Every year I keep track of trends and make notes to avoid making the same mistakes again. Last year I made a note that sellers needed to have their homes priced to sell by the end of July. Even though our market isn’t as seasonal as you might expect we can’t blame buyers for wanting to take a break and get out for a last summer vacation when it’s 105 degrees.

This year has been different. We have never seen the amount of traffic at our listings, the number of buyers visiting open houses and the offers from motivated buyers in Augusts as we did this year. Perhaps it’s simply supply and demand or buyers are motivated by the drop in interest rates this year. Whatever the reason, based on the number of buyers and agents calling us to ask about coming soon listings, we expect the fall season to be stronger than usual as well.

What that means for you is if you have plans to sell you don’t need to wait until next year to get a great price. Of course, real estate is local so before acting on this advice call us to talk about your specific situation.

Investors Paying Full Price Or Better

It used to be investors would only pay 60-70% of the value for your home. You may be surprised at the number of investors who are paying full price or even higher when there are multiple offers. We met with a couple last week and they were surprised that 6 out of the last 10 condos that were sold in their community were sold to investors. After looking at the data comparing list price to the final sales price this couple was happy to see it looks possible for them to sell their home and rent it back until the home they are buying is ready to be moved into. For many investors being able to buy today with the lower interest rates and having a home already tenant occupied until the spring is an advantage vs needing to rent a home in September or October.

Selling Your Home Is More Convenient Than Working Another 3 Months

We have clients that want to build a new home. When we walked into the model home the builder salesperson was trying to require the buyers to sell their home with Open Door. The builder was not willing to do any other type of home sale contingency. In my opinion considering how good the market is there is no reason for a builder to essentially force a consumer to sell their home and lose an estimated $25,000 by selling their home to a house flipping company like Open Door.

It’s great that consumers have more choices and can choose to give up money for convenience. We often use shopping services that are more convenient despite knowing it will cost a little extra. What I would never consider is giving up so much equity when selling my home knowing the current market conditions.

Consider how hard you have to work to make $25,000 after taxes. For most people that is going to be at least 3 months which comes out to 520 hours of work and stress plus commuting time. For most people I expect working an extra 520 hours is more inconvenient than having a handyman touch up paint, etc and having a few strangers in your home for a short period of time.

Even worse is the compounding effect of what $25,000 invested could be worth in the future. Whenever I am making a financial decision I calculate the value of my money in 20 years.

According to the calculator at Investor.gov $25,000 invested at 8% compounded annually for 20 years is estimated to be worth $116,523.93!!!

Will An Appraiser Give Extra Value?

In most real estate transactions, you have to sell the value of any improvement to the buyer and also an appraiser hired by the mortgage company. The two areas of your home an appraiser is more likely to give you extra value are in your kitchen and master bath. An appraiser is not likely to add value for a new fence, back yard landscaping, etc.

How Accurate Are Appraisals?

One of the most misunderstood aspects of real estate is the appraisal process. Most consumers assume an appraisal is an exact reflection of market value. The truth is an appraisal is simply the opinion of value of one person. That value is going to depend on the comparable properties used and adjustments an appraiser gives for upgrades, features and condition.

For example, often someone asks me how much value and appraiser will give for a pool. That depends on the pool construction, neighborhood, how much higher other homes with a pool have sold for and the appraiser. There is no exact amount of value given by an appraiser. Recently we sold a home and the first appraiser valued the home at $421,000 and the second appraiser who was hired a week later valued the home at $470,000. It’s the same house with almost a $50,000 difference. The first appraiser misunderstood something about the area resulting in a lower appraised value. Sometimes a seller will provide a pre-listing appraisal or an appraisal from a previous refinance. Be careful relying on that value without double checking the appraiser’s work.

What I’m Reading

BiggerPockets.com is a well know real estate website where investors from around the world gather to learn from each other. In addition to helping people buy and sell real estate we are also active real estate investors and I have learned a great deal from BiggerPockets. Currently I am reading The Book on Rental Property Investing subtitled How to create wealth and passive income through smart buy & hold real estate investing. Whether you are an experienced investor or you’re getting the itch to buy your first property this book is a great resource. If you’d like to talk about this book or real estate investing call or text me directly at 512-791-7473 . 


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