Don’t Be Fooled By These 3 Real Estate Myths

by Brendon DeSimone Published April 01, 2013 Zillow

As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.

Their assumptions may come from TV reality shows or watching their parents’ house-hunting experiences. Maybe they’ve learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized “real estate myths.” Here are three such myths that many less-seasoned home buyers and sellers assume are true.

Myth No. 1: Spring is the best time to sell a home

Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn’t necessarily the best time to sell a home anymore.

The reality: The best time to sell is during the holidays and right after

Today, more than half of buyers aren’t married, and their decisions aren’t based upon school schedules. So spring isn’t as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.

It’s a supply-and-demand issue. Most sellers assume buyers aren’t seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.

After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn’t even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.

Myth No. 2: Always start with your lowest offer

There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying “never offer the full asking price.” That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.

The reality: A low offer may get you nowhere fast

A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent to understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.

Myth No. 3: A cash offer trumps all

There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.

The reality: A savvy seller may be more tempted by a solid financed offer

Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.

A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.

Learn your market

When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.

March 2013 Denver Home Market

March Statistics

Denver’s Hot Real Estate Market Now Seeing Quick, 24-hour Sales

By John Mossman
The Denver Post

Metro Denver’s housing market has roared back to life with an early spring rush characterized by multiple offers, low inventory and — in some cases — homes going under contract within 24 hours of being listed. “It’s a frenzy out there,” said Ty Dokken, the new board president of Denver-based Metro Brokers Inc.”It’s one of the hottest sellers’ markets I’ve seen in the last 10 years.”

A quick market makes for extremely motivated buyers, he said, adding that they have to say yes quickly or risk losing the deal.

After the housing bubble burst in 2007, the real estate market flat-lined for a period, then finally started picking up steam a year ago. But the sudden rush has nonetheless caught many buyers and sellers off-guard.

“Two years ago, buyers were dictating to sellers,” said Michelle Ackerman, Redfin’s managing broker for the Denver metro area. “Today, it’s the sellers who are dictating terms. We’re seeing multiple bid offerings all over the metro area.”

The most recent S&P/Case-Shiller home-prices index showed that prices in the Denver metro area rose 9.2 percent in January compared with January 2012. Nationally, the year-over-year gain was 8.1 percent — the largest increase since the summer of 2006.

Denver has now experienced 13 straight months of year-over-year gains, following 18 months of declines.

Housing inventory — or, more specifically, a lack of it — is the driving force behind the frenzied market.

Just 6,786 single-family homes and condos were listed for sale in February, down 32.7 percent from a year ago and the lowest since 1985, according to real-estate analyst Gary Bauer.

Demand has gone up as buyers feel more confident both in the housing market and in the overall economy. Mortgage rates, meanwhile, are holding near historic lows, giving buyers an extra jolt of motivation.

“There’s a lot of incentive for people to lock in these low rates,” said Tom Thibodeau, professor of finance and academic director of the University of Colorado’s Real Estate Center. “Where else can you get that kind of certainty in your liabilities?”

Also, apartment rents continue to rise, making the prospect of homeownership more appealing to many renters.

But there are complicating factors on the supply side of the equation. New-home construction dropped dramatically during the economic downturn and hasn’t fully recovered.

“There’s really not much of a pipeline that is out on the market and ready to be sold,” Thibodeau said.

Also, negative equity, while improving, still is prevalent, with 20 percent of the households with a mortgage in the Denver area owing more than their homes are worth.

“That 20 percent is not going to enter the market,” he said. “Unless these people are willing to go to the closing and write a check, they’re not going to sell.”

Given those conditions, it’s not surprising that buyers feel pressured to move quickly.

Doug Richesin, a physician, recently purchased a home in Denver’s Park Hill neighborhood, putting the home under contract within 24 hours of it going on the market.

Working with Redfin’s Ackerman, Richesin was able to view the property before it was listed.

“We really liked it,” he said, “and with interest rates where they were — and the swiftness at which many homes were coming off the market — we thought it would be in our best interest to aggressively put in an offer.”

Richesin, who lives with his wife, Larissa, and their 11-month-old son, Henry, said it “would have been nicer to have had a more leisurely time looking at more houses, but we knew we had to act fast.”

Situations such as Richesin’s have prompted leaders at Redfin to coin a term for homes that go under contract within 24 hours of being listed. The company began tracking so-called “flash sales.”

Over the last five months, Denver ranked ninth on Redfin’s list of the most flash sales in the country, with 115 homes selling within 24 hours.

Thibodeau said such quick sales weren’t uncommon before the bubble burst.

“It’s hard to put a value judgment on whether they’re good or bad,” he said. “But I can understand the economic reasons.”

Real estate brokers say technology, particularly mobile devices, is also helping to speed up the process.

Seattle-based Redfin uses instant alerts to notify users via e-mail or smartphone that a home meeting their search criteria has come on the market.

Zillow offers a program called “Make Me Move,” which allows would-be sellers to tell others the price they’d be willing to sell their home for, without actually putting it on the market.

Real estate brokers say they’re responding to the inventory shortage in various ways.

Chris Davis of Re/Max Alliance has begun going door-to-door to find potential sellers.

“If I have a buyer interested in a particular neighborhood,” he says, “I’ll mail letters ahead of time, asking homeowners in the area if they are interested in selling. If they are, I tell them I’ll be knocking on their door, asking if we can look at their house.”

Metro Brokers’ Dokken does the same thing.

And while the super-heated market has been good for sellers, Redfin agent Ilona Botton sees a lot of fear and frustration among prospective buyers.

“If you look at the statistics, we don’t have any more potential buyers than normal. It’s just that we don’t have any houses to sell them. So that makes things pretty competitive,” she said.

Her clients sometimes get frustrated and decide to continue renting or stay in their current home. Others feel compelled to overbid on properties because they’re afraid they’re not going to find a house.

“We see a lot of overbidding in Park Hill,” she said, “because it’s a highly desirable area.”

As for sellers, Botton said some are overpricing their homes, hoping to take advantage of the surging market. Others are waiting for even higher prices in the future.

Prospective buyer Lisa Nguyen, who has looked at 15 to 20 homes, offered an all-too-familiar lament: “There just haven’t been very many houses come on the market. And the ones that do come on the market, they tend to go so quickly.”

Source: Denver’s hot real estate market now seeing quick, 24-hour sales – The Denver Post