Bob Bendat
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  • Yorba Linda

  • July20th

    No Comments

    Harmful Effects from Changing the Listing Price?

    Posted in: Bob Bendat, First Team Real Estate, News, Real Estate, Yorba Linda

     

    Posted: 20 Jul 2011

     

    We are again honored to have Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research as our guest blogger. To view other research from FIU, visit http://realestate.fiu.edu/. – The KCM Crew

    The Research

    Are there any negative effects from changing the listing price of a property?  This question haunts Brokers/Agents as well as sellers of property every day.  At present, there does not seem to be a consensus answer to this question within the professional real estate community.  Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.

    In Knight (2002)[1], the impact of changing a property’s listing price is investigated.  Additionally, the types of property that are most likely to experience a price change are also estimated.  The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.  Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts.  Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.

    Implications for Practice

    Sellers as well as Brokers/Agents should therefore be aware of the critical necessity of getting the price correct from the start.  Sellers wanting to over list will ultimately take longer to sell and will sell their property for less, on average, according to Knight.  Brokers/Agents’ desire to take a listing and get the price right later will ultimately lead to their working harder according to Knight, and they are not doing their sellers any favors.  Thus, an initial and detailed analysis of the proper price is much more critical than many originally thought.

    Interestingly, I have found in my own research that the direction (up or down) of the listing price change does not matter.  A listing price increase and decrease both lead to similar results found in Knight’s work – longer marketing times and lower prices.  Therefore, get the price right from the beginning.  It is best for all.

    Endnotes
    [1] Knight, John, R.  (2002).  Listing Price, Time on Market, and Ultimate Selling Price: Causes and Effects of Listing Price Changes.  Real Estate Economics.  30:2, 213-237.
    To all KCM Crew members (subscribers to www.KeepingCurrentMatters.com):

    We

    will cover this research in detail and help you simply and effectively explain it’s impact on your sellers in the August KCM edition which will be available in the first week of August

  • June6th

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    CoreLogic: Home Price Index increased 0.7% between March and April

    Posted in: Bob Bendat, Economic News, First Team Real Estate, Information of Interest, interest rates, Real Estate, Real Estate Market News, Yorba Linda

    Forex – CoreLogic: Home Price Index increased 0.7% between March and April
    By: Calculated Risk on June 1 11 1:55 EDT
    Notes: Case-Shiller is the most followed house price index, but CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average of February, March, and April (April weighted the most) and is not seasonally adjusted (NSA).

    From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

    CoreLogic … today released its April Home Price Index (HPI) which shows that home prices in the U.S. increased on a month-to-month basis by 0.7 percent between March and April, 2011, the first such increase since the home-buyer tax credit expired in mid-2010. However, national home prices, including distressed sales, declined by 7.5 percent in April 2011 compared to April 2010 after declining by 6.8 per cent in March 2011 compared to March 2010. Excluding distressed sales, year-over-year prices declined by 0.5 percent in April 2011 compared to April 2010.
    …
    “While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign. …” said Mark Fleming, chief economist for CoreLogic.
    I was expecting the CoreLogic index to increase over the summer because it is not seasonally adjusted, however the seasonal increases usually start in June (when the Spring home purchases start to closes). This is just one data point, but it is possible this index will have small increases all summer.

    I’ll have more later (and hopefully a graph).

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  • June1st

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    Should I Buy or Should I Rent in This Market??

    Posted in: Bob Bendat, Economic News, First Team Real Estate, Information of Interest, interest rates, News, Real Estate, Real Estate Market News, Yorba Linda

    Should You Rent or Buy in this Market?by The KCM Crew on June 1, 2011 · 1 comment

    in For Buyers,Pricing

    Many families are trying to determine whether or not now is the time to buy a home. Some are advising these families to sit out the current real estate market and instead rent for the next year or two. We do not agree with this advice. Homeownership means a lot to a family. We also realize that the financial aspects of purchasing a home today can be a concern. The challenge is any advice given by someone in the real estate community is immediately dismissed as self-serving.

    For this reason, we want to give you the advice of three entities not involved in real estate sales:

    Citigroup“When we examine the relationships between mortgage payments and income and mortgage payments and rent, we see that these relationships have also reverted back to or below equilibrium points. In some cases, particularly when mortgage payments are compared to the cost of renting, home prices actually appear cheap.”

    JP Morgan“JPMorgan analysts said ‘the continuation of falling rental vacancies and rising rental demand will make home buying increasingly attractive’, especially as rental prices increase.”

    Business School professors Eli Beracha and Ken H. Johnson“Fundamental drivers now appear to be in place that favor homeownership over renting in the near term future…

    The second finding might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting…

    Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

    Bottom Line
    Is it better to rent or buy? According to those quoted above, it seems it may be becoming a no-brainer.

  • May27th

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    Why You Need a True Professonal to Sell Your Home

    Posted in: Bob Bendat, First Team Real Estate, Information of Interest, interest rates, News, Real Estate, Real Estate Market News, Yorba Linda

    by The KCM Crew on May 27, 2011 · 3 comments
    Why You Need a True Professional to Sell Your Home
    in For Sellers

    Many people ask whether they should hire an agent to sell their home or whether they should first try as a For Sale by Owner (FSBO). In today’s volatile market, I believe this is an easy decision: you need an experienced professional!

    You need an expert guide if you are traveling a dangerous path
    The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a buyer willing to pay fair market value for your home at a time that there are mass inventories of foreclosures and short sales will take a true real estate professional. Finding reasonable financing can also be tricky in today’s lending environment.

    You need a skilled negotiator
    In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible re-negotiation of that off after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

    Realize that when an agent is negotiating their commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

    Bottom Line
    We believe that famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

  • May24th

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    Why Must I Sell My Home Twice??

    Posted in: Bob Bendat, Economic News, First Team Real Estate, Information of Interest, Real Estate, Real Estate Market News, Self help, Yorba Linda

    Appraisals: Why You Must Now Sell Your House Twice
    May 24, 2011

    Banks have become very conservative when lending mortgage money today. With the current foreclosure challenges in the country, we can’t really blame them. The requirements now necessary to qualify for mortgages have gotten much more stringent and it seems will get even more stringent as we move forward. The banks want to make sure the prospective buyer has the ability to repay the loan. However, this does not just involve the borrower buying the property.

    The second way a bank can protect their investment in the mortgage is to make sure that the collateral backing that mortgage is secure. That is where the appraisal comes in. The bank wants to make sure that, should the buyer not be able to make their payments, the house they will be forced to take back will sell for an amount at least equal to the balance left on the mortgage. For that reason, the banks seem to be getting more conservative with appraisals also.

    This past week, the National Association of Realtors (NAR) released their Existing Homes Sales Report. In that report, they said:

    “11 percent of Realtors® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal.”

    One out of four real estate transactions was either cancelled (11%) or renegotiated to a lower sales price (14%) because of a low appraisal!!

    Bottom Line
    Every house now has to be sold twice: first, to a potential purchaser and then to the bank appraiser. And, it seems that the second sale may be the more difficult of the two. Sit with a local real estate professional and make sure you put together a plan for both sales.

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