based on the realization of x home a month like mine will sell. X # of buyers will look at the best 20 or so homes. My home has to be a one of the best bang for the buck homes or it won’t make the list of home to be viewed. If not on the list my home will not sell. The bottom line is home priced well sell and homes that aren’t don’t. The golden Rule.

Let’s talk first about the 3 types of seller:

1. Those that wish they would sell. They are the one that say I’ll put my home on the market high if it sells great but I don’t have to sell. In a decreasing market this is silly and a waste of time and resources for all involved. Buyers will use this as a value marker. They compare it to the low priced home they want to buy to say if I do x my home will be worth that amount.
2. Those that need to sell they are in a short sale or are relocation, or people that need a bigger home because of combining families. Very popular now in this economy. They try but many are listed too high because they haven’t looked at the market and been realistic. They are usually chasing a market not willing to do what it takes to sell.
3. Those that must sell. These are inventor on the books homes. Builders or mostly bank owned property they are a liability and if not priced right will cost more money over time. They will be systematically reduced like a clearance item until they sell. Most in a decreasing market are priced just like I will tell you to price, but the bank put them at 5% below the market to get offers. The banks want multiple offers the first week to get buyers to offer their highest and best offer. That competition will get a higher $ figure then starting high and moving lower. If they don’t get an offer at list price they reduced the price every 20 days 5% or so to get it sold.

This is completed as if you’re a seller not in foreclosure or short sale, YET! You have equity and you want to sell. We’ll in reality you have no equity in a home until you sell it, that is also a myth. Deciding on a sales price for your home is actually like complex mathematics. I sometimes feel like Russell Crow in A Beautiful Mind writing long formulas on the windows. In the end it is simple and beautiful but not always easy for the home owner. First off let’s get rid of the urban myth that you can’t use a distressed sales of bank owned or short sales as comparable home or comps for retail sellers or better worded “your sale”. That is just plain misinformation being spread by Realtors! If you hear “You have to use a like comparable retail seller to retail seller” ask them to leave or at least put away the script. This is utter Poppycock! This is the biggest mistake Realtors make in pricing a home with a comparative market analysis or CMA. Actually the 2nd biggest because the first is pricing a home off sold comparables; we’ll get to that. You use the homes that are selling now, most like your home in style, closest to your home in proximity, nearest in time period that is the best comp. That’s what buyers are willing to pay for a home; so that is your market. Your market is your market because, that is what is selling. There aren’t 2 markets for Retail Sellers and for all the rest. Wake up sleeping beauty; your market is your market because, that is what is selling. Say it with me one time, “Your market is your market because, that is what is selling.” This wisdom came straight from a very experienced “Yoda like” appraiser. That is how your home will be appraised and that is what you will have to live with when it goes under contract, and is appraised.

When you look at the value of your home, you use the most like and closest in proximity, most recent in time, sales as comps for your home! You do not use the highest price sold in 10 blocks, no matter when, within 6 months, those days are gone and they aren’t coming back anytime soon. Let me explain the process. First we’ll look at the home as an appraiser would. You get all the sold comp like your home in the last 90 you can move up to 160 days if you don’t have 4 like your home in style year built + – 5 years and within 20 %+= – of your sqft. You put that on a spreadsheet for each comp and create a column for list price, sold price, sales concession paid by the seller, Net sales price subtracting the concessions, square Foot, net sold price per sqft, list to sold price % (You’ll need that average later). You do this for sold similar style home. In a decreasing market you weigh the Sold CMA on property sold in the last 60 days no matter what they sold for, or who sold them. You calculate the sold price per sqft you can even do that for finished price per sqft. Remember they are similar comps style average to average condition. You now have a CMA and a spread sheet that is your Sold or Appraisal CMA. So you know approximately what it will appraise for but that tells you very little about where you need to be priced to get serious buyers interested in your salt lake home for sale!

Lastly let’s talk about the price point of the home and how that affects the amount of buyers. Because real estate has seen a perfect storm over the last 2 years. Lending being turned upside down with an outcome of few people can now qualify for homes. Pricing drove through the roof by investor buying. The lending industry allow state income loans, builders and home seller could sell their over median income qualifying home, easily to almost anyone with no money down on a 100% stated income loan. Literally anyone could buy and home with no money down. Now all loans are fully qualifying with verified income. So if you’re self employed and your taxes show you make $46,000 (Average income in Salt Lake County) a year. You qualify for a home with $3,833 monthly income at 36% DTI or a full home payment of $1,379 and other debts of $300 a month. That scenario would allow them to qualify for $205,000 home at a Housing DTI Ration of 37% and a total DTI of 44%. These are over the standard limit but would probably get approved with automatic underwriting and a 680 credit score. So the median income in the city qualifies for $205,000 but the medium home price is $236,000. See the problem? Now what would it take income wise to qualify for a $400,000 home. You would need a house hold income of $7,313 or $87,757 a year. So you can see what the problem are, we just doing have the # of qualified buyers in that market for the # of home owners needing to sell.

Most of them are over their head and the home is in foreclosure. If we see inflation and rates go up that will have a dramatic effect on what people can qualify for and how many families can’t afford their current monthly house payment. Most of the 100% stated loans were 3 to 5 year fixed and then adjustable loans. I have one of them that just because an adjustable. Since the fed has the Treasury Bill artificially at an artificially low rate, it ok for now. If we have inflation or more accurately when, the adjustable rate payment could see a house payments over $400,000 jump by $1000 a month. All we would have to have is 2006 rates of 7.8%. With higher interest rates fewer buyers will qualify and less will be in the market and we’ll see the home value home continue to drop. What do you do if your payment is $500 more than you can pay and your home is worth ½ what you owe? Unless they reduce the principal of your loan on a loan modification; it doesn’t make sense to put your family in that financial situation for many years! Most lender are not reducing the amount owned just forbearing the interest on a portion for 10 years. We’ll in 10 years you still have a similar problem. If you do a short sale you qualify for an FHA in 1 year and that is what we are seeing. That is the why so many homes for sale in the salt lake market just aren’t selling. It is because of the perfect storm has come together to put less buyers in the market then homes available. My next post tomorrow will be all about how to evaluate the market and price you home so that it sells for the top dollar in your market. It will be Titles “How to price and sell your Salt Lake Home for top dollar!”